Fluttercoin Wants to Reward Your Spending: Interview with TheKidCoin

fluttercoin logo

fluttercoin logo
Fluttercoin’s logo reflects its three reward systems as well the cause-and-effect nature of some of the rewards.

One reality often grappled with in the digital currency sector is what’s seen as an unequal distribution of newly created bitcoins.

While Satoshi Nakamoto originally envisioned a currency everyone could participate in and be rewarded, powerful hashing-farms have muscled out even the most determined hobbyists – forcing them to mine more profitable alt-coins.

First came Scrypt – an algorithm promising to be ASIC resistant.  As Scrypt-ASICs are now entering the scene, the alt-coin market has responded by producing Scrypt-N, Proof of Stake, and now Proof of Transaction rewards. (Proof of Transaction whitepaper here)

While “Proof of Work” rewards computing power, and “Proof of Stake” rewards interest based on a user’s holdings, “Proof of Transaction” introduces the possibility of rewards based on completing a transaction – creating an inherent pressure to transact in coins implementing Proof of Transaction.


Launched in early March, Fluttercoin incorporates Proof of Work, Stake, and Transaction.  This “all-of-the-above” approach encourages a robust ecosystem for the coin.  Fluttercoin’s creator TheKidCoin told me,

I see POW as the miner’s system of rewards, POS as the investor or stake holder’s system of rewards, and POT as all of the above plus the everyday adopter of the coin’s system of rewards.

All three methods have their own merit for securing and facilitating transactions on the network. 

Initially only POS/POT was envisioned for Fluttercoin, but with so many people invested in mining equipment, TheKidCoin felt a POW mining stage could help ensure a fair distribution for the coin.

Even with his change of heart, TheKidCoin has not forgotten the main purpose of creating Fluttercoin and Proof of Transaction,

The motivation  […] was to create a currency where miners weren’t the only participants rewarded, as is the case with all other currencies.  The long-term success of a currency is with its acceptance as a method of payment, gift, or even donation.  Proof-of-transaction rewards the spending of fluttercoins, by giving adopters of the coin the opportunity to be rewarded by simply sending/receiving coins.

While simply rewarding users for transacting seems idealistic and easily exploited at face value, the way it is implemented in Fluttercoin seems to offer more of a psychological encouragement rather than a strict reward.

How Proof of Transaction Works

Every block that is mined will generate a certain hash, and each participant’s address is translated to hex format.

From each address, a “search term” of a few characters is selected.

Each node that receives the block will compare these search terms to the block hash, and when a match is found the address that generated the search term is rewarded a part of the reward from the following block.

TheKidCoin explains,

POT rewards are generated by chance 100% – which eliminated guessing etc.  It is always decided after a block is mined – and on the subsequent block it is rewarded.  However, POT verifies transactions on every POW block (and never on a POS block). The POT verification algorithm runs whether there is a reward or not, thus verifying that a miner did not try to disable POT to increase their reward, and that the transactions again are in the correct order, have the correct addresses, and that the coinbase reward is valid.

Because the reward is entirely random, this (among other features) discourages people from just sending transactions to themselves in order to be rewarded.

In this way, the Proof of Transaction reward is designed as a type of “points back” benefit for transacting in Fluttercoin; making it better than using other currencies, while leaving it as secure as possible.

What’s Next

Like everything else in the crypto-currency space, Fluttercoin is a work in progress.  TheKidCoin plans on continuing to evaluate reward structures and to adjust as necessary, building the wallet to optimize user experience, and integrating with a payment processor.

I personally think once POT is understood, it will lead future currencies to adopt it.  Some have suggested Fluttercoin should be weary of this – but open source is open source, and to me it’s actually a compliment to use my system in some way.  However, even before the coin was released, I was thinking up new ways to expand upon POT security and possible reward systems attached.

That is often the pitfall of open-source work – it requires some of the hardest work while providing minimal reward, but for TheKidCoin recognition is reward enough:

I hope that Fluttercoin not only is a huge success, but that it is the start of a new era in electronic currencies.  That is really is all I can hope for.

As long as people are willing to build on new ideas, Fluttercoin won’t be the last digital currency to take flight.

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