Blockchain-based Permacoin System May Replace Torrents


Permacoin as a cryptocurrency has long been a mere concept in a white paper. It might be considered a ‘useful’ cryptocurrency, as mining capacities in Permacoin network are utilized not only in issuance of new coins, but in data storage.

Initially, the permacoin concept was conceived by five specialists from Microsoft Research, University of Maryland, and Cornell Tech.

“We propose a modification to Bitcoin that repurposes its mining resources to achieve a more broadly useful goal: distributed storage of archival data. Unlike Bitcoin and its proposed alternatives, Permacoin requires clients to invest not just computational resources, but also storage. Our scheme involves an alternative scratch-off puzzle for Bitcoin based on Proofs-of-Retrievability (PORs). Successfully minting money with this SOP requires local, random access to a copy of a file. Given the competition among mining clients in Bitcoin, this modified SOP gives rise to highly decentralized file storage, thus reducing the overall waste of Bitcoin,” reads the project’s conceptual whitepaper, “Permacoin: Repurposing Bitcoin Work for Data Preservation”.

How it works

Say, we’ve got very big data array, like a national archive. As information therefrom might become of use any moment, and is definitely useful at least in historical terms, we would like to have guarantees that should the government decide to restrict access thereto or, say, destroy some entries therein, we will still be able to retrieve those data.

To avoid centralized institutions, we may take those data, segment them, build a Merkle tree, and launch a network. As of now, anyone willing to generate blocks will have to download a random set of segments. In order to generate a block, the miner in question will have to demonstrate some amount of stored data. Thus, the miner proves they actually store the data.

“Generating a block might be monetarily rewarded. Generally, the system is similar to bitcoin’s, however, in this case user does not burn electricity to generate hases, but stores publicly required data,” says Alexander Chepurnoy, Scorex framework developer.

In bitcoin’s case, it would be unfair to state that miners’ computational capacities go nowhere. Apart from minting new coins, miners service the network and maintain transaction confirmations. Generally, it is similar to overhead and operational costs incurred by banks for the sake of customer servicing, security maintenance, personnel performance, encashment, etc. Those expenses seriously exceed expenses incurred by bitcoin miners. Thus, Permacoin is hardly a plaster for all sores of bitcoin, but more like an alternate pragmatic approach to the system.

At the hackathon we created a simple implementation of Permacoin within Scorex operational environment. Initially, there were two consensus algorithms in Scorex: one resembles NXT, and the other Quora. Now we’ve got Permacoin implementation, so it makes three consensus options,” says Chepurnoy.

According to the original developers, efficient solving Permacoin puzzles is possible only in case of storing some public data on a hard drive. To maintain the network decentralized, it is also important to establish conditions incentivizing a user to store data on their hard drive without leasing cloud storage capacities.

In the latter case, real influence on the network may become distributed amongst several major storage providers, so Permacoin developers did their best to make cloud storage inefficient by reducing chances for successful puzzle solving much lower in that case.

Notably, Permacoin offers FPS (floating preimage signature) instead of RSA digital signature, as it does not require as much computational capacity.

Permacoin and network censorship

Network censorship becomes a burning issue nowadays. Recently Russia deployed an extended campaign to ban ‘bad’, ‘wrong’ or ‘pirate’ resources, which climaxed in the eternal ban of the country’s most popular torrent tracker

Those suffering from internet censorship have to acquire bypassing methods or file appeals to courts.
Permacoin might become a useful tool for censorship combating as it solves two major torrent problems, namely decentralized data storage, and incentivizing users to store and share files.

The latter aspect is especially vital, as nowadays users sharing their files via torrents have no profit apart from merely symbolic karma bonuses and copyright-owner hatred. Most users download a file and switch off the client, and delete it after they used it. Permacoin and its monetary system may become a real incentive to store and distribute information across the network.

“Permacoin resembles a torrent client. One might create something torrent client compatible to download movies from Permacoin. The reward will go to those storing the data. Permacoin will make it profitable to store data. Speaking about censorship, Permacoin might become a convenient and prompt solution. If a government bans a document, one could still be able to download it from the Permacoin network,” Chepurnoy comments.

Some users might ask how one could prevent distribution of blatantly immoral content on this kind of tracker, like child pornography or aptly named extremist materials. However, Permacoin concept implies that people may vote for inclusion in or exclusion of certain materials from the dataset. Thus, the risk of distribution of ‘bad’ materials essentially reduces.


Among successful implementation of Permacoin concept, there is blockchain-based STORJ system. The project’s website describes the system as follows:

“P2P network of encrypted cloud storage enables users to transmit and share data without reliance on any third parties represented by data providers.”

However, there are other approaches towards Permacoin implementation and distributed blockchain-based cloud storages. This issue will be covered in our further features.

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