Privacy is quickly becoming one of the most important features for any new blockchain cryptocurrency. Even the big stalwarts such as bitcoin, Ethereum, and Litecoin are beginning to get in on the privacy craze.
One cryptocurrency is taking a completely different approach to not only privacy, but to many aspects of cryptocurrency economics. Today we’re going to be talking about one of our top picks for 2018, PIVX.
PIVX: The basics
PIVX is an increasingly popular cryptocurrency that went from being valued on coinmarketcap.com at just a few cents each to a recent high of $15 each. The project is highly unique as it is currently the only cryptocurrency that offers full privacy alongside a proof-of-stake consensus model.
In addition to offering proof-of-stake, the system also relies on masternodes that allow for high transactions speeds, privacy features, and also a steady way for wealthy investors to earn a regular income. At 10,000 PIVX, the price of a masternode is likely all but out of reach for the average investor that didn’t get in early.
PIVX started out as a fork of Dash. Dash operates on X11 proof-of-work mining and masternodes. The PIVX team wanted to offer the speed advantages of masternodes, but did not want to rely on arguably wasteful proof-of-work mining.
PIVX has a unique economic model which allows for a very different method of supplying new tokens to the ecosystem. Every minute, a block is confirmed and the reward of about five PIV is released. This reward is divided up between a winning masternode, and a winning proof-of-stake participant.
Instead of this being a static reward, PIVX offers a unique feature that allows the network to decide how to reward the masternode and the staker. If there are too many masternodes on the network, rewards will increase for stakers.
Likewise, if there are not enough masternodes, the masternode reward will increase. Finally, a small percentage of each block reward goes into a self-governance budget.
With the new blocks every minute, the PIV released is not part of a limited supply. This means that hypothetically, there is an unlimited amount of PIVX tokens that will exist. While some may argue that this type of economic model is inflationary, meaning the token values will drop over time, the PIVX team argues against this and also offers a solution.
The economics of PIVX
Since the supply is hypothetically unlimited, there are two key factors that contribute to controlling the supply.
The first aspect is that all transaction fees paid on the network are destroyed, or “burned”. This means that transaction fees are not paid to masternodes or any other network participant. This will help control the supply in some ways.
If PIVX continues to grow in popularity, then there will naturally be more transactions on the network, which will lead to the destruction of more PIVX units. This ensures that, at least to some extent, the supply isn’t absolutely unlimited.
The second point to consider is that the network is designed to incentivize people to buy and hold the token. For instance, to set up a masternode, one must gather 10,000 units of PIVX. Secondly, in order to participate in the proof-of-stake mining, one must also buy and hold PIVX.
How much PIVX is needed to successfully mind your proof-of-stake?
According to this calculator, you will need to have at least 500 PIV (about $4,500 worth) in order to stand a chance at mining one block per month, assuming your computer is on 24 hours a day. Staking 10,000 PIVX will net you an estimated 43 PIV per month, and running a masternode will earn about 48 PIV.
In this way, masternodes are not overly incentivized and proof-of-stake mining is also roughly equally profitable, with only a slight preference given to masternodes.
PIVX and the ZeroCoin protocol
Last year, PIVX began offering a new version of the wallet that is compliant with what’s known as the ZeroCoin protocol. Roughly speaking, the protocol which was created by John Hopkins University students, outlines a theoretical design for a wholly anonymous and untraceable cryptocurrency system.
PIVX is compliant with ZeroCoin through the use of what’s known as “zPIV”.
zPIV units are created through a process called minting. The process goes something like this. The user opens their PIVX wallet, goes to the zPIV minting tab and chooses the amount of PIVX they want to convert into zPIV. This process consumes a very small transaction fee.
Minting usually completes in just a few seconds. Once the process is complete the wallet will contain the amount of zPIV that was minted. zPIV is different from PIVX in that it can only exist in very specific quantities, much like physical cash or casino chips.
For example, it’s not possible to own or send 1.1 zPIV. Instead, you can only own 1, 2, 5, 10, 50, and so on. The reason for this restriction is to ensure that a potential attacker is not able to determine the source or destination of the anonymized cryptocurrency by searching for specific quantities sent or recieved.
zPIV is not its own currency. zPIV units can only exist within the wallet in which they were minted. When you send them, they will arrive as regular PIV units at the destination. The difference being that the PIV units that arrive at the destination have no direct connection to the wallet in which they originated from as zPIV.
Unfortunately, zPIV is not perfect. Minting zPIV requires a transaction fee. Additionally, once units are converted to zPIV, they are not eligible for staking or for use in a masternode. While the addition of staking zPIV is on the roadmap for 2018, it’s not currently available. The PIVX team promises that once it is available, the staking of zPIV units will be more lucrative than the staking of regular PIVX units.
Furthur, tracking zPIV across multiple devices with the same wallet can be difficult. If you send zPIV from one device, your other device won’t reflect this balance change unless you manually copy over the wallet.dat again. This is also on the list of fixes to come out this year.
Constant development and a bright future
Remember how PIVX is collecting part of the block reward during each block? The PIVX team has been doing an exemplary job of making use of this budget for the furthering of the currency. This includes not only technical development, but also marketing, advertising, and other community outreach programs.
The currency has more than a dozen significant new features planned for this year and given the steady pricing of PIVX units of over eight dollars each even during the multiple recent major market dips, it’s safe to say that PIVX as an organization should be quite well-funded for the for seeable future.
Disclaimer: These are writer opinions and should not be considered investment advice
Featured Image via Pivx.org