Earlier this week, the PIVX cryptocurrency project took privacy to a new level, introducing a first-of-its-kind ability to anonymously earn rewards through an feature called “zPoS”—which stands for “zPIV Proof of Stake”. This capability positions PIVX to be among the most innovative, flexible and private protocols in the space, addressing the monetary use case.
The history of PIVX
As readers will know, Bitcoin has some privacy deficiencies. For example, when you make a Bitcoin transfer, you expose the full balance 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.
The PIV and zPIV coins
The original coin of the PIVX network is called PIV. Transacting with PIV is similarly public to Bitcoin, 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.
Using the PIVX 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 this week’s version 3.1 release of the PIVX wallet, network users are now incentivized to maintain their PIV holdings in the private zPIV format, as those coins can now 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 to fund open project initiatives.)
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. The exact rate of return will be determined by the network, but PIV stakers prior to version 3.1 have historically received about 7% annual ROI—considerably better than a USD savings account!
Recent history has shown a growing tendency amount people to give up their privacy, for any of a number of reasons. Incentivizing people to regain economic privacy, without having to convince them of the need for that, is a beautiful benefit of the zPIV staking system.
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