NeuCoin Whitepaper Reignites Proof-of-Work vs. Proof-of-Stake Debate

A little more than a week after release of NeuCoin's technical whitepaper, an intense debate been sparked between the proponents of the two main crypto technologies, proof-of-work (PoW) and proof-of-stake (PoS).

Online forums including Bitcointalk, Peercointalk and Reddit, as well as NeuCoin’s own forum, have been playing host to the exchanges, which have drawn in not only lay community members but several of its household names.

On Reddit, Bitcoin core developer Jeff Garzik began by fiercely defending Bitcoin from PoS supporters’ allegations that PoW is becoming centralized.

“Bitcoin has many existing stakeholders. If large mining pools misbehave, the network and the existing stakeholders can choose new miners -- and it is within their economic interest to do so. Separation of powers means that stakeholders and miners are two separate classes,” Garzik wrote.

NeuCoin co-creator and co-author of the white paper Dan Kaufman, who initiated the Reddit debate, posted in response:

“Transaction volume could grow by 1,000X to compensate for coinbase awards going the way of the dodo bird. But for right now, the math is the math. Don't believe Bitcoin mining is becoming centralized? Ever heard of Bitfury and KncMiner?”

Bitcoin's Garzik further suggested that the Peercoin's use of checkpointing might make it even more centralized than Bitcoin. “Peercoin has been beset with security problems,” he said, “resulting in the need for centralized administration through checkpoints.”

To this Kaufman commented that checkpoints “won't be necessary in NeuCoin's design” and that the solution it is poised to present is “making a lot of larger holders of Bitcoin uncomfortable.”

Meanwhile on Peercointalk, in an unusual endorsement of a competing coin, senior Peercoin developer Ben Rossi voiced his approval of NeuCoin’s underlying technical foundation.

“The fact that the NeuCoin team has been able to detail the underlying maths that make up proof of stake is important [...]. I personally believe that these documentation deficiencies have retarded the spread of information about the protocol and by association reduced the number of developers who wanted to jump through the hoops to make sense of what was going on greatly.”

Amid the renewed debate on the issue of underlying technology in crypto, Cointelegraph reached out to NeuCoin co-founder Dan Kaufman for more background on the project and how developers envisage ensuring its success in the long term.

Cointelegraph: What prompted the creation of the NeuCoin Project and the digital currency? How/when did you and your co-founders get together to launch this initiative?

Dan Kaufman: The NeuCoin project started about a year ago. We loved the idea of what Bitcoin could mean for mainstream consumers, but were struck by how techy, intimidating and inaccessible it was. Bitcoins were hard to obtain and had no real applications yet that regular consumers care about. And not surprisingly, even with all the buzz and media attention, Bitcoin had gone nowhere in six years of existence in terms of consumer adoption. 

“NeuCoin distribution model rewards all participants who grow its utility and user base, not just miners.”

We also saw how Bitcoin’s distribution to just miners was hindering its mainstream adoption. Looking at Ripple and, more recently Stellar, we saw there were alternative technologies that would let you use coin distribution as a strategic tool for growth and adoption. 

With our consumer marketing background we knew that for the mainstream to adopt, you’ve got to put consumer experience and usability first. So, we gathered a strong tech team and spent the last year building a digital currency that is first and foremost easy to use, free to try, and actually useful for regular consumers through micropayment platforms with content partners. It is also designed for growth: the NeuCoin distribution model rewards all participants who grow its utility and user base, not just miners.

CT: In the press release about NeuCoin and the initial funding, you were quoted as saying, “Strategic currency distribution is a huge advantage over Bitcoin and other Proof-of-Work coins.” What other advantages do you see NeuCoin offering over other digital currencies? What potential do you see in NeuCoin as becoming widely adopted?

