Dynamic Proof-of-Stake Overview

by coinewzealand

Bitcoin and many of the so-called altcoins use the proof-of-work concept to generate new units of currency (a process called mining). One of the issues with this, however, is the vulnerability to the “selfish miner” or the 51% attack. Typically, new units of digital currency go to whomever contributes the most processing power to a network.

That processing power is used to verify and encrypt other transactions. Theoretically, if someone contributing a majority of processing power in an altcoin network (say, 51%), they’d be able to start messing with the integrity of other transactions. This recently happened with Bitcoin itself, in fact. The word of the body (the mining pool) contributing that processing power is all the rest of the community really had to go on.

Another issue with standard Bitcoin derivatives is the electricity costs of mining can be rather inefficient. While this has been rectified in some newer altcoins, the standard method of mining can be rather inefficient.

An alternative to this is the proof-of-stake currency, where all (if not most) of the units are generated at first. Peercoin is an example of a proof-of-stake digital currency. This implementation makes a 51% nearly impossible, but is also vulnerable to someone monopolizing the supply.

Enter the dynamic proof-of-stake. The dynamic proof of stake is a slightly different animal, how we intend to implement the Kiwicoin. The main issue is the Kiwicoin is intended to possess a software managed “reserve” account, dependent upon the roster of registered recipients. This registry is perhaps the structure weak point, as well as the reserve (potentially).

The primary idea, however, is that the reserve constantly increases (or even potentially decreases) relative to the total Kiwicoins in circulation. This means a monopoly attack is much harder. The reserve cannot be accessed, save by automated monthly payments. No matter how many are in circulation, the reserve will always be a fixed percent of all the Kiwicoins in circulation.

The Kiwicoin is intended as a basic income vehicle, rather than a conventional digital currency. Despite this, we believe the dynamic proof-of-stake idea can be a contribution the rest of the digital currency community can make use of.