REDDCOIN WHITEPAPER

REDDCOIN WHITEPAPER
Abstract
Proof of Stake Velocity often referred to as PoSV is offered as an alternative to Proof of Work normally called PoW and Proof of Stake abbreviated to PoS to ensure the security of the peer-to-peer network and confirm Reddcoin transactions, a cryptocurrency specifically created to enhance social interactions in the digital period. The PoSV is designed to encourage both Stake i.e. ownership and Velocity i.e. activity which is directly related to the two main functions of Reddcoin as a real currency which are being a medium of exchange and having the quality to store monetary value. Reddcoin also functions as the unit of account in heterogeneous social context. The technological parts of PoSV are neatly presented after a detailed review of designs that existed before it. The economic parts of Reddcoin are then thoroughly analyzed. The unique position which makes Reddcoin serve as a digital social currency in the competitive world of cryptocurrencies is finally discussed.
1 Introduction
Bitcoin recently graduated to being the most discussed and in some cases controversial topics. Ever since Satoshi printed his bitcoin idea on a paper in 2008, Bitcoin has developed from a technological experiment which interests only a few computer enthusiasts to what is now arguably the most important innovation by most people. Recently, various types of Bitcoin (altcoins) are created almost everyday which has led to the emergence of a whole new industry of altcoins such as trading exchanges, mining pools, gaming websites etc. Not so many topics today can be as polarizing as cryptocurrency. Some of its merits offered by technologists are considered a crime by economists. People who believe in cryptocurrency always consider it a movement while disbelievers often regards it as a fad. While one group defends it dogmatically the other will be against it in kind which makes either camp think of the other as being intellectually lazy to see what they see and This major obstacle has hindered cryptocurrency from being accepted by the general public.
Most of the innovation in the world of cryptocurrency has been almost exclusively technical. Technologists have put forward improvement on various sections of Bitcoin, such as new hash functions replacing SHA256 and new mechanism instead of Proof-of-Work. Very few cryptocurrencies have been designed to address the economic and social aspects of being a real currency. Reddcoin, at the time of writing, seems to be only one. This paper is written with three goals in mind which are:

1. providing a broad overview of the current issues surrounding cryptocurrency, both technological and economic, which was missed by the original designers.
2. to address these issues with proposals which require coordinated changes in both low-level network protocol and high-level economic and social ecosystem.
3. to encourage a more open and objective discussion of cryptocurrency by the general public and promote a more complete thinking for future innovation in cryptocurrency world.
   The rest of the paper is organized as follows. Section 2 describes the merits and demerits of Proof-of-Work (PoW) and Proof-of-Stake (PoS) from both economic and technological points of view. PoSV is then proposed to address those demerits in the context specific for a digital social currency. The technological design choices of PoSV are given in broad strokes. Section 3 addresses the commonest criticism by economists on cryptocurrency and shows how Reddcoin and PoSV in conjunction provide new answers opportunities for social research in general. Section 4 places emphasis on the major differences between Reddcoin, a digital social currency which focuses on integration with human social interactions and aims to make concrete and add quantity to people’s intangible asset of social influence, and the common digital commercial currencies which aim to foster transactions of goods and services and offer protection from hyperinflation.
   2 Technology
   Cryptocurrency uses the cryptography principle to execute a decentralized, distributed and secure cash system. It provides solution to the double-spending problem in a distributed ledger by introducing a mechanism which secure the network against 51% attacks and Distributed Denial of Service (DDoS) attacks.
   2.1 Proof of Work
   Proof of Work (PoW) are pieces of data which are costly to produce so as to satisfy specific requirements but are trivial to verify. Bitcoin uses the Hashcash PoW. Mining which is the process of producing PoW, is very vital in creating, distributing and securing Bitcoin and many of its variants. The major criticism of PoW mining is in its massive energy wastage which results into a large amount of money which cannot be recovered. In addition to wastefulness stated above, there are a lot more reasons why mining remains a very controversial aspect of PoW cryptocurrencies.
