I am a big fan of Proof of Stake (PoS).
PoS is going to become a major topic over the next year as more people realize that Bitcoin's Proof of Work (PoW) is fueled by fossil fuels, mostly coal, and is horribly unsustainable.
I thought up with this article because distribution is vital to the security and value of PoS coins.
I have included a few PoW coins for comparison.
For those of you that are not familiar, PoS is an alternative consensus protocol for securing a blockchain.
Bitcoin uses a PoW consensus protocol. Because of popularity of Bitcoin the PoW protocol is the most well known and understood of protocols. There are others which are not yet common and I will save their mention for another day.
Ethereum is trying to move to PoS (in order to lower fees and increase speeds), but has not been able to manage it so far.
Let's look at #Bitcoin (BTC) to get an idea of what a good distribution looks like.
Regardless of any criticisms, there are many good reasons that make BTC the market leader.
A great distribution is one.
The other chart that I would like to show you is not loading....
Ah! Bitcoin!
Slow!
This chart is less pretty, but will suffice.
Top 2 addresses own about 2%
The top 110 addresses own roughly 19%
#BlackCoin (BLK) is the oldest pure PoS coin based on Bitcoin.
It has an even distribution and a strong community.
I believe that at it's current marketcap it is one of the best buys available today.
It started with a PoW period, with no premine, in order to ensure that nobody could control 51% of the network (avoiding the dreaded 51% attack which you probably know about from BTC discussions).
But, it has since switched to pure PoS believing that PoW is wasteful and unnecessary.
From the clustering of Bittrex and Poloniex wallets you can see the result of the mining pools selling to exchanges during the initial PoW phase.
This is the BLK equivalent chart that didn't load for BTC
BTC is far more widely used and has many orders of magnitude more addresses.
The main difference in value between BTC and BLK is the fullness of the orderbook (past and present).
I am not here however to show you why BTC is more valuable than BLK.
But, why BLK is undervalued on the market.
#NavCoin is a promising project in the privacy sector. They use PoW and PoS together.
You can read arguments for and against their privacy adaptations.
I have a small stake - here's hoping they work out!
#NavCoin (NAV) is a newer project with only half the total wallets, but with 4x the market cap of BLK.
Obviously they are working on developing better privacy, and so their speculative value comes from the possibility that they may blow other projects out of the water by having leading edge privacy with forward secrecy.
But, they may be a long shot, maybe things won't work out and their value could come crashing down?
Only time will tell.
Here you can see that distribution is unbalanced even among the top stakeholders.
This is something which newcomers may not love - especially as prices rise.
#PeerCoin (PPC) has made the argument that a mixed PoS/PoW system helps create an even distribution.
They emerged about a year before BLK, so if they are right it should have proven true by now.
Although PPC has roughly the same number of wallets as BLK they are not nearly as evenly distributed - neither among the top 1000, nor even among the top 10.
I don't understand why they hold more than 3X the marketcap of BLK.
PPC is the only coin in this article which I do not hold.
You can see here that the top 2 PPC addresses own more than the top 10 BLK.
#Pivx (based on BLK PoS) has a great distribution, despite being newer.
They are also working on privacy features and currently have 2.5X the market share of NavCoin.
The cool things is - it's all open source - if PiVX hits on something big every other project can implement it (like Pivx used BLK's PoS system).
I assume the wallet cluster in the center is an exchange? I don't know why it's not ID'ed.
It's also strange that the light blue address cluster are all the same size, probably not an exchange.
Now let’s look at the distribution of a few PoW coins.
Distribution is not related to security with PoW, but it is important because large sell-offs can disrupt short/mid term growth patterns.
And, people want to feel that distribution is fair.
#Litecoin (LTC) has a thriving community and a great distribution.
#VertCoin (VTC) has a lot of users, but a surprisingly top 10 heavy distribution.
#DigiBytes (DGB) is like whoa.
It’s market share is right around that of Pivx, but almost half of the coins are held by the top ten rich rich addresses! :P
In Summary:
I believe that BlackCoin is undervalued because the coin has a long history of quickly adopting great developments as well as independently developing value which has been adopted by others, but there are also other PoS coins which I also like!
I believe that BLK’s even distribution will help it continue to maintain consistent growth patterns, and I worry about the distribution of coins like PPC, NAV, and DGB.
I am hopeful that each of the coins I have mentioned will continue to grow, but I sold most of my DGB for BLK when it pumped because I am worried about mass sell-offs from the top. Apparently the large wallet is an investor... Not 100% comforting to me, but I still hold a decent stake.
I consider reversion to the mean and spread out my USD value across each of the coins which I think may be long-term winners.
There is no investment advice above, just rambling thoughts.
In the end the value of a coin comes down to the community using it and the outreach and sales strengths of the people who are passionate about using and developing the project.
I often think about how far ahead of the curve my old Amiga Computer was… but they went bust and now I use a 86x compatible.
The best product does not always win!
Diversify Diversify Diversify!
Donations:
BlackCoin: BRDaGxByyM5PGisScAjpZt3V2ceVb5vTqe
Litecoin: LfCb4LXqMhBCs3yZ6mTchgeLFFcP26rUzz
Bitcoin: 1BkE3a5Z88wHBeHVwm3EU4RPGUCZmR4PZ6
NavCoin: NNXYmeYVs8BA9rhvXms2jXjbzeEitE7q6Q
Pivx: DAmxgf4xh1w5xDt9SRqCpV9DneZct8BT4F
VertCoin: VrLrz8u4YWzUt6KgsRhKgVgFTafLwARKN8
DigiBytes: DJyd2NAiuJpFmFpve6nvz7isWBYCfpsqqv