What if a digital currency being both a commodity and a currency is a disadvantage not an advantage, now that it’s been proven that cryptography can solve existential problems for the digital version of both?
We always sought to be part of building the best Proof-of-Stake currency because we knew that if the consensus was near cost-less there would not need to be a fee market to support the consensus costs, like is happening with Bitcoin now. If Bitcoin’s fees rise too high, the market despite decentralization, will choose the less costly option almost no matter what. So in addition to the costly work and the security of the Bitcoin consensus, the third leg of the stool is it’s reduced payment cost. Inevitably fee markets are likely to arise, especially as Bitcoin’s reward gets exponentially closer and closer to zero. Proof-of-Stake further secured by our Proof of Stake-Time protocol is a great solution to preventing this fee market due the inherent lack of costs to forming the consensus securely. However Proof-of-Stake is missing a different leg of the stool, costly work supporting a market value for profit. So we thought, how can the market and the users have their cake and eat it too? How can we ensure a near cost-less secure consensus that prevents a fee market while also forming a cost pegged value, that is not so dependent on just speculation? We can do what the market has done for centuries prior to the Nixon shock, separate the currency and the commodity, yet pair their supply.
Through Bitcoin we have learned that even in the case of a digitally mined resource an ecosystem is built around mining. These miners and companies that enable them, have investments in the ecosystem and the commodity. They aim to invest time, money and resources into work that results in a profitable sale of the commodity. This is exactly how bitcoin functions as a commodity and value is generated based on costs. However, classically the currency and the commodity are not one in the same for practical reasons. They are tied to one another in supply ratios and in turn value. This also makes incredible sense in cryptocurrency. For example in PoW, security is more robust with longer block times yet this makes the currency less spendable. Likewise higher fees are better for miners but worse for the user. Often the currency and the commodity are at odds with one another at the protocol level. In cryptocurrency we can lock protocol rules to optimize these cost and value relationships and ensure they persist in their optimal contexts. In particular, if the supply ratio between the two is constant and the consensus is shared via auxiliary mining, this can be a well leveraged and flexible decentralized ecosystem. Costs can be minimal for money transmission yet required for resource procurement. We can enable a market-based organic value cycle as the costly work of reserve procurement also enhances the performance, scalability and security of the currency.
As VeriCoin accepts the blocks of Verium miners, VeriCoin is further decentralized and additional blocks are processed between VeriCoin’s blocks, all the while the VeriCoin users have low fees and the Verium miners are earning larger fees and rewards. The value of VeriCoin is it’s performance as a fast and near costless currency and Verium’s value is based on it’s own procurement costs and it’s ability to endow a paired currency with such benefits.
In addition, one of Verium’s key innovations is a variable blocktime which automatically scales the block size and enhances transaction performance of Verium and VeriCoin. As computational power grows, transactions process more quickly, this will over time and increased power bring VeriCoin’s average blocktime to 20 seconds and faster. So safely, proportionally to computational power, VeriCoin will become a faster and more secure currency with low fees and miners will earn their VRM rewards in minutes per mining between blocks that are proportional to their electric costs, in a profitable fee market.
In conclusion, we think separating the currency and the commodity allows for the best cryptocurrency solution for maximizing decentralization, security, performance and costlessness.
Creator and Developer of VeriCoin