In this article, I’m going to introduce the PIVX coin, along with its associated network, and propose some ideas for helping it become a leading cryptocurrency.
The history of PIVX
As readers will know, Bitcoin has some privacy deficiencies. For example, when you make a transfer, you expose the full balance of BTC held on the source address(es) used in the transaction.
DASH forked from Bitcoin, in order to (among other reasons) introduce the masternode-facilitated PrivateSend feature, which, in mixing transactions, provides some level of privacy through obfuscation.
Concern remained among some, however, that obfuscation can’t protect your privacy if someone with the resources of a nation state wants to determine who’s behind a transaction. To address this, PIVX forked from DASH with the goal of providing for deeper anonymity.
At the time of this writing, the project is within days of releasing version 3.1 of PIVX, and achieving both the goals of providing anonymous privacy, as well as providing the incentive for people to use those facilities.
The PIV and zPIV coins
The original coin of the PIVX network is called PIV. Transacting with PIV is similarly public to Bitcoin and DASH (without PrivateSend), in that all PIV transactions can be explored and traced on its blockchain.
The PIVX project innovated in the creation of a second coin supported by the network, called zPIV, which, existing in discrete denominations like casino chips, is truly anonymous.1
Using the project’s wallet, one can privately convert PIV into zPIV, and transacting in zPIV is completely anonymous for the sender—meaning that while the blockchain reveals that a certain number of PIV arrived at a public PIVX address, no information about the sender is revealed. (And if the recipient of those PIV then converts them to zPIV, their forward-going history will also remain private.)
The incentive to be private
With the forthcoming version 3.1 release of the PIVX wallet, network users will be incentivized to maintain their PIV holdings in the private zPIV format. For those who leave their wallets open, any zPIV balance can be “staked”, and earn PIV rewards.
What does this mean? PIVX uses a consensus algorithm called “Proof-of-Stake”. Unlike the Bitcoin “Proof-of-Work” network, in which miners validate new transaction blocks, in the PIVX network, “staking wallets” are randomly chosen to validate new transaction blocks, every 60 seconds. A given wallet’s chances of being selected for validation of a given block, and earning a reward, are increased as a function of the number of coins it holds, and the time over which it’s been staking those coins.
For each block that is validated, the network creates five new coins. If the validating wallet is staking zPIV, then it will receive three PIV, and a randomly selected masternode will receive two. If the validating wallet is staking PIV, then it will receive two PIV, and the selected masternode will receive three.
(There is a possibility of a sixth coin being created and awarded to the PIVX Treasury, which we’ll get to in a minute.)
So with the release of version 3.1 of the wallet, PIV holders will be incentivized to convert to zPIV, and through staking of those zPIV, participate in securing the network and earn rewards. I’ve been staking PIV for a while, and have earned close to 5% interest—considerably better than a USD savings account—and this should only improve with the release of version 3.1.
The tendency among people, especially in the US, is to give up their privacy under the idea they have nothing to hide. Trying to mass educate is a lost cause. But incentivizing people to be truly private, without having to convince them of the need for that, is a beautiful artifact of the zPIV staking system.
The PIVX Treasury
PIVX has a governance system in which anyone can make a proposal, and if accepted by vote of the masternode operators, the proposal can get funded. If an accepted proposal exists on the network, and is not fully funded, then a sixth coin will be created during each block validation, and transferred to the PIVX Treasury. This will happen until the Treasury holds enough PIV to fund all accepted proposals.
What does this facilitate in practice? When visiting the PIVX Discord, you’ll find support staff who are paid to help users with their questions. You’ll notice ongoing marketing activities that are funded through the Treasury. The developers themselves are paid for proposals to maintain and extend the system.
The PIVX Treasury system represents an elegant, decentralized, democratic method of funding the long-term maintenance and advancement of the platform.
The PIVX economy
Each time a PIVX transaction block is validated, up to six new PIV are created. In this way, PIVX is inflationary. Each time a PIVX transaction occurs, however, the transaction fees are burned (destroyed). In this way, PIVX is deflationary.
Whether the network is in aggregate inflationary or deflationary depends on the networks transaction volume, but we can see that by design the network isn’t ever inflationary—which is a good thing economically.
Where are we, and what’s the problem?
Considering the capability of privacy and anonymity, the ability for anyone to help secure the network and earn interest, the governance system and treasury, the sound economic model and the vibrant community, I’m optimistic that PIVX has the ingredients necessary to establish itself as a leading store of value and medium of exchange.
