A Euro Substitute

A Composite Cryptocoin

By Steven J. Grisafi, PhD.

I have decided upon my recommendation for a cryptocurrency to serve within a two step international trading scheme for the European Monetary Union. I propose replacing the Euro dollar with a composite cryptocurrency formed as the sum of the Namecoin and the Peercoin, which I call the Basecoin. I make this selection for the following reasons. Both the Namecoin and the Peercoin utilize the same cryptography algorithm as the Bitcoin. The Namecoin serves as the Proof of Work contribution to the composite. The Peercoin serves as the Proof of Stake contribution. Mining for the Namecoin occurs almost exclusively as merged mining with the Bitcoin. The difficulty of mining the Namecoin is so great that casual users cannot hope to be successful using the Namecoin wallet, but must instead join a mining pool. Such mining for the Namecoin occurs almost exclusively as merged mining with the Bitcoin. Miners participating in such merged mining pools do so for the rewards to be achieved upon successful mining of the Bitcoin. Consequently, the Namecoin rides the coattails of successful Bitcoin mining.

Two recent attacks upon the Bitcoin block chain by anonymous hackers failed to disrupt the processing of transactions. The motivation for these attacks appears to have been to persuade other users of a need to enlarge the Bitcoin block size from one megabyte to something larger, such as ten megabytes. Bitcoin miners in locations where Internet bandwidth is limited oppose any change to enlarge the block size. Since much Bitcoin mining occurs in China, where bandwidth is limited for many users, there is much resistance to enlarging the block size. However, the failure of the anonymous hacking attacks demonstrated that there is no need to enlarge the block size. Each hacking attack was an attempt to overwhelm the processing of transactions so as to create a bottleneck with the possible resultant loss of transactions. But the effect of the attack only served to raise the price of transactions to be included within the block chain by successful miners. Miners have the option of placing a floor price upon transactions that they are willing to include. To so do means a loss of income to miners, but this mechanism provides stability to the block chain under duress of hacker attacks.

The difficulty of minting the Peercoin is of the same order of magnitude of mining the Namecoin. The Proof of Stake mechanism causes users to horde Peercoin in the hope of achieving successful minting. The need to retain Peercoin in a user’s wallet in the hope of achieving successful minting serves to stabilize the value of the Peercoin, and consequently, also that of the Basecoin. Successful miners of the Namecoin must purchase Peercoin to form their Basecoin. Similarly, successful minters of the Peercoin must purchase Namecoin. The need for miners and minters to purchase the other coin of their activity serves to stabilize the value of the Basecoin. The difficulty of both mining and minting for the Basecoin essentially limits its money supply growth rate to the one percent inflation rate that the Peercoin developers have built into the design of their coin. In and of itself, the Namecoin has value in its own right as it serves as the basis for dot-bit domains and their information network. Hence, hording of the Peercoin, coupled with the inherent value of the Namecoin, posits stability for the value of the Basecoin.

Acceptance of the Basecoin as the substitute for the Euro dollar within the European Monetary Union would obviously enhance interest in both the Namecoin and Peercoin. Yet, I have observed these coins to possess relatively stable value and dynamics. Such interest of cryptocurrency enthusiasts for both the Namecoin and the Peercoin upon acceptance of the Basecoin as the Euro substitute is welcome because their activities would serve to process the transactions of international trading within the European Monetary Union. Although one could also solicit proposals for a new cryptocoin to serve as the Euro dollar substitute, I thought it best to select a composite of established coins. The task that would remain now, if the Basecoin were to be accepted, is to establish exchange rates for the Basecoin with the to be reinstated national currencies of all member nations within the European Monetary Union. For this task the money supply potential seems most suitable.