   2.1.1 Mining Arms Race
   Mining, due to many factors, is extremely competitive and it has undergone so many evolutions since the introduction of cryptocurrency in 2008 which depends on the amount of energy required, time it will take to recover mining cost etc. During the very early age of Bitcoin, CPU was used to carry out the mining operation but when mining became available on graphics cards (GPU), mining on CPU was seen to be loss-making. Application Specific Integrated Circuit (ASIC) are designed to carry out PoW computation at several magnitude higher speed and lower energy cost started to emerge and soon rendered GPU mining obsolete. Miners who cannot afford continuous hardware upgrade due the constant changes taking place in mining could not recover initial investment. This constant changes have seen so many hash functions starting from SHA256 used in PoW of bitcoin to use the Scrypt hash function. Scrypt was initially touted as “ASIC-resistant” due to its heavier memory usage. It is now known to be “ASIC-ignored”. ASIC is designed and manufactured to perform all the hash functions but its entry barrier is all financial and not technical. Unless there is sufficient market demand for mining Scrypt-based cryptocurrencies, it’s simply financially unprofitable for manufacturers to invest in the production of such ASICs. The demand of the market has seen ASICS thrived as the demand for script based functions are few.
   2.2 Proof of Stake
   Proof-of-Stake (PoS) first introduced in Peercoin is an alternative to PoW. The resource used by PoS is referred to as “coin age” which is currency amount times holding period. Like energy, the coin age is also expensive to amass in large quantity. One important feature of PoS is the significant reduction in energy consumption. There is also a better alignment of incentives between miners and stakeholders because miners are now the stakeholders. PoS however has several limitations which are initial distribution, hoarding, full nodes and mining on multiple forks.
   2.3 Proof of Stake Velocity
   2.3.1 What is Velocity of Money
   The velocity of money is the frequency in which a unit of currency flows through the economy while being used by members of the society within a given period. Everything being equal, a higher velocity of money indicates a more flourishing economy, richer members and a healthier financial system. The formula to measure velocity of money in a given time frame is the follow:
   VT = nTM where VT is the velocity of money; nT is the aggregate notional of transactions and M is total amount of money in circulation. In other words, given a fixed amount of money in circulation, velocity of money must be increased in order to increase the size of the economy.
   3 Economics
   There has always been extensive debate about Bitcoin. Economists remain unconvinced of Bitcoin’s status as a real currency. Reddcoin and PoSV are created to address some of those issues and offer new angles to re-examine the questions.
   3.1 Medium of Exchange
   There is a consensus on Bitcoin’s function as a medium of exchange. In fact, almost all the merits of Bitcoin talked about today boil down to how it acts as a better medium of exchange, e.g. global reach, lower fees, much quicker transaction and easy to use. Mining bitcoin with a huge amount of energy makes economist considered bitcoin to be a drastic retrogression. In comparison, PoS and PoSV mining require little energy consumption and can be done by any average user on any computer and even mobile device.
   3.2 Unit of Account
   Reddcoin is designed to fill gap in becoming the first digital currency integrated with all major social networks and serving as the “unit of account” for social interactions in the digital age. Inside the distributed ledger of Reddcoin, transactions can be read not only in pure financial terms but also as proxies for human behaviours. Social scientists have since been looking for a way to track, study and organize human social behaviours in the large scales. Reddcoin offers a unique global platform for these areas of research and open up new possibilities for value-add services.
   3.3 Store of Value
   Economists are very skeptical of Bitcoin’s function to store value. They compare Bitcoin with the US dollars and gold and point out its lack of a fundamental floor of the value. What will a floor on value of Bitcoins really be? Terms such as PoSV, PoW or PoS in itself does not provide a fundamental floor for cryptocurrency value. Due to PoSV which is specifically designed for Reddcoin makes it enjoy a floor of its value due to its purpose of functioning as the global reserve currency of human social influence.
   3.4 Deflation vs Inflation
   It cannot be considered as money if it cannot be discussed in terms of inflation. Bitcoin and most of its variants were created with a deflation model where the total amount of the cryptocurrency is capped. Bitcoin has developed into a modern digital version of the gold standard world in which the supply of money is fixed rather than subject to increase via printing press. Supporters of bitcoin believe deflation is a virtue in preserving the value of Bitcoin against inflationary fiat currencies thereby making it a better store of value. PoS and PoSV both uses an inflation model with fixed nominal interest rate. For instance, Peercoin adopts a nominal interest rate of 1% per annum compared to PoSV’s 5%. Central banks of developed countries like Bank of England, Federal reserves and European Central Bank have a long-term inflation target of around 2%. PoSV chooses 5% because Reddcoin should encourage more spending i.e. social interactions, than other cryptocurrencies which do not share this goal and also given the global nature of social networks which constitute of users in both developed and emerging markets, 5% seems to create a balance. The monetary system of Reddcoin is not designed to make people who hold money rich, but to foster transactions and ensure the Reddcoin economy as a whole rich.
