What is Peercoin?
Peercoin is a peer-to-peer digital currency, which uses cryptography to achieve a 'distributed consensus' between its users.
It uses a hybrid of both the 'proof of work' (which is the one Bitcoin uses) and 'proof of stake' system. The reason it uses a hybrid is to attempt to address the vulnerabilities the proof of work system has.
Walkthrough Video that Explains How to Buy Peercoin Online
Receiving coins as rewards declines over time when using the proof of work system. This may reduce the incentive to mine for coins because their value is reduced. The possibility of a monopoly can then be apparent and one user could own 51% of the mining share and in turn could create a 51% attack.
Proof of stake means new coins are generated based on holdings of individual users. The chance of a monopoly is still present but reduced as it makes the monopoly costly.
Peercoin and Bitcoin relationship
Peercoin was inspired by Bitcoin and so shares lots of its source code and technical features. It has a similar hash function (the algorithm that solves the mathematical problems to add each new block) to Bitcoin. This means that miners can easily jump between mining either Peercoin or Bitcoin.
When we saw the Bitcoin fork, the number of Bitcoins rewarded to the miners reduced from 25 to 12.5. This is a considerable reduction and meant that mining was less profitable.
As this happened, Peercoin saw a spike in its mining. Lots of Bitcoin miners jumped over and began mining Peercoin because it was more profitable.
This relationship is entirely opportunistic for those miners with little benefit to Peercoin. Should we see this happen again, miners may jump to different altcoins.
How does Peercoin work?
Those who hold Peercoins can verify the transactions, the more you hold the more important your verification is for the network.
This means that Peercoin doesn't rely on mining powerhouses to generate coins, in fact this system makes each computer equal in their ability to mine.
The argument then is that it encourages saving rather than to spend, therefore leads to stores of wealth.
Creation of Peercoins
There are two ways to generate new Peercoins. The first is mining, where a hash function directly secures the network.
The second, is minting. This rewards users in proportion to the coins they hold (the target is 1% annually), which helps secure the network. The longer-term plans of Peercoin is to reduce gradually the amount of mining and rely more on minting. This will create a fair distribution and could lead to an increased reward from minting.
This is more energy efficient because it is only done per transaction and so does not require the computing fire power needed to mine.
Once a transaction is completed and a Peercoin enters your wallet, it must age for 30 days before minting can occur. The longer Peercoin ages, the higher the chance minting will happen and add a block to the blockchain. This is true until it reaches its cap of 90 days, where the probability then plateaus.
Once minting happens (block is created), the coin is frozen for 520 blocks and cannot be used. This usually lasts for three and a half days.
Should I buy or trade Peercoin?
Given Peercoins relationship to Bitcoin I think it is hard to see this cryptocoin going away anytime soon. The fact that miners can switch between mining for Peercoin and then Bitcoin does allow miners to take advantage of the each one depending on the difficulty of mining.
Due to the fact Peercoin intends to reduce its dependency on mining and increase minting as a method of generating Peercoins, they intend to reduce the fee paid to the network when mining occurs. This will increase minting and combined with its increased energy efficiency should allow for greater long-term scalability.
Due to its smaller blockchain, it can sync quicker to your computer and makes it attractive to any future innovations.
With this in mind I think there is certainly scope for this cryptocurrency in the future.
Currently you cannot trade Peercoin as a CFD however you can still trade it through cryptocurrency exchanges. The likes of Bittrex, Coinswitch and other exchanges make trading Peercoin very easy.
As with all cryptocurrencies, price movements are very volatile due to the nature of such a new phenomenon. Unlike traditional currencies that have been around for hundreds of years, the recent introduction of cryptocurrencies into the world of trading is very exciting.
Seeking out the best places to buy and sell is certainly an opportunity to make some short-term cash but as with all trading, you run the risk of losing your investment. Given the volatility we see in the cryptocurrency markets, caution is advised.
How to buy Peercoin Online - Step by step Guide:
Despite Peercoins similarities to Bitcoin and its age (founded in 2012) it finds itself just about in the top 50 of cryptocurrencies in terms of market share. Major exchanges only focus on the coins with the largest market share (Bitcoin, Ethereum etc) and so buying Peercoin directly is impossible, or at least with a trustworthy source.
This creates an extra step when buying Peercoin. This invloves buying a more popular cryptocurrency that you are able to buy directly using fiat currency, namely Bitcoin. Once you have a cryptocurrency, simply use an exchange to trade it for Peercoin, there are ample excellent exchanges to choose from.
Before you buy Peercoin, you need to get a wallet that you can keep your Peercoins in. This acts much the same as a cash wallet and has similar functionality to your email. You will be given a wallet address where people can send Peercoin to you and a password that only you will know (like most passwords!). Simply download from the Peercoin website.
How to buy Peercoin -
- To exchange Peercoin for Bitcoin, you first must buy some Bitcoin. Coinbase is a widely used exchange that allows you to directly buy Bitcoin using fiat currency. Go to the Coinbase website, and click the 'Sign up' button, you will then find a form similar to the one shown below. Enter your details as instructed.
- The next step is to add a payment method. You are given two options; 1- bank transfer and 2- via credit / debit card. Click 'Add payment' and select your choice. Coinbase then verifies your identity and so depositing will wait until Coinbase has verified you. This is not a long process.
