Proof-of-Stake is term referring to the use of currency itself (ownership) to achieve certain goals. In the NovaCoin Proof-of-Stake is used to provide mining and transaction processing on a par with Proof-of-Work.

Novacoin uses the mixed Coin-Age/CoinDayWeight approach to provide proofs of the stake. The Proof-of-Stake difficulty is adjusted so as to limit the rate at which new blocks can be generated by the network to 10 minutes target spacing rate. Due to the very low probability of successful proof generation, this makes it unpredictable which computer in the network will be able to generate the next solution.

How it's supposed to work?

It's performed through scanning all available inputs in order to find lucky one that satisfies following condition:
 SHA256(SHA256(KERNEL)) < CoinDayWeight *  NetworkTarget
Miner has to find a SHA256 hash that is under the target value. Target is derived from network target using CoinDayWeight parameter. The proof is presented by kernel hash and header signature. Each coinstake kernel represented by structure of 6 fields, a some of this fields could be varied pretty freely.
nStakeModifierunsigned long int8Shouldn't be modified manually.
nTimeBlockFromunsigned int4Timestamp for block which provided previous transaction.
nTxPrevOffsetunsigned int4Offset of previous transaction inside the block.
nTxPrevTimeunsigned int4Timestamp of previous transaction.
nPrevoutNumunsigned int4Output number of previous transaction.
nTimeTxunsigned int4Current timestamp.
The hashing result of a valid Proof-of-Stake value must be lower than block target. Miner tries to find this suitable solution by scanning all available unspent inputs with suitable CoinDayWeight.

How long will it take me to generate a Proof-of-Stake?

Just like with Proof-of-Work, no-one can say exactly. But there is an estimation of how long it might take. Calculations are quite similar with Proof-of-Work, but instead of hash we have coin * day-in-seconds here. So, at difficulty 1.0 we need ~ 4294967297 coin * day-in-seconds to find a block.

Probability of successful block generation during one day could be calculated from available CoinDayWeight using formula:
 P = CoinDayWeight * 86400 / (4294967297 * difficulty)

Let's estimate probability for current difficulty (0.23482093):

Sum \
<= 30456090120
Average block generation time could be calculated as:
 T =  4294967297 * difficulty / (CoinDayWeight * 86400)
Sum \
<= 30456090120

When can I start generating Proof-of-Stake blocks?

If you have balance then novacoind would automatically try to generate proof hashes for you. If you find a stake the reward is calculated using current Proof-of-Stake difficulty and Coin-Age amount consumed. The reward amount is added to your stake amount and is shown together in the stake field of getinfo output.

Because stake is withheld from spending for 520 blocks, if you do need to keep your balance around to be spent soon we provided a configuration option reservebalance to help you keep your balance from being used by stake. You can add a line reservebalance=10000 to novacoin.conf and restart your novacoind. This way novacoind would try to keep your balance above 10000 coins when generating stakes.

What about rewards?

Block reward is based on Coin-Age parameter and Proof-of-Stake difficulty. A reward can be calculated using formula
 nProofReward = min(10, CoinAge * (0.03125 / difficulty) ^ (1 / 3) * 33 / (365 * 33 + 8)) 
In other words, a reward is limited by 10 coins value, starts from 1 coin per Coin-Year and cut a half every 8x multiply of difficulty.

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