Network Stake-Dependent Interest An overview of cryptocurrencies.
Bitcoin is the wise grandfather who introduced the modern cryptocurrency to the world. It features a long (over 100 year) proof-of-work phase. This requires miners to mint new coins to increase supply. The supply will end at 21,000,000 coins and miners will then only mine transaction fees to keep the transaction ledger (called a blockchain) secure. The requirement for proof-of-work mining means the coin consumes enormous amounts of energy to keep generating blocks. The transaction time with 10 confirmations is approximately 100 minutes.
Litecoin was the next generation of coin. Featuring a new algorithm for minting coins (Scrypt), it was more difficult for large ASIC farms (clusters of computers designed specifically to mint a coin) to form allowing regular computer users to mine for them. THe supply will be 84,000,000 coins. After that, miners will mine transaction fees only such as with Bitcoin. The transaction time with 10 confirmations is approximately 25 minutes.
Blackcoin was the first coin to utilize proof-of-stake for the majority of its existence. The initial distribution of Blackcoins occurred by means of proof-of-work and finished in less than a week. Over 70,000,000 Blackcoin were produced in this time. After the mining period ended, the only way for the transaction ledger or blockchain to be secured is by means of proof-of-stake. Proof-of-stake is a mechanism where the wallet mints coins at a slow rate according to total value. When the wallet is open, it is earning compound interest at 1% a year. If the wallet is closed, it earns nothing until it's open again and can earn 1% interest with fewer compound events. This proof-of-stake minting requires very low energy (0.5 watts per miner vs hundreds or thousands of watts in the case of Bitcoin or Litecoin). The transaction time with 10 confirmations is approximately 10 minutes.
VeriCoin is the fourth generation of coin. Featuring the benefits of Blackcoin, VeriCoin features very fast transaction times (10 minutes for 10 confirmations) and a very efficient proof-of-stake phase (less than 0.5 watts per wallet on a smartphone for example). In addition to these benefits carried over from Blackcoin, Vericoin introduces network stake-dependent interest.
What is it anyway
Network stake-dependent interest is the mechanism in which the amount of coins minted during the proof-of-stake phase occurs. Instead of a flat 1% interest, Vericoin's interest rate can range from 0% to just under 3%. The practical range of interest is between 1.5-2.5%. Based upon the number of coins being staked (occurs when the wallet is open and unlocked), the interest rate varies. The more coins staked, the higher the interest rate. This provides incentive for keeping the client open and unlocked, further securing the network. The additional security ensures that the blockchain is not compromised and forked. In addition, it provides incentive for owners of the coin to use it as a savings vehicle as it earns interest at a more reasonable rate and more representative of a real economy. The VeriCoin development team studied the economics of interest/inflation rates in model systems and the key range for a stable economy ranges between 1.5-2.5%. Finally, with a slow inflation rate (1.5-2.5% vs ~10% for Bitcoin), the coins have the potential to become a steadily valued currency.