competing bitcoins

[scepticus]

Hi all, I'm new here. I was wondering if someone can answer me this question:

What is to stop another consortium of users establishing another bitcoin style cryptocurrency with their own limit of coins (say also 21,000,000) called for example myCoin?

myCoins would presumably be as valuable as bitcoins. And yourCoins, herCoins, hisCoins etc. And no upper limit on the number of such cryptocoins.

apologies if this has been asked and answered before.
 

[1714600087]

1714600087

[1714600087]

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[FreeMoney]

Absolutely nothing stopping you. Imagine a newcomer hears about both though. The older one will have a larger community, more development, more shops, more nodes, etc. To lure people to yours something will probably have to be different.

A new one will have the benefit of quicker generation for an individual. This is offset by the lower value of them, but there's still something to be said for the psychological rewards of consistent generation. Although maybe it would get boring to quickly generate cheaper coins compared to the thrill I just got randomly getting my second generation in a week, worth about $4 I suppose.

[scepticus]

if BC are successful under the current model then they will become more scarce. Therefore there will be an incentive to make up the shortfall of BC liquidity, and people will do it. There will be no appreciable difference at all between bitcoin and another cryptocurrency denomination.

at the limit then, cryptocurrency by itself will not be limited by scarcity for this reason.

it seems to me that the value of cryptocurrency is to confer a peer-to-peer, offline payment clearing capability on mainstream currency. SO I could generate say 21,000,000 cryptocoins (cc) of a particular denomination and sell them for $21,000,000. I put the $ in a safe place and then people can clear their $debts securely using the cc. Then when someone wants their $ back, they redeem their cc at a later date.

you could take the same approach with gold, or anything else.

if people want more CC than I have, then I can mint one new CC per new $ that wants to buy CC. If there is an excess of CC over demand, the unused CC (that are not backed by $ in the safe) are simply kept out of circulation until the $ demand for them arises.

[db]

There is nothing to stop them but they are unlikely to get many users. Compare with ruthenium, a metal similar to gold and just as rare. Still, only gold is used as a medium of exchange. There is no particular reason for that other than tradition and expectations because gold was first. What's the use in getting ruthenium / myCoin when everyone else accept gold / Bitcoin?

[scepticus]

consider that parties A and B wish to transact but neither has bitcoin or gold, because they are too scarce. The free market has a habit of inventing money where it is needed so parties A and B are likely to use ruthenium/myCoin if the latter are available and the BC/gold are not.

Why would they wait to aquire BC/gold?

ever deflating BC will not work because the deflation implies a very high real rate of interest. because most business is conducted on a credit basis (e.g. delivery of goods preceeds payment), this makes the currency untennable  because of the usurious rates of real interest.

assuming the two parties A and B are traders who value the ability to exchange more than the asset used to clear their transaction, then they won't be disposed to use a deflating currency since its skews the relationship too far towards the seller.

[db]

consider that parties A and B wish to transact but neither has bitcoin or gold, because they are too scarce. The free market has a habit of inventing money where it is needed so parties A and B are likely to use ruthenium/myCoin if the latter are available and the BC/gold are not.

Why would they wait to aquire BC/gold?

Sure, but why would it not be available? Bitcoins are very divisible so they won't run out (anytime soon).

ever deflating BC will not work because the deflation implies a very high real rate of interest. because most business is conducted on a credit basis (e.g. delivery of goods preceeds payment), this makes the currency untennable  because of the usurious rates of real interest.

assuming the two parties A and B are traders who value the ability to exchange more than the asset used to clear their transaction, then they won't be disposed to use a deflating currency since its skews the relationship too far towards the seller.

This is an interesting but separate issue that deserves it's own thread. I suggest you make it a top level post.

[scepticus]

Sure, but why would it not be available? Bitcoins are very divisible so they won't run out (anytime soon).

the same argument is applied to the infinite divisibility of gold. considering that, you would presumably hold that at some point in the future it would be reasonable to swap a car for a microgram of gold?

historically gold has always bene valued in the region of 300 loaves of bread. Thats about the value we humans have always attached to the shiny yellow stuff for 6000 years. To posit that 300,000 loaves of bread would be a reasonable exchange rate for gold - has no basis in reality.

items are not given value by scarcity alone. Everything is scarce to some degree.

[Some Mouse]

Honestly it would be better to try a different model entirely. For one, there is a lot of criticism about bitcoin's overall structure - even ignoring the hard deflationary nature of them.

[db]

Sure, but why would it not be available? Bitcoins are very divisible so they won't run out (anytime soon).

the same argument is applied to the infinite divisibility of gold. considering that, you would presumably hold that at some point in the future it would be reasonable to swap a car for a microgram of gold?

historically gold has always bene valued in the region of 300 loaves of bread. Thats about the value we humans have always attached to the shiny yellow stuff for 6000 years. To posit that 300,000 loaves of bread would be a reasonable exchange rate for gold - has no basis in reality.

