Minters Get Richer
Peercoin’s distribution model is nuanced, but we can look at it through a particular paradigm, ‘The Rich Get Richer’ (RGR), to see how it compares to other monetary systems. In order to tackle this concept, we first must recognize the difference between ‘nominal’ and ‘real’ value. The basic thought experiment is that if everyone’s wealth were to be multiplied by 10, all prices would also be multiplied by 10, and the total purchasing power in your possession would be unchanged. Here, the nominal value is multiplied by 10, but the real value is constant.
In Peercoin, all coin holders have the ability to run a minting node for very little cost (can be run on a standard home computer or a raspberry pi). When minting, they are awarded by 3%-5%/year* of their coins. From the perspective of a network where everyone mints, this is merely a nominal change because everyone is rewarded proportionally. In practice, the entire network does not mint, as coinage is burned in transactions or simply never consumed. The result is that a better paradigm for Peercoin than RGR is the paradigm ‘minters get richer’ (MGR). The minters receive the inflation due to PoS, which causes their wealth to grow while those that burn their coinage have stagnant wealth. The MGR paradigm is far easier to defend than RGR because a) it makes sense to reward those responsible for the security of the network, and b) any coin holder can become a minter by simply running a minting node. This makes Peercoin’s inflation model fairly egalitarian within the current distribution of coins.
Not everyone currently has Peercoin, so there must be a way to integrate new people into the coin. Ideally, a PoS coin like Peercoin will maintain a continuous on-ramp that consumes resources equal to the amount of coin generated from fresh supply. Indeed, this is precisely what is achieved with PoW distribution on the Peercoin network. It allows fresh entry into the system, while the network maintains continuity and systemic sustainability through its long-term minters. In this way, the fair distribution of Peercoin continues to cultivate a community of caretakers that will maintain security of the blockchain.
*Peercoin's PoS reward model includes a 3%/year reward as well as a static amount that is proportional to the total supply. This additional static term tunes minter behavior to favor continuous minting, but generally follows a similar concept of proportionality to the total stake used. As such, this added complexity has no bearing on the concepts of nominal versus real value discussed in this article.
Check out this tutorial to learn how to get started minting with Peercoin.
