NeuCoin, its developers say, has the potential to “realize Satoshi’s original vision” by addressing the issues of increasing transaction fees, centralization of mining and divergence of interests between miners and regular coin holders in Bitcoin. Through the utilization of proof-of-stake as opposed to Bitcoin’s proof-of-work, separate parties become united and transaction costs are reduced to a negligible amount.
“We believe Satoshi’s invention was the most important of the 21st century,” said Dan Kaufman, one of NeuCoin’s creators. “But there is no way to deny that Bitcoin mining is becoming more and more centralized. A handful of VC-backed mining companies are creating an oligopoly. And if you’ve ever seen a warehouse full of Bitcoin mining rigs that could heat a football stadium - you just know that proof-of-work is not an efficient way to process transactions.”
Proof-of-work supporters tend to dismiss proof-of-stake because there is “nothing at stake,” meaning that since proof-of-stake mining doesn’t incur any costs for electricity and computing power, nothing would prevent dishonest miners from endlessly trying to commit double spend fraud or mine on multiple chains, no matter how low the odds of succeeding.
NeuCoin’s whitepaper is quick to point out one obvious counterargument to “nothing-at-stake”:
“What proof-of-work proponents are neglecting to see is that proof-of-stake security does have a cost: the capital cost of acquiring and holding coins. The brilliance of proof-of-stake is that it turns all coin owners into security providers, and requires any would-be attacker to purchase a large amount of the currency to attempt an attack, which would be an attack on his own wealth.”
The 39-page paper further describes how it believes that proof-of-stake can solve the inherent drawbacks of Bitcoin’s proof-of-work and attempts to mathematically show that all “nothing at stake” objections would be defeated by NeuCoin’s design.
Proof-of-stake’s provision of security by coin owners has two important implications. Firstly, mining rewards are proportionate to the number of coins owned and time held, making them akin to interest payments on the miner’s coin holdings. Secondly, the misalignment of interests between miners and holders is redressed: no longer are the miner and holder two separate entities; they are one and the same entity.
“To encourage miners to get involved, we actually have a small PoW component during the first year and high PoS awards to incentive early adopters. It will be decentralized and fair and everybody will benefit, not just the centralized corporations,” Kaufman explained.
In its initial implementation, however, NeuCoin further presents several improvements which its team suggests make it the first currency to demonstrate a mathematical solution to the nothing-at-stake argument and all its associated attack vectors: grinding, history revision and pre-programmed attacks. These improvements include higher mining incentives, an in-built mechanism to avoid duplicate stakes by ‘punishing’ nodes which broadcast them, and a redesigned version of Peercoin’s stake modifier parameter. The scenario in which miners are able to alter transaction history is thus avoided.
In one of the more harmonious forking stories witnessed in altcoins, NeuCoin was fortunate to enlist Peercoin core developer Michael Witrant as a strategic technical advisor. NeuCoin also recently added Patrik Stymne, chief systems architect and co-founder of King (Candy Crush Saga), to its list of strategic advisors, which also includes Jackson Palmer, creator of Dogecoin, Alex Norstrom, Head of Growth at Spotify, and Brock Pierce, serial crypto entrepreneur and Bitcoin Foundation Board member.
“We're extremely happy to have two amazing new technical advisors join us,” co-founder and CTO Ophélie Pubellier commented on the recruitment. “Michael was appointed core developer by Sunny King himself and has created several important PoS innovations. Patrik is responsible for scalability and security for millions and millions of users for Candy Crush and before that for Lycos Europe and Razorfish.”
As its white paper suggests, NeuCoin has its sights set on mass market adoption. The idea that Bitcoin may not be the cryptocurrency of the mainstream for years to come is nothing new, yet to suggest that it instead might be one based on proof-of-stake – a complete departure from Bitcoin’s tried and tested network and one which would create new challenges for industry, consumer and regulator alike – is a bold move.
The robustness of the technical aspects of the whitepaper alone points to a development team which is both ambitious and knowledgeable in crucial areas, while openly inviting public consultation even pre-release (a survey for prospective users is already available), and offering bounties for feedback on the whitepaper.
Investors have keenly sensed this potential, with NeuCoin having already secured US$2.25 million in seed and angel funding from investors including Patrik Stymne, Uber senior vice-president of business Emil Michael, Facebook’s head of growth Rob Goldman and Hotwire president Henrik Kjellberg.
The NeuCoin currency and online wallet will launch in the summer, with a presale to the cryptocommunity planned for April.
Did you enjoy this article? You may also be interested in reading these ones:
Instantly buy Litecoin, Dogecoin, Peercoin, and Darkcoin at ShapeShift.io *No account needed*