That's just because the production of gold has increased at roughly the same rate as the production of bread (and most other stuff). If gold mining were to stop but general economic growth continue then eventually the 300 000 loaves of bread would happen. The production of bitcoins will stop in a few years.

How is this relevant to the availability of bitcoins and the viability of competing Bitcoin-ish currencies?

[scepticus]

Honestly it would be better to try a different model entirely. For one, there is a lot of criticism about bitcoin's overall structure - even ignoring the hard deflationary nature of them.

I have never believed and never will (until proved wrong by reality) that you can create actual value by bit-twiddling numbers in mysterious ways. But what bitcoin style twiddling does offer, and what you can do, I think is to implement decentralised clearing houses for some other substance of actual value.

that capability is worth its weight in gold  , though I guess it too may prove impossible at the margin (hope not though)

[scepticus]

That's just because the production of gold has increased at roughly the same rate as the production of bread (and most other stuff).

has it? I don't think so.

Do you have some data to support the above?

[db]

I have never believed and never will (until proved wrong by reality) that you can create actual value by bit-twiddling numbers in mysterious ways.

You don't believe in the programming profession or the utility of computer programs?

[scepticus]

You don't believe in the programming profession or the utility of computer programs?

ah, my mistake. I should have said. I don't think you can create money by twiddling numbers in mysterious ways.

Otherwise the geniuses who invented CDOs etc would have made the planet rich by now.

[Quantumplation]

Honestly it would be better to try a different model entirely. For one, there is a lot of criticism about bitcoin's overall structure - even ignoring the hard deflationary nature of them.

I have never believed and never will (until proved wrong by reality) that you can create actual value by bit-twiddling numbers in mysterious ways. But what bitcoin style twiddling does offer, and what you can do, I think is to implement decentralised clearing houses for some other substance of actual value.

that capability is worth its weight in gold  , though I guess it too may prove impossible at the margin (hope not though)

*shrug* Money is just a placeholder for goods.  Swapping money for goods/services is done on the premise that you'll later be able to swap said money for your own goods/services.  Money in itself never has any value.

I could pick up a seashell, and as long as you have confidence that you'll be able to trade that seashell to someone else for something of equal value to what you trade me, regardless of if it's a single microgram of gold or a jetplane, then that seashell is money.  It's backed by confidence.

Therefore, money is nothing BUT twiddling numbers (and paper/coins, in a more archaic sense) in mysterious ways.

[db]

That's just because the production of gold has increased at roughly the same rate as the production of bread (and most other stuff).

has it? I don't think so.

Do you have some data to support the above?

Back to 1900 at least:

http://www.goldsheetlinks.com/production2.htm
http://commons.wikimedia.org/wiki/File:World_GDP_per_capita_20th_century.GIF

[Some Mouse]

Back to 1900 at least:

http://www.goldsheetlinks.com/production2.htm
http://commons.wikimedia.org/wiki/File:World_GDP_per_capita_20th_century.GIF

Comparing -per capita- GDP growth to world gold production is so blatantly fallacious as to hardly merit a response.

I have never believed and never will (until proved wrong by reality) that you can create actual value by bit-twiddling numbers in mysterious ways. But what bitcoin style twiddling does offer, and what you can do, I think is to implement decentralised clearing houses for some other substance of actual value.

that capability is worth its weight in gold  , though I guess it too may prove impossible at the margin (hope not though)

There are a few possibilities.

One is assigning value directly to the computational verification of the trade's integrity, and using that. I have a conceptual model for this, if a few people can be interested.

Another is allowing people and/or sites to create their own currencies... this is inherently messy, as it creates a lot of trust problems that currency is supposed to resolve.

[scepticus]

Comparing -per capita- GDP growth to world gold production is so blatantly fallacious as to hardly merit a response.

quite. the relevant graph is total gdp, not gdp per capita. And of course the graph of that tells a very different story:

http://filipspagnoli.files.wordpress.com/2009/01/world-gdp-per-capita-and-population-growth-historical-data.gif

[scepticus]

*shrug* Money is just a placeholder for goods. 

that is the 'money as a veil over barter' theory.

actually looking at the history money has always been an item desired for itself. gold because of the human magpie instinct, and fiat because you can use it to make the taxman leave you alone.

are there any instances in which an abstract number has ever been used as money?

[Quantumplation]

Yes.  Bitcoin.

Gold was desired due to it's luster.  In this instance, it was a good in a barter economy.  Money for getting a taxpayer to leave you alone is exactly that: used to exchange for the "service" of the taxpayer going away.

The only other instance I can think of where people would want money surely for the sake of having money would be confederate dollars, because they assosciate themselves with the south (a weird form of patriotism or something)... And even most of THOSE people I've talked to are convinced that "the confederate dollars comin back, and when it does, i'll be ready."  Hence, they value it because they have confidence that one day they'll be able to trade said money in for something else of value.

[db]

-per capita- GDP

Oops.

quite. the relevant graph is total gdp, not gdp per capita. And of course the graph of that tells a very different story:

Makes sense, too, considering the decline of use of gold as currency.