Welcome to the third instalment of my attempt to convey the complexity of Skycoin by breaking it down to component level and explaining the modules individually in lay terms. Today's subject... Coin Hours.
Sky hodlers will notice that something called Coin Hours mysteriously appear in their wallet and keeps increasing over time. What are Coin Hours and where do they come from? What is their function and what else can they be used for? Do they have any value and will they be listed on an exchange? Confusion reigns and questions abound so let's try and gain clarity on coin hours.
Coin Hours can be thought of as the fuel that is needed to run Skywire. Somewhat similar to NEO GAS but significantly different with Coin Hours having a far wider scope and functionality. It is a rather clever mechanism which allows transactions on the Skycoin network to be executed at no base currency cost while simultaneously preventing the network from being spammed with micro transactions.
Way more than network fuel
Furthermore, Coin Hours will be used to purchase bandwidth and other services such as priority network access or dapps on Skywire and perhaps best of all, will have a market driven monetary value! This value will initially be driven by an Over The Counter buy-back program whereby holders can trade Coin Hours for Skycoin. Once the Skycoin DEX (Decentralised Exchange) launches, Coin Hours will also be tradable for other cryptocurrencies. Another exiting use case is the use of Coin Hours as collateral during the mix and merge process in CoinJoin transaction to discourage users from backing out and slowing down transactions. CoinJoin is the soon-to-be launched privacy protocol which Skycoin is implementing.
Coin hours are earned by simply keeping Skycoin in your wallet. You earn one coin hour per hour for every Skycoin in your wallet. The wallet doesn't have to be open or on line for coin hours to accumulate as the calculation and allotment happens on the blockchain itself so even if you are off line for a year, your coin hours keep accumulating and will be waiting for you next time you open your wallet.
Coin Hours protect the network from spam
Every time you send Skycoin to another wallet, your Coin Hour stash shrinks by 75% of which 25% is sent to the receiving wallet and 50% burned, leaving you with 25%. There is actually some more underlying complexity involved here but the average user need not concern himself with this as the node will automagically calculate optimal efficiency in the user's favour.
In addition to making it impossible for a malicious user to overload the network with hundreds of thousands of micro transactions, this mechanism brings scarcity in to the Coin Hour equation and ensures that they stay in low supply and thus in high demand which of course translates to higher value. Does anybody else spot the potential for a substantial passive income here given enough Skycoin in your wallet?
In summary, it should be apparent now that it is well worth the effort of preserving Your Coin Hour stash, something best accomplished by maintaining a series of wallets in which you keep your Skycoin so as not to lose most of your Coin Hours when transacting in Sky. No doubt, more exciting use cases for Coin Hours will emerge as the Skycoin ecosystem continues it's phenomenal growth with more and more quality projects being attracted/