Updated: Proof-of-Stake interest is safe and does not act as inflation.

[grue]

that's not proof of stake. the example you provided merely shows a proof of stake coin with inflation. proof of stake can be implemented without inflation.

Can you name one coin that implements proof-of-stake without any form of inflation?

I'd say a coin with both proof-of-stake and proof-of-work and without the inflation, would be a very great coin indeed! I am not aware of one that exists.

why don't you make one?

[bitme]

As far as I know, there is no coin that supports PoS without inflation. It would be a cool concept, and I'd be happy to make it, if I knew how. Basically, you'd have to send 1% of the coins as a TxFee, and destroy the TxFee in each Transaction. Then, you put the PoS's 1% interest in play. You destroyed 1% of the coins, and are now getting it back, but without the previous history behind each one. It's a brand new unspent output in place of your previous coins!

NEXT is PoS coin without inflation.
https://bitcointalk.org/index.php?topic=345619.0

[Impaler]

If one wants a non expending money supply with a PoS system it is a simple matter to combine the Demurrage feature in Freicoin with a PoS reward such that the two cancel out.  Effectively your demurrage is refunded when the user sighs a block.  The rate of positive 'interest' from a PoS reward system can be more then, less then or equal to the demurrage rate such that the net rate of interest can be any desired quantity including zero. 

Personally I do NOT think a fixed supply of coins is desirable, coin supplies should grow (or shrink) with the demand such that they maintain equal purchasing power over long periods of time.

[colinistheman]

Is NO ONE seeing MY posts? I'm trying to make it as clear as day that there doesn't have to be inflation OR deflation. You can just have new unspent outputs instead of your old coins! Gah! I give up trying to make people around me see my reasoning.

I like your idea and think it's good if implemented and works just like you say. Then that would be great!

[colinistheman]

that's not proof of stake. the example you provided merely shows a proof of stake coin with inflation. proof of stake can be implemented without inflation.

Can you name one coin that implements proof-of-stake without any form of inflation?

I'd say a coin with both proof-of-stake and proof-of-work and without the inflation, would be a very great coin indeed! I am not aware of one that exists.

why don't you make one?

I would if I had the programming know-how

[colinistheman]

NEXT is PoS coin without inflation.
https://bitcointalk.org/index.php?topic=345619.0

Awesome! How many coins max is there? (I hope not hundreds and hundreds of millions like some of these coins)

[RoadTrain]

In PPC transaction fees (currently 0.01 per kB) are destroyed.
So, with high transaction volumes it's even likely to experience deflation in total money supply.
Even now sometimes blocks with a high number of tx's contribute negatively to money supply.

So it's a dynamic system, I'd never call it truly inflationary.
In fact, it might prove to be even more deflationary than capped-supply coins.

[colinistheman]

Personally I do NOT think a fixed supply of coins is desirable, coin supplies should grow (or shrink) with the demand such that they maintain equal purchasing power over long periods of time.

I see your point, but I disagree. I don't think it is a good idea to have the supply grow or shrink with "demand". If the entire supply is used up, a new one can be made. But this way it does not devalue (or increase the value of) the existing currency.

I do like your idea of equal demurrage and interest cancelling eachother out

[GhostInTheBlockchain]

There is nothing wrong with 1% inflation.

Luckily it is only 1%, but why? The question is: why does there have to be any inflation?

Bitcoin has inflation, too.  Every time new bitcoins get mined the bitcoin economy experiences a bit of inflation.  Of course, that inflation ends when all bitcoins have been mined.  Additionally, the inflation is offset a little by lost coins.  In the balance of things bitcoin is deflationary.

A PoS system like peercoin contains inflation by design but not in a static 1% way.  At first the inflation comes from both PoW coins and PoS coins coming into existence.  As with bitcoin, the PoW inflation will end when all PoW coins are mined.  However, unlike bitcoin, peercoin destroys coins with every transaction. They go poof and exit the system.  This is done to offset the inflation caused by new PoS coins coming into existence.  Interestingly, I believe if everyone spends there peercoins immediately the peercoin system can actually become deflationary because more coins will be destroyed during the transactions than are created by PoS work.  Therefore, overall peercoin is not exactly 1% inflationary.

