NeuCoin: the First Secure, Cost-efficient and Decentralized Cryptocurrency

TL;DR

NeuCoin is a secure, cost-efficient, and decentralized cryptocurrency that improves proof-of-stake security and addresses common criticisms, offering an alternative to proof-of-work systems.

Contribution

NeuCoin introduces enhanced proof-of-stake mechanisms that increase security and decentralization, addressing key flaws and objections of existing proof-of-stake cryptocurrencies.

Findings

NeuCoin incentivizes continuous staking with higher rewards.

It abandons coin age in the mining formula for better security.

NeuCoin effectively counters 'nothing at stake' objections.

Abstract

NeuCoin is a decentralized peer-to-peer cryptocurrency derived from Sunny King's Peercoin, which itself was derived from Satoshi Nakamoto's Bitcoin. As with Peercoin, proof-of-stake replaces proof-of-work as NeuCoin's security model, effectively replacing the operating costs of Bitcoin miners (electricity, computers) with the capital costs of holding the currency. Proof-of-stake also avoids proof-of-work's inherent tendency towards centralization resulting from competition for coinbase rewards among miners based on lowest cost electricity and hash power. NeuCoin increases security relative to Peercoin and other existing proof-of-stake currencies in numerous ways, including: (1) incentivizing nodes to continuously stake coins over time through substantially higher mining rewards and lower minimum stake age; (2) abandoning the use of coin age in the mining formula; (3) causing the stake modifier parameter to change over time for each stake; and (4) utilizing a client that punishes nodes that attempt to mine on multiple branches with duplicate stakes. This paper demonstrates how NeuCoin's proof-of-stake implementation addresses all commonly raised "nothing at stake" objections to generic proof-of-stake systems. It also reviews many of the flaws of proof-of-work designs to highlight the potential for an alternate cryptocurrency that solves these flaws.