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What is Peercoin?
Peercoin, also known as PPCoin or PPC, is a peer-to-peer cryptocurrency utilizing both proof-of-stake and proof-of-work systems.
Peercoin is based on an August 2012 paper which listed the authors as Scott Nadal and Sunny King. Sunny King, who also created Primecoin, is a pseudonym. Nadal’s involvement had diminished by November 2013, leaving King as Peercoin’s sole core developer.
Peercoin was inspired by bitcoin, and it shares much of the source code and technical implementation of bitcoin. The Peercoin source code is distributed under the MIT/X11 software license.
Peercoin is the fourth largest minable cryptocurrency by market capitalization. Peercoin has a market cap of $30 million USD as of Jul 20, 2014. Unlike bitcoin, Namecoin, and Litecoin, PPC does not have a hard limit on the number of possible coins, but is designed to eventually attain an annual inflation rate of 1%. There is a deflationary aspect to PPC as the transaction fee of 0.01 PPC/kb paid to the network is destroyed. This feature, along with increased energy efficiency, aim to allow for greater long-term scalability.
PPC’s major distinguishing feature is that it uses a hybrid proof-of-stake/proof-of-work system. The proof-of-stake system was designed to address vulnerabilities that could occur in a pure proof-of-work system. With bitcoin, for example, there is a risk of attacks resulting from a monopoly on mining share. This is because rewards from mining are programmed to decline exponentially, which may decrease the incentive to mine. As miners decline, the likelihood of a monopoly increases, which leaves the network vulnerable to a 51% attack (a 51% attack is when a single entity possesses over half the mining share, which would allow this entity to theoretically double-spend a transaction involving their coins). With a proof-of-stake system, new coins are generated based on the holdings of individuals. In other words, someone holding 1% of the currency will generate 1% of all proof-of-stake coin blocks. This has the effect of making a monopoly more costly, and separates the risk of a monopoly from proof-of-work mining shares.