FAQ

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Here you will find answers to the most commonly asked questions. (TODO: consolidate from http://peercoin.net/faq (DONE) and https://github.com/ppcoin/ppcoin/wiki/FAQ http://www.peercointalk.org/index.php?topic=8.0 needed as well)

Contents

General

What is Peercoin?

Peercoin is a distributed peer-to-peer digital currency that can be transferred instantly and securely between any two people in the world. It's like electronic cash that you can use to pay friends or merchants.

What are Peercoins?

Peercoins are the unit of currency of the Peercoin system. A commonly used shorthand for this is “PPC” to refer to a price or amount (e.g. “100 PPC”). There are such things as physical Peercoins, but ultimately, a Peercoin is just a number associated with a Peercoin Address. A physical Peercoin is simply an object, such as a coin, with the number carefully embedded inside.

How can I get Peercoins?

There are a variety of ways to acquire Peercoins:

  • The most common way to buy Peercoins are the Peercoin exchanges, see the exchange list on peercoin.net.
  • Accept Peercoins as payment for goods or services.
  • There are several services where you can for traditional currency.
  • Find someone to trade cash for Peercoins in-person.
  • Participate in a Proof-of-work mining pool.
  • If you have a lot of mining hardware, you can solo mine and attempt to create a new block.
  • Visit a Peercoin faucet to receive a small amount for testing purposes.

Is Peercoin a clone of Bitcoin?

No, Peercoin is one of the truly unique alternative coins. Although its code is based on Bitcoin, Peercoin is the first coin to introduce Proof of Stake to secure the network. Proof of Work is also used in Peercoin, to promote fair coin distribution, but is not necessary for the security of the network.

Does Peercoin guarantee an influx of free money?

Since Peercoin is a new technology, what it is and how it works may be initially unclear. Peercoin is sometimes presented as being one of three things:

  1. Some sort of online 'get-rich-quick' scam.
  2. A loophole in the market economy, the installation of which guarantees a steady influx of cash.
  3. A sure investment that will almost certainly yield a profit.

In fact, none of the above are true. Let's look at them independently.

Is Peercoin a 'get-rich-quick' scheme?
If you've spent much time on the Internet, you've probably seen ads for many 'get-rich-quick' schemes. These ads usually promise huge profits for a small amounts of easy work. Such schemes are usually pyramid/matrix-style schemes that make money from their own employees and offer nothing of any real value. Most convince one to buy packages that will make them earn hundreds a day, which in fact have the buyer distribute more such ads, and make minute profits.
Peercoin is in no way similar to these schemes. Peercoin doesn't promise windfall profits. There is no way for the developers to make money from your involvement or to take money from you. That Peercoins are nearly impossible to acquire without the owner's consent represents one of its greatest strengths. Peercoin is an experimental, virtual currency that may succeed or may fail. None of its developers expect to get rich off of it.
As an investment, is Peercoin a sure thing?
Peercoin is a new and interesting electronic currency, the value of which is not backed by any single government or organization. Like other currencies, it is worth something partly because people are willing to trade it for goods and services. Its exchange rate fluctuates continuously, and sometimes wildly. It lacks wide acceptance and is vulnerable to manipulation by parties with modest funding. Security incidents such as website and account compromise may trigger major sell-offs. Other fluctuations can build into positive feedback loops and cause much larger exchange rate fluctuations. Anyone who puts money into Peercoin should understand the risk they are taking and consider it a high-risk currency. Later, as Peercoin becomes better known and more widely accepted, it may stabilize, but for the time being it is unpredictable. Any investment in Peercoin should be done carefully and with a clear plan to manage the risk.

Can I buy Peercoins with Paypal?

It is possible to buy physical Peercoins with PayPal but it is otherwise difficult and/or expensive to do so for non-physical Peercoins, because of significant risk to the seller.

While it is possible to find an individual who wishes to sell Peercoin to you via Paypal, most exchanges do not allow funding through PayPal. This is due to repeated cases where someone pays for cryptocurrency with Paypal, receives their coins, and then fraudulently complains to Paypal that they never received their purchase. PayPal often sides with the fraudulent buyer in this case, which means any seller needs to cover that risk with higher fees or refuse to accept PayPal altogether.