   4 Digital Social Currency
   4.1 Social vs Commercial
   A commercial currency is the commonest currency form and its primary function is to enhance transactions in exchange of goods and services. Bitcoin and its various types now serves as the latest innovation of commercial currencies and is recently competing head-to-head with fiat currencies like USD and EUR, for shares of commercial transactions in the global economy. A social currency in its nature is completely different.
   According to Wikipedia:
   “Social currency is a common term that can be understood as the entirety of actual and potential resources which arise from the presence in social networks and communities, may they be digital or offline. It derives from Pierre Bourdieu’s social capital theory and is about increasing one’s sense of community, granting access to information and knowledge, helping to form one’s identity, and providing status and recognition.”
   Recently, a growing number of companies have been queuing up to embrace the concept of “social currency”, by allowing customers to pay using posts on Facebook, tweeting on Twitter and other social media content but the absence of a criteria to quantity the “fair value” of social media content and influence is the major obstacle. To our knowledge, Reddcoin is the only digital social currency that was design, created and has continuously evolved to become the “reserve currency” of the social interactions of people. Reddcoin has two primary objectives:
4. concretizing and quantifying one’s intangible asset of social influence, and
5. facilitating social interactions between and within social networks, both online and offline.
   Reddcoin isn’t designed to compete with commercial currencies, fiat or digital, but to complement them. Support of merchant is encouraged, most especially when commercial activities form parts of a collective social act. Even though the social aspect remains the topmost focus of Reddcoin. The three most essential assets in the Reddcoin ecosystem are community, brand and infrastructure. Reddcoin team go the extra mile to create a professional, friendly and consistent brand. Extreme care is taken to develop a community that share a clear long-term mission and the same set of values of being caring, helpful, generous, friendly and rational. All system infrastructure is built with special emphasis on providing a uniform, simple and secure user experience.
   4.2 Transition from PoW to PoSV
   Reddcoin project was launched in January 2014 and is still using PoW. Since inception, Reddcoin has been distributed to a huge and diverse user base through various channels which include one of the very few successful and honest Initial Public Coin Offering (IPCO), trading on multiple exchanges, mining, community promotion events, generous giveaways and tipping users on various social networks like Reddit, Twitter and Twitch TV. Stakeholders now include lots of people from about 100 countries, with varying background, interests and age. Reddcoin in a short period boast a fairer wealth distribution per wallet address than all the top cryptocurrencies such as Bitcoin, Dogecoin, Litecoin and Peercoin. Reddcoin at the time of writing, also has 2 -3 times more coin age spent today than all the other PoW cryptocurrencies. Reddcoin, even without PoSV, is the currency with the fairest stake ownership and highest monetary velocity. In months to come, Reddcoin will gradually transition from PoW to PoSV with new features added at incremental pace.
   4.3 Hard to Clone
   There is no easy way to clone Reddcoin. Specifically, the clone can’t adopt PoSV from its inception due to the simple fact that, the knowledge of the long term adoption of PoSV or PoS will result in people hoarding from the very beginning. To ensure a wide and fair distribution, an element of surprise at protocol level plus dedicated efforts at community level are both indispensable. Reddcoin’s brand, community, infrastructure and the publication of this whitepaper make it extremely difficult to duplicate what has already been obtained.
   5 Conclusion
   We proposed Proof-of-Stake-Velocity (PoSV) as the alternative to Proof-of-Work (PoW) and Proof-of-Stake (PoS). We begin by looking through all the main disadvantages of PoW and PoS and consequently showed how PoSV greatly reduces the wastefulness which result from mining, takes away mining arms race, prevents the threat of multipools and ASICs, avoids the inherent conflict of interests by ASIC manufacturers, introduces new types of coin-aging functions to discourage hoarding and facilitate spending and significant contribution to the network. General issues of concern by economists toward cryptocurrency were addressed and discussed in light of the recent development of Reddcoin and PoSV. Particularly, Reddcoin is nicely placed to fill the specific habitat of a digital social currency that is closely integrated with human social interactions and acts as the criteria to concretize and quantify people’s intangible asset of social influence.