Bitcoin is without a doubt the biggest and baddest peer-to-peer electronic coin on the market. With a market cap now exceeding several billion dollars, Bitcoin has emerged as a major global investment vehicle and potential exchange currency.
Yet, Bitcoin isn’t the only all-digital P2P coin in the world. So-called “AltCoins” are emerging to challenge Bitcoin, with several promising to correct perceived flaws in Bitcoin itself. One popular emerging coin is “Peercoin,” which promises to address some of Bitcoin’s greatest challenges.
Peercoin, which is short for “Peer-to-Peer” Coin, is pretty much what it sounds like. Peercoin was created by software developer Sunny King, and was the first currency to use a combination of proof-of-work/proof-of-stake system (more on that later). Peercoin is now believed to be the 5th largest cryptocurrency.
Unlike Bitcoin and other cryptocurrencies, PeerCoin does not have a hard limit. Some have wondered if Bitcoin’s hard limit of 21 million coins is simply too small to function as a global currency. For one, Bitcoin prices could rise too high, and there may not be enough coins to truly facilitate global trading. With Peercoin, new coins will constantly flow into the market, but the flow of new coins will be closely regulated. Currently there are 20.7 million Peercoins in the market, but that number will continue to expand indefinetly.
By regulating the flow of new coins into the market, Peercoin may be able to preserve value, while also ensuring that the currency is viable as a global facilitator for trade. It is also designed to eventually reach an inflation rate of only 1%, which could make it useful for preserving value, which is in turn a useful trait for an actual functioning currency.
PeerCoin is also designed to be energy efficient, unlike Bitcoin, which is currently consuming large amounts of electricity through the mining process. As the price of mining has skyrocketed, many have come to question the viability of Bitcoin mining. If mining becomes too expensive, companies and individuals may simple stop mining new coins. This, in turn, could have detrimental effects on the currency’s viability and cause people to abandon it.
Peercoin’s proof-of-stake system is designed to guard against monopoly forces within production and holding. Bitcoin, on the other hand, faces the risk of eventually becoming controlled by a few mining organizations with the necessary equipment and resources to mine Bitcoins. This could create a situation in which monopolies would be able launch a double spending attack, which would essentially allow the monopoly money to spend Bitcoins more than once. The proof-of-stake system will ensure that new coins are generated based on holdings and should make it difficult to double spend Bitcoins.
Initially, Peercoin will function through a proof-of-work system, like Bitcoin, but over time the proof-of-stake system will take over as the currency grows. This will help Peercoin stabilize and grow in the future. As mentioned, this will also protect against anyone gaining too much power and threatening to essentially high jack the currency.
Of the many altcoins on the market, Peercoin currently appears to be in the best position to develop into a genuinely viable Bitcoin alternative. Mr. King took note of many of the biggest challenges facing Bitcoin and developed a currency that appears to take the best elements of Bitcoin and addresses many of the perceived weaknesses. Of course, given how far Bitcoin has come, and its unique first mover’s advantage, it may remain unchallenged.