- Once Coinbase's verification process is complete, you will be allowed to deposit into your newly opened account. Once you have funded it you will have a choice of buying Bitcoin, Ethereum or Litecoin. It is up to you which one you want to exchange for Peercoin. We will stick with Bitcoin in this step-by-step.
- Once Bitcoin is in your possession, you then must go to an exchange that offers Peercoin (most exchanges do offer Peercoin). I like coinswitch because if compares exchanges prices, so you can get the best price.
- Enter Bitcoin and Peercoin and the amount you want to exchange, then click 'continue'.
- Confirm the amounts are correct. You will see that the amount of Peercoin you will receive has been calculated by coinswitch. You will also find the comparisons between differing exchanges, pick the one you want and click 'exchange'.
- Next you need to enter the address of your Peercoin wallet. You were given this when you opened your Peercoin wallet. Continue by ticking 'I agree to terms' and hit 'next'.
- You will then be taken to a processing page where the transaction is completed. You will be given an address to send your Bitcoins to. Simply go back to Coinbase and using the address given, send the amount of Bitcoins agreed back to the buyer of your Bitcoins.
How to buy Peercoin with a credit card
Although a lot of exchanges show Peercoin against the US dollar, you cannot exchange it for dollars because all these exchanges only allow you to trade crypto coins with crypto coins rather than fiat currencies.
In order to buy Peercoin using a credit card, you must go through a similar process as above and buy a more established coin first. Normally we would suggest buying Bitcoin because you can trade Bitcoins on all crypto exchange sites.
How to buy Peercoin with Paypal
There was a time when Paypal was on board with cryptocurrencies. You could buy Bitcoins through its platform however they have withdrawn from the crypto market and now only allow you to deposit into their accounts from the sale of a cryptocurrency.
They allow this process through coinbase, which means that whatever cryptocurrency you own, you can sell for Bitcoin, Ethereum or Litecoin. You can then exchange that for your fiat currency and desposit into a Paypal account. That is the only way you can use Paypal with cryptocurrencies.
How to trade Peercoin
When it comes to trading Peercoin, you can use exchanges to buy the actual asset but unfortunately you cannot trade it on leverage just yet.
Brokers are making trading crytpocurrencies more readily available by offering the more established coins as CFDs. There are also futures markets and binary options markets becoming available on some brokers platforms.
As I mentioned you cannot trade Peercoin as a CFD yet, it doesn't have the liquidity of coins like Bitcoin, which helps protect the broker and trader. If you are looking to trade cryptocurrencies on leverage and using CFDs you can use brokers like AVA Trade.
AVA Trade now offers seven different cryptocurrencies (Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, Ripple & Dash) as a CFD. They are a highly regarded broker and I would recommend if you intend to trade crypto on leverage.
If you are looking to trade Peercoin, you must make sure you have a Peercoin wallet and another cryptocurrency wallet, so you have something to buy it with.
To open an AVA Trade account, follow the process below.
- Access the AVATrade site and sign up by entering your details. You can also sign up using Facebook or Google+.
- You then need to fill in a short questionnaire. This is for AVA Trade to get a gauge on your knowledge of the financial markets. You must understand the risks associated with using leverage (basically you can blow your account without the underlying asset losing all its value).
- Next you should select 'Floating Spread Account' with MetaTrader4 (MT4). MT4 is the most popular trading platform on the market at the moment and I don't there are any others that will come close any time soon. It offers hundreds of functions and you can even program automated trading on it.
- Next step is to fund your account. It offers two methods of deposit; bank transfer and credit / debit card.
- You will then be required to decide what platform you want to use, again their are two options; you can either use the web browser platform (slightly limited compared to the one you download onto your computer) and the version you download onto you desktop.
The future of Peercoin
One of Peercoins most attractive features was its new technology, however, that was new technology in 2012. In 5 years the cryptocurrency market has evolved drastically, first moving towards mining on CPU and now with smart contracts, all gradually overtaking Peercoin.
That’s not to say Peercoin is a caveman in the world of crypto, they are and have prepared technological novelties which has kept miners attention.
The slide from mining to minting is also an attractive prospect for users who do not own super software to mine these cryptocurrencies. This will also stop Bitcoin miners that are mining for Peercoin from being rewarded Peercoins and immediately selling them. The aim is to rely more so on minting, which will them promote saving.
This then provides scalability to the coin, which is often something to look for in any type of business.
I would be surprised if this was ever a leading light in the crypto world but would also be surprised to see it dwindle away and fail.
Enjoyed this Peercoin guide? Then see our other cryptocurrency guides:
- How to buy and trade Bitcoin
- How to buy and trade Dash
- How to buy and trade Dogecoin
- How to buy and trade Ethereum
- How to buy and trade Golem
- How to buy and trade Litecoin
- How to buy and trade Monero
- How to buy and trade NEM
- How to buy and trade NEO
- How to buy and trade Peercoin
- How to buy and trade Potcoin
- How to buy and trade Ripple
- How to buy and trade Stratis
- How to buy and trade Tezos
- How to buy and trade Waves
- How to buy and trade Zcash