Buying Peercoins from individuals this way is still possible, but requires the seller to have some trust that the buyer will not file a claim with PayPal to reverse the payment.

Where can I find a forum to discuss Peercoin?

The Peercointalk forum is where most of the discussion on Peercoin occurs.

How are new Peercoins created?

New Peercoins are generated by the network through the process of "mining" and minting.... needs expanding

What's the current total number of Peercoins in existence?

Current count (22,086,411 PPC as of 14th Feb 2015. Also see Total Peercoins in circulation chart

Block reward starts at 2999 PPC and decreases at a rate based on the network difficulty (16 x increase in difficulty = 1 halving of the block reward)

How divisible are Peercoins?

A Peercoin can be divided down to 6 decimal places. Therefore, 0.000001 PPC is the smallest amount that can be handled in a transaction. If necessary, the protocol and related software can be modified to handle even smaller amounts.

What do I call the various denominations of Peercoin?

Unlike most currencies, Peercoin amounts are highly divisible. This has led to a desire to create names for smaller denominations of Peercoin amounts. Peercoin is decentralized, so there is no organization that can set official names for units. Therefore, there are many different units with varying degrees of popularity. As of 2015, the most common units are Peercoins, Peerbits, and Sunnys: 1 Peercoin = 10 000.00 Peerbits = 1 000 000 Sunnys.

The Peercoin (abbreviated PPC) is the unit that was used in the original Peercoin wallet software created by Sunny King. There is nothing particularly special about this unit, but it is by far the most common unit due to tradition.

Economy

Where does the value of Peercoin stem from? What backs up Peercoin?

Peercoins have value because they are useful and because they are scarce. As they are accepted by more merchants and services, their value will stabilize.

When we say that a currency is backed up by gold, we mean that there's a promise in place that you can exchange the currency for gold. Peercoins, like dollars and euros, are not backed up by anything except the variety of merchants and services that accept them.

Alternatively it needs to be added that while the law of supply and demand applies it does not guarantee value of Peercoins in the future. If confidence in Peercoins is lost then it will not matter that the supply can no longer be increased, the demand will fall off with all holders trying to get rid of their coins. An example of this can be seen in cases of state currencies, in cases when the state in question dissolves and so no new supply of the currency is available (the central authority managing the supply is gone), however the demand for the currency falls sharply because confidence in its purchasing power disappears. Of-course Peercoins do not have such central authority managing the supply of the coins, but it does not prevent confidence from eroding due to other situations that are not necessarily predictable.

Was Peercoin fairly launched?

Yes, Sunny King announced the planned release of Peercoin 9 days before the release. There were no blocks mined prior to launch. One forum member wrote, “[Sunny King] released a link to the source in the other thread at the promised time (5 min before 18:00 UTC). There was no premine. By the time I had built from source and got things running, there were 5 blocks mined.”

Sources:

Is the 1% minting reward fair for all users?

Yes. When the entire money supply grows due to the minting process, all Peercoin holders who participate in minting maintain their relative share of the network. Although large stakeholders generate a higher total number of Peercoins, they cannot, in percentage terms, pull ahead of other minters.

Is Peercoin inflationary?

The change of PPC money supply is determined by:

   Proof of Work mining (increases supply)
   Number of transactions (decreases supply by 0.01 PPC per transaction)
   Proof of Stake minting (increases supply at a rate up to 1% per year)

Thanks to increased mining participation, Peercoin inflation rate has consistently remained below 5% for the first half of 2014. At the current adoption rate, this rate will decline further over time, making Peercoin less inflationary and more sustainable than most other cryptocoins.

What if someone bought up all the existing Peercoins?

Peercoin markets are competitive -- meaning the price of a Peercoin will rise or fall depending on supply and demand at certain price levels. Only a fraction of Peercoins issued to date are found on the exchange markets for sale. So even though technically, a buyer with lots of money could buy all the Peercoins offered for sale, unless those holding the rest of the Peercoins offer them for sale as well, even the wealthiest, most determined buyer can't get at them.

Additionally, new currency continues to be issued daily and will continue to do so for decades; though over time the rate at which they are issued declines to insignificant levels. Those who are mining aren't obligated to sell their Peercoins so not all Peercoins will make it to the markets even.

