Peercoin is one of the earliest altcoins out there. Founded back in 2012, it was developed by Sunny King and Scott Nadal. Using much of the original Bitcoin protocol, it is very similar to the original cryptocoin. However, a lot of the various altcoins out there were developed because the people behind them felt that there was something wrong with the original Bitcoin. The main reason Peercoin was developed was because Bitcoin mining ate up a lot of energy. Peercoin’s aim is to become more energy-efficient, while also enhancing security.
The energy efficiency goal of Peercoin was motivated by the high energy consumption of Bitcoin mining. It was estimated back in 2013 that Bitcoin mining was costing $150,000 daily in power costs. This can be traced to the fact that running the cryptographic hashing functions that are the foundation of Bitcoin mining is very resource intensive. Peercoin’s developers hoped to find a solution for producing more tokens that was less energy intensive.
The result was a combination of the proof-of-work system used by Bitcoin and the proof-of-stake system. The proof-of-work aspect of Peercoin is run using the SHA-256 algorithm and the rewards are halved every time the network increases in size 16 times. This means that as the network gets bigger, dependence on proof-of-work mining reduces.
The proof-of-stake part of the hybrid system is Peercoin’s claim to fame. With a proof-of-stake system, new coins are generated based on how much Peercoins a person is holding. Someone holding 1% of the currency will be generating 1% of all proof-of-stake coin blocks. This means that anyone who wants to take over the network needs to buy a lot of Peercoin to take it over. Additionally, instead of the a competition for blocks which will require faster and more powerful computers, the proof-of-stake system consumes around 30% less energy than normal Bitcoin mining would do.
Besides using the hybrid proof-of-work/proof-of-stake system, Peercoin also has a couple of features that set it apart from Bitcoin. First is steady inflation. Peercoin is designed to have a steady 1% inflation per year. This means the system can accommodate an unlimited number of coins, though there will be an increasing loss of purchasing power. Second is that the Peercoin network sets a flat transaction fee, instead of the variable ones of Bitcoin. This is aimed at self-regulation and to offset deflation.
Overall, the Peercoin cryptocurrency has developed into a strong competitor to Bitcoin with its features. It currently has around $50 million in stored wealth, which makes it one of the bigger altcoins out there. It will be interesting to see how it will evolve in the future.