The Reddcoin development team has announced they have designed a brand new algorithm, known as Proof-of-Stake-Velocity (PoSV), which the coin will be moving to in the fairly near future.
This new algorithm works similarly to Proof-of-Stake, where users “mint” new coins by demonstrating ownership of your current coins, rather than with the computational power used in more traditional Proof-of-Work coins.
One issue often raised with Proof-of-Stake is that it can potentially discourage people from using or spending their coins. The “Velocity” part of PoSV aims to fix this, as it also incorporates network activity between addresses into the Proof-of-Stake process — this can be achieved either by spending coins, or by keeping your wallet open which will “shuffle” them around automatically to keep generating rewards.
The Reddcoin PoSV FAQ reads:
Proof-of-Stake-Velocity (PoSV) is a new algorithm designed by Reddcoin core team to replace Proof-of-Work (PoW) as the mechanism to verify transactions and mine blocks. It encourages both ownership (Stake) and activity (Velocity). To increase your chance of ﬁnding a valid block and receive block rewards, instead of buying GPU or ASIC for more hash power, you just need to have a bigger holding of Reddcoins and keep your wallet running and connected to Internet to participate. PoSV minting, the counterpart to PoW mining, requires little computing power or energy and can be done on CPUs of PCs, laptops and even mobile devices. Every Reddcoin user will automatically become a PoSV minter.
To implement the new algorithm, a reworked block-halving schedule will be used to reduce PoW mining rewards every 35 days. The FAQ states that they expect the full switch to PoSV “to happen between the 3rd and 6th halving, depending on how ready other parts of the Reddcoin ecosystem will be”. It also means the overall number of Reddcoins in existence will eventually exceed what was originally intended due to the infinite 5% interest rewards that will come into effect at this point.
The overall thought process behind PoSV seems to make a lot of sense, reducing the need for power-hungry mining machines while retaining a volume of transactions. If it works as intended (which I’ll leave to somebody far more technical than I am to scrutinise), we could see Reddcoin taking off in a big way — after all, there’s not a lot of coins out there who can claim they had their own algorithm developed for them.
The announcement was originally made on Reddit, where you can find links to the full white paper and FAQs on the new algorithm.
Note to Reddcoin users: There is a hard-fork (or probably several) coming to Reddcoin in the near future. To ensure the safety of coins, we at Coin Joint suggest that you are extra diligent in ensuring you always have the latest wallet installed before making any transactions.