This situation doesn't suggest, however, that the markets aren't vulnerable to price manipulation. It doesn't take significant amounts of money to move the market price up or down, and thus Peercoin remains a volatile asset.

Is Peercoin open to value manipulation?

The current low market cap of Peercoin means that any investor with deep enough pockets can significantly change/manipulate the rate. Is this a problem?

This is only a problem if you are investing in Peercoin for short period of time. A manipulator can't change the fundamentals, and over a period of 5-10 years, the fundamentals will win over any short term manipulations.

Sending and Receiving Payments

Why do I have to wait 10 minutes before I can spend money I received?

10 minutes is the average time taken to find a block. It can be significantly more or less time than that depending on luck; 10 minutes is simply the average case.

Blocks (shown as "confirmations" in the GUI) are how the Peercoin network achieves consensus on who owns what. Once a block is found everyone agrees that you now own those coins, so you can spend them again. Until then it's possible that some network nodes believe otherwise, if somebody is attempting to defraud the system by reversing a transaction. The more confirmations a transaction has, the less risk there is of a reversal. Only 6 blocks or 1 hour is enough to make reversal computationally impractical. This is dramatically better than credit cards which can see chargebacks occur up to three months after the original transaction!

Ten minutes was specifically chosen as a tradeoff between first confirmation time and the amount of work wasted due to chain splits. After a block is mined, it takes time for other miners to find out about it, and until then they are actually competing against the new block instead of adding to it. If someone mines another new block based on the old block chain, the network can only accept one of the two, and all the work that went into the other block gets wasted. For example, if it takes miners 1 minute on average to learn about new blocks, and new blocks come every 10 minutes, then the overall network is wasting about 10% of its work. Lengthening the time between blocks reduces this waste.

As a thought experiment, what if the Peercoin network grew to include Mars? From the farthest points in their orbits, it takes about 20 minutes for a signal to travel from Earth to Mars. With only 10 minutes between new blocks, miners on Mars would always be 2 blocks behind the miners on Earth. It would be almost impossible for them to contribute to the block chain. If we wanted collaborate with those kinds of delays, we would need at least a few hours between new blocks.

Do you have to wait until my transactions are confirmed in order to buy or sell things with Peercoin?

YES, you do, IF the transaction is non-recourse. The Peercoin reference software does not display transactions as confirmed until six blocks have passed (confirmations). As transactions are buried in the chain they become increasingly non-reversible but are very reversible before the first confirmation. Two to six confirmations are recommended for non-recourse situations depending on the value of the transactions involved.

When people ask this question they are usually thinking about applications like supermarkets. This generally is a recourse situation: if somebody tries to double-spend on a face-to-face transaction it might work a few times, but probabalistically speaking eventually one of the double-spends will get noticed, and the penalty for shoplifting charges in most localities is calibrated to be several times worse than the proceeds of a single shoplifting event.

Double-spends might be a concern for something like a snack machine in a low-traffic area with no nearby security cameras. Such a machine shouldn't honor zero-confirmation payments, and should instead use some other mechanism of clearing Peercoin or validating transactions against reversal.

Applications that require immediate payment processing, like supermarkets or snack machines, need to manage the risks. Here is one way to reverse an unconfirmed payment:

A Finney attack is where an attacker mines a block containing a movement of some coins back to themselves. Once they find a block solution, they quickly go to a merchant and make a purchase, then broadcast the block, thus taking back the coins. This attack is a risk primarily for goods that are dispatched immediately, like song downloads or currency trades. Because the attacker can't choose the time of the attack, it isn't a risk for merchants such as supermarkets where you can't choose exactly when to pay (due to queues, etc). The attack can fail if somebody else finds a block containing the purchasing transaction before you release your own block, therefore, merchants can reduce but not eliminate the risk by making purchasers wait some length of time that's less than a confirm.

Because pulling off this attack is not trivial, merchants who need to sell things automatically and instantly are most likely to adjust the price to include the cost of reversal fraud, or elect to use special insurance.

I was sent some Peercoins and they haven't arrived yet! Where are they?

Don't panic! There are a number of reasons why your Peercoins might not show up yet, and a number of ways to diagnose them.

The latest version of the Peercoin-Qt client tells you how far it has yet to go in downloading the blockchain. Hover over the icon in the bottom right corner of the client to learn your client's status.