The current market cap of DASH is $2.8 billion, while the market cap of PIVX is $211 million. Just moving closer to DASH would represent a major return for PIVX investors today.
Not only are there structural reasons to make this happen—i.e. I know of no other cryptocurrency that offers what PIVX offers—there’s also a large economic incentives.
In my view, getting from where the project is today, to where it needs to be, fundamentally depends on positioning PIVX for the coming wave of new entrants to the crypto markets. These are people without much knowledge, and possibly not much interest, in how cryptocurrencies and blockchains work. But they are very interested in the benefits that crypto offers to them.
So what are the problems? In my opinion, the following needs to happen, in order of importance:
- Engagement and interaction — PIVX needs to deliver an amazing user experience in the wallet for the forthcoming wave of new users, and in this regard, it needs to expose interaction concepts in familiar terms those particular users will understand, and be comfortable with, if not excited about, engaging with. In particular, and fundamentally, the wallet needs to address the confusion those new users will likely have in understanding the differences between PIV and zPIV. I’ll expand on this in the next section.
Positioning and information — This pertains to the PIVX website. The current website, in my opinion, overemphasizes the technology, e.g. “Zerocoin + PIVX = Privacy Meets Proof of Stake” (unintelligible without a lot of work), “Built on Bitcoin” (confusing), “60 Second Blocktime” (unintelligible without a lot of work), and its styling is consistent with that technology focus. I believe the coming wave of new users should be greeted by a friendly website that, in a friction-free way, explains the benefit of PIVX to them, in terms they can understand, and unequivocally motivates and helps them to get hold of, and use PIV. Of course, the technology details should be discoverable, but only for those motivated to look for them. I think the Stellar project do a good of this. Finally, the current website seems to be built on WordPress, using the popular DIVI theme. For a project of this importance, and given the various purposes it will eventually serve should the currency become mainstream, I would suggest building it on the developer-friendly CraftCMS.
Branding — The current PIVX logo is typeset in capital letters. Perhaps that was chosen since it’s an acronym for Private Instant Verified Transactions. I believe a friendly, warmer, more engaging feeling would be transmitted to new users if the letters were set in lower-case, i.e. pivx. That feels cute, and sticky to me, and could look beautiful with a well-designed text treatment. Secondly, I think it would be great if the project’s logo could somehow transmit the dual-coin nature of the network, in order to help users become accustomed to this core concept.
The wallet experience
The first solution that comes to mind, to provide the experience that anticipates the context, background and needs of the wave of future PIVX customers (and benefits the current ones as well), is to introduce the metaphor of two “accounts”, presented in familiar terms, like “PIV Current Account” and “zPIV Private Savings Account”. With a simple distinction like this, we can communicate the potential for earning “interest” without having to introduce complex concepts like “staking”, and communicate that interacting with that account is the “private” part of the overall system.
This is just a starting point. There will be lots of challenges to address, including:
- The wallet should include an on-boarding experience for first-timers, helping them understand how thing work, and where to purchase PIVX if they don’t have some.
It should address the potential confusion users may have with the concept that an account can have multiple addresses, and nail the UX around that.
The wallet needs to communicate that it has to be open to earn interest. As part of that, the wallet needs to communicate that it needs to be encrypted to make earning interest something that is safe.
To reinforce the the above, the wallet needs to clearly indicate when the Private Savings Account is earning interest (and not with an indicator that the “wallet is staking”.)
The wallet needs to communicate that earned interest is a statistical event, and, while we can report an average rate they can expect, emphasize that it will fluctuate.
We can build on the dual accounts metaphor, emphasizing that mobile wallets are extensions of the PIV Current Account. (Color differentiation between the accounts could help with this.)
Anticipating that people may want to store their wealth in zPIV, we’d want to ensure a means of hiding their balance (since the wallet will always be open.)
The wallet needs a UI hierarchy that only exposes advanced concepts like masternodes to those specifically searching for them.
Lots, lots more.
How can I help?
I’m associated with a world-class group of product designers, developers, and copy-writers, that is capable of delivering on the above points 1 and 2. Most of our work is for customers in the Bay Area, and our costs are consistent with that environment.
We could definitely contribute 100x in terms of the critical wallet user experience, and associated website, from where the project is today. (And based on my experience with many Qt wallet, it would be the best crypto wallet in existence.)
If the PIVX community believe that what I’ve outlined above could help establish PIVX as a leading cryptocurrency, and believe the investment would be worthwhile, then we would make the effort to submit a proposal for funding as part of PIVX Treasury activities.