DK: You’re right; NeuCoin’s distribution model is the engine for growth and adoption, really a huge advantage over PoW coins. Here are two other key advantages for NeuCoin:

Firstly, NeuCoin is totally consumer-driven: it is easy to use, free to get started and focused on micropayments, offering consumers something new to do that they haven't been able to do with traditional payment methods.

Secondly, execution: NeuCoin already has micropayment partnerships in place and will be ready to roll out the first pilots soon after the coin launches. We’re a big, strong team with a solid track record of building successful consumer-facing services and have real funding from prominent investors, also from the consumer media and tech world. 

CT: What was NeuCoin's approach to attracting investors?

DK: The high Proof-of-Stake awards! Like anyone getting in early on NeuCoin, their coin stake will grow tremendously. But first of all, our investors know us and our track record well. Second, they also come from consumer-driven media and tech, companies like King, Uber, Facebook, Spotify, Hotwire, and have a very consumer-oriented look on any type of project. They were fascinated by the potential of cryptocurrencies, but agreed it has so far been totally inaccessible for mainstream users, and that no one had approached it from a pure consumer experience angle.

Like us, they saw the potential for mainstream adoption, by offering an easy, freemium and actually useful experience. That’s how you get consumers onboard, just like with any other digital consumer product.

CT: According to the NeuCoin website, micropayment platforms will drive consumer adoption. How do you see micropayments as being the path to mainstream adoption?

DK: For any product or service to get adopted by the mainstream it has to be easy and provide some obvious benefit, fill a need, solve a problem, be fun and engaging.  

Same thing for digital currency: it has to offer some actual benefit over traditional payment methods, otherwise why would a consumer bother? Being able to make anonymous transactions isn't something most mainstream consumers care about. Buying a computer at dell.com is actually easier with a credit card than Bitcoin, so that’s not it either. 

International transfers is one area where crypto has huge potential. Micropayments is another, it offers consumers and digital content providers a new experience that hasn’t been viable with traditional payment methods, like  being able to pay 5 cents to watch a video, or 20 cents to get rid of all video ads for the day, or 50 cents for a micro subscription, tipping your favorite content creators.

To get consumers and content providers to try this new experience with as little friction as possible NeuCoin's micropayment platforms will be powered by freemium distribution of NeuCoin to users, who will be able to try premium content for free - a significant advantage over micropayment platforms using Bitcoin. NeuCoin will also give user acquisition bounties to participating content providers for all new users that sign up for free NeuCoin, to keep the circle of adoption going.

CT: Neucoin is supported by three independent non-profit foundations in the Isle of Man, each with its own focus: code, utility, and growth. Tell us more.

DK: NeuCoin’s core development, consumer marketing, and projects to increase the coin’s utility will be handled by three independent non-profit foundations based in the Isle of Man – the Code, Growth and Utility foundations.

These three foundations also control the allocation of NeuCoin's pre-mine, and are bound to use this resource to maximize the value of NeuCoin. Three separate foundations with distinct functions and resources were created rather than a single one, with the object of making the currency more decentralized. This structure also affords NeuCoin greater flexibility and adaptability to navigate the international regulatory environment for digital currencies that is still evolving. 

“All foundations are ultimately controlled by NeuCoin holders (1 NeuCoin = 1 vote), who have the power to hire, fire and set compensation for the foundations’ Council Members [.]”

Although the three foundations are independent of each other, they all share the same mission – to maximize the long-term value of NeuCoin. Each one is overseen by independent Council Members, who are aided by Strategic Advisors with experience in digital currencies, consumer marketing, economics, finance and regulatory matters.

All foundations are ultimately controlled by NeuCoin holders (1 NeuCoin = 1 vote), who have the power to hire, fire and set compensation for the foundations’ Council Members, and have a right of approval on annual budgets, spending priorities and other matters.

The foundations are located in the Isle of Man, as per the public record. From there you can download the current Isle of Man foundations register (updated daily) with the three NeuCoin foundations near the end of the list (numbers 000060M, 000061M and 000062M).