Peercoin announces new changes to its PoS reward system

Written by: Jinia Shawdagor
April 15, 2020
  • The new reward model comprises two parts.
  • Peercoin hopes this model will help maintain its promise of 1 percent inflation per year.
  • This reward model will help increase the number of active minters in the Peercoin chain.

Peercoin, an innovative project that came up with the Proof of Stake (PoS) blockchain security system has made changes to its reward model. The project unveiled this news on April 11 via a blog post, noting that these changes seek to help tackle inflation issues within its ecosystem. Per the blog post, Peercoin developers came up with a way to ease inflation without affecting the concept of coinage (minting).

At the moment Peercoin uses a reward model that promised 1 percent minting inflation per year. As such, this system allowed minters to claim their 1 percent for participating in block creation. However, this model has its shortcomings. In practice, minters on the Peercoin network do not claim this reward, and Peercoin’s minting results in less than 0.5 percent per year.

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As a result, Peercoin developers decided to change this limitation to fulfill the promise of a 1 percent per year Proof of Stake increase in the number of coins. According to the blog post, they found a way to implement this change without undermining the concept of coinage. This involved coming up with a set of rules that aim to create a balance between big and small minters so that every participant gets their fair share of the reward.

Creating a reward system with two portions

In the publication, Peercoin noted that its developers came up with a minting reward comprising two parts, namely dynamic and static. The static portion is a simple fraction of the existing coin supply that is divided among the blocks minted on average per year.

On the other hand, the dynamic part would use the standard coinage calculation. However, the system would augment it with a multiplier that is based on the total amount of coinage that was minters claimed in the previous year of block-creation. This means that the dynamic portion increases when participation in the chain is low.

Per Peercoin, these portions are weighted 75:25 dynamic:static. As such, they add up to the promised 1 percent per year PoS inflation, which was agreed upon through consensus since the chain began in 2013.

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This move seeks to increase participation in the chain

According to Peercoin, this new reward model would help increase participation in the chain. This is because more participation would result in a greater reward. In return, the project hopes that this move will help keep its promise of 1 percent of inflation per year.

To help ward off bad actors that may try to manipulate this system, the developers put in place several mechanisms. For instance, there is a 20 percent minimum on the number used for participation. There is also a 1-year cap on coinage to prevent rewarding minters that are inactive for years.

Mentioning its expectations of the new system, Peercoin said,

“All in all, we expect this protocol change to significantly grow the number of minters participating continuously in block creation, thereby sustaining the Proof of Stake difficulty, and ultimately the security of the chain itself. In addition, guaranteeing the 1% inflation target will stimulate the Peercoin economy to grow and maintain good fundamentals throughout the ages.”

Do you think the changes to Peercoin’s PoS reward model will help the project maintain its promise of 1 percent of inflation per year? Share your thoughts in the comment section below.