The peercoin designers did not design peercoin as a micro-transaction system.  They want it to be more like a savings account that earns interest. Therefore they reward people for saving their coins by allowing savers to mint new PoS coins.  PoS minting also has other benefits as described here:

https://en.bitcoin.it/wiki/Proof_of_Stake

[Impaler]

As far as I know, there is no coin that supports PoS without inflation. It would be a cool concept, and I'd be happy to make it, if I knew how. Basically, you'd have to send 1% of the coins as a TxFee, and destroy the TxFee in each Transaction. Then, you put the PoS's 1% interest in play. You destroyed 1% of the coins, and are now getting it back, but without the previous history behind each one. It's a brand new unspent output in place of your previous coins!

NEXT is PoS coin without inflation.
https://bitcointalk.org/index.php?topic=345619.0

I'd wait until we see their source code before jumping on board.  I certainly hope they have a solution though because a pure PoS system is something that would really help crypto-currency get out of the bubble-nature it is in now.

[colinistheman]

Bitcoin has inflation, too.  Every time new bitcoins get mined the bitcoin economy experiences a bit of inflation.  Of course, that inflation ends when all bitcoins have been mined.  Additionally, the inflation is offset a little by lost coins.  In the balance of things bitcoin is deflationary.

A PoS system like peercoin contains inflation by design but not in a static 1% way.  At first the inflation comes from both PoW coins and PoS coins coming into existence.  As with bitcoin, the PoW inflation will end when all PoW coins are mined.  However, unlike bitcoin, peercoin destroys coins with every transaction. They go poof and exit the system.  This is done to offset the inflation caused by new PoS coins coming into existence.  Interestingly, I believe if everyone spends there peercoins immediately the peercoin system can actually become deflationary because more coins will be destroyed during the transactions than are created by PoS work.  Therefore, overall peercoin is not exactly 1% inflationary.

The peercoin designers did not design peercoin as a micro-transaction system.  They want it to be more like a savings account that earns interest. Therefore they reward people for saving their coins by allowing savers to mint new PoS coins.  PoS minting also has other benefits as described here:

https://en.bitcoin.it/wiki/Proof_of_Stake

Good points and well said

[colinistheman]

As far as I know, there is no coin that supports PoS without inflation. It would be a cool concept, and I'd be happy to make it, if I knew how. Basically, you'd have to send 1% of the coins as a TxFee, and destroy the TxFee in each Transaction. Then, you put the PoS's 1% interest in play. You destroyed 1% of the coins, and are now getting it back, but without the previous history behind each one. It's a brand new unspent output in place of your previous coins!

NEXT is PoS coin without inflation.
https://bitcointalk.org/index.php?topic=345619.0

I'd wait until we see their source code before jumping on board.  I certainly hope they have a solution though because a pure PoS system is something that would really help crypto-currency get out of the bubble-nature it is in now.

Yeah I'm a little cautious too. It sounds good, but their software is written in java and could be dangerous potentially. Also, it seems like all their coins exist already and are in the hands of 73 rich individuals? I could have that wrong but sounds weird.

[elebit]

All peer-to-peer crypto currencies must have inflation by design. How else could you bootstrap it?

Absolutely no one would use a coin that had no mining and all coins existed before the first block.

[taltamir]

Bitcoin has inflation, too.  Every time new bitcoins get mined the bitcoin economy experiences a bit of inflation

Inflation =! an increase in money supply.
Inflation = a decrease in the value of a currency which is caused by an increase of its quantity divided by market size.
When the market size is fixed (eg, 100% penetration of a fiat currency that is legal tender and required by law to be accepted by everyone in a nation) then any printing of new money causes inflation.