If it has not caught up then it's possible that your transaction hasn't been included in a block yet.

You can check pending transactions in the network by going to a block explorer and then searching for your address. If the transaction is listed here then it's a matter of waiting until it gets included in a block before it will show in your client.

Why does my Peercoin address keep changing?

Unlike postal and email addresses, Peercoin addresses are designed to be used exactly once only, for a single transaction. Originally, wallets would display only a single address at a time, and change it when a transaction was received, but an increasing number of wallet implementations now generate an address when you explicitly want to receive a payment.

While it is technically possible to use an address for an arbitrary number of payments, this works by accident and harms both yourself and other unrelated third parties, so it is considered a bad practice. The most important concerns with such misuse involve loss of privacy and security: both can be put into jeopardy when addresses are used for more than a single transaction only.

How much will the transaction fee be?

Unlike Bitcoin, Peercoin has a fixed fee of 0.01 PPC in order to prevent spam as well. In addition, this fee is destroyed instead of going to miners and so helps to offset some of the inflation from mining and minting.

What happens when someone sends me a Peercoin but my computer is powered off?

Peercoins are not actually "sent" to your wallet; the software only uses that term so that we can use the currency without having to learn new concepts. Your wallet is only needed when you wish to spend coins that you've received.

If you are sent coins when your wallet client program is not running, and you later launch the wallet client program, the coins will eventually appear as if they were just received in the wallet. That is to say, when the client program is started it must download blocks and catch up with any transactions it did not already know about.

How long does "synchronizing" take when the Peercoin client is first installed? What's it doing?

The popular Peercoin client software from Peercoin.net implements a "full" Peercoin node: It can carry out all the duties of the Peercoin P2P system, it isn't simply a "client". One of the principles behind the operation of full Peercoin nodes is that they don't assume that the other participants have followed the rules of the Peercoin system. During synchronization, the software is processing historical Peercoin transactions and making sure for itself that all of the rules of the system have been correctly followed.

In normal operation, after synchronizing, the software should use a hardly noticeable amount of your computer's resources.

When the wallet client program is first installed, its initial validation requires a lot of work from your computer's hard disk, so the amount of time to synchronize depends on your disk speed and, to a lesser extent, your CPU speed. The Peercoin blockchain is relatively small by design, so this should not take more than a few hours. You can use the Peercoin software during synchronization, but you may not see recent payments to you until the client program has caught up to the point where those transactions happened.


Networking

Do I need to configure my firewall to run Peercoin?

Peercoin will connect to other nodes, usually on TCP port 9901. You will need to allow outgoing TCP connections to port 9901 if you want to allow your Peercoin client to connect to many nodes. Testnet uses TCP port 19901 instead of 9901.

If you want to restrict your firewall rules to a few IPs, you can find stable fallback nodes.

How does the peer finding mechanism work?

Peercoin finds peers primarily by forwarding peer announcements within its own network and each node saves a database of peers that it's aware of, for future use. In order to bootstrap this process Peercoin needs a list of initial peers, these can be provided manually but normally it obtains them by querying a set of DNS domain names which have automatically updated lists, if that doesn't work it falls back to a built-in list which is updated from time to time in new versions of the software. In the reference software initial peers can also be specified manually by adding an addr.txt to the data directory or via the addnode parameter.

Mining

What is mining?

Mining is the process of spending computation power to introduce new peercoins into the system.

Technically speaking, mining is the calculation of a hash of the a block header, which includes among other things a reference to the previous block, a hash of a set of transactions and a nonce. If the hash value is found to be less than the current target (which is inversely proportional to the difficulty), a new block is formed and the miner gets the newly generated Peercoins (78.19 PPC per POW block at current levels). If the hash is not less than the current target, a new nonce is tried, and a new hash is calculated. This is done millions of times per second by each miner.

Security

What is the purpose of checkpointing?

As of version 0.2, centrally-broadcasted checkpointing is no longer a critical part of the protocol. Its purpose is to defend the network during the initial growth period, and to help ensure a smooth upgrade path. Central checkpointing is now being gradually weakened, and will be eventually removed, to achieve a similar decentralization level to Bitcoin. The checkpoints exist solely as a security measure: if something terrible were to happen, we have the checkpoints as a backup.

Help

I'd like to learn more. Where can I get help?