But with bitcoin while new coins are being created, the market size & the number of people participating is increasing much faster than new coins are minted and as a result bitcoin is experiencing deflation (value of money rising) despite new mining (as can be seen by the rapid rise of its value)

[taltamir]

As far as I know, there is no coin that supports PoS without inflation. It would be a cool concept, and I'd be happy to make it, if I knew how. Basically, you'd have to send 1% of the coins as a TxFee, and destroy the TxFee in each Transaction. Then, you put the PoS's 1% interest in play. You destroyed 1% of the coins, and are now getting it back, but without the previous history behind each one. It's a brand new unspent output in place of your previous coins!

NEXT is PoS coin without inflation.
https://bitcointalk.org/index.php?topic=345619.0

It promises a lot but its currently closed source and doesn't explain how it intends to deliver on any of those promises.

[Etlase2]

That being said I do like the potential extra security proof-of-stake brings but this factor does not outweigh my dislike for this interest inflation quality, most likely motivated by greed.

So if you hold more coins and then you get more free coins this is inflation. Wouldn't this increase the maximum number of coins of that currency? Is this figured in to the max coins that are supposed to be issued in a cryptocurrency? Or will the "21 million total coins" of a proof of stake coin turn into 50 million total coins after x number of years with all the coins brought into circulation due to the proof of stake generation? Printing money for no work done-- sound familiar? (*cough* U.S. government?)

"Printing money for no work done" is not what is happening, the network is being secured--that is work. It isn't motivated by greed. Who gains from it? Certainly not the early adopters. There is no debt that becomes easier to repay for the network by printing more money. The reality is a small amount of inflation mildly counteracts the free lunch hoarders get over spenders. Spenders pay for the network with transaction fees. Hoarders benefit for doing nothing. With mild inflation, the hoarders must pay some small share for protecting their wealth, rather than relying on others. Try to think a tad more critically.

[cbeast]

PoS coins are and always will be of limited use. They are best served as local currency issued by a sovereign. They are more useful if they can be merge-mined and exchanged with Bitcoin. As a general use global payment system and reserve currency, Bitcoin's PoW is more trustworthy as there is no real danger of reversing a transaction. As a local currency, transaction reversal may be desirable if it is only possible by the authorities.

[NorthFreedom]

Reading through this thread it becomes stunningly apparent that most of you have not done any sort of in-depth research into the mechanics behind Peercoin, and rather are relying on the BTC-e trollbox for information. Please read the thoughts of PPC developer Sunny King into why PPC has been designed the way it has been.

As well, because it bothers me to continually read the same tired arguments, you should NOT be thinking of 1% PoS rewards in the same way as fiat inflation.

Let's say in society I'm holding $100. Let's also say that there is $1000 total in the country held by 10 people including yourself (the money supply). Everyone has $100 in this scenario.

Traditional 1% inflation is if the Government prints an extra $10. Now, I only have $100 out of $1010 total, meaning my relative purchasing power has decreased. This makes me unhappy as a holder of the currency, and is the lens that many of you are thinking of the mechanics of the coin.

With Peercoin, EVERYONE GETS the 1%, assuming you choose to secure the network with PoS minting. Your relative purchasing power has not changed. Everyone has the chance to hold $101 / $1010 (10% of the money supply) so to speak, which is no different than $10 / $1000.

The only difference is that this 1% PoS reward mechanism secures the network, and is offset by transaction fees. It is a useful form of work.

[romerun]

It's 1% inflation if everybody mints and nobody spends since coinage is required for minting. So in practice, pos inflation will be way way way lower than 1%. Another catch is that 0.01 tx fee is destroyed inflating the currency. I found the design is actually clever.

[coolbeans94]

Peercoin's PoS is a decentralized increase in the money supply based on the amount of coins you own. It is not bad at all. It is possible to increase the money supply and sill not have inflation. It is exactly the same as if you were to add more decimal places onto the end of Bitcoin. You have more tradeable units but the value stays the same. With Peercoin, you mint more coins, so your value stays the same because you have received more coins.  It is decentralized inflation, which is different than traditional inflation. It is not a top down approach, it is a bottom up approach that is distributed fairly.

The 1% PoS minting is like a gradual stock split.

The .01 tx fee works like a super-mini reverse stock split.


Peercoin has both of these features.