Bitcoin Forum

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.
 

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.

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.

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?

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.

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


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

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.

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.

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?

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)

has it? I don't think so.

Do you have some data to support the above?

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.

*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.

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.


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.

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

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?

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.

Oops.


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

gold declined as a currency because there wasn't enough of it, so credit was invented, and then fiat.

if bitcoins are made artificially scarce they will suffer the same fate - people will use something else.

what is more valuable, an random encrypted number or a someone's promise to pay you, which is legally enforceable in court?

Hi Scepticus - I'm sure the forum will value your input on this stuff!

After a bout of agreement with you yesterday over on HPC, I find myself agreeing with you hear again; Bitcoins value comes in the way it is distributed, rather than the magic numbers themselves. I suppose the distinction may be lost on many, but it is one of the reasons why I'm hopeful it will find some success.

I do think that the quantity of coins should grow with the level of participation. I read on these forums that the limit isn't expected to be hit for decades, but the coins should become gradually more scarce in the run up to this point.

I think this process of coin quantity growth should probably have more time spent on it. At this point, the value of the currency is probably judged more by external factors (whether people believe in it, decide to use it etc), but if it does become popular, this will need looking at. While the number of participants are growing, the number of coins should grow with it - easily done by allowing continued, distributed, coin minting. The reverse is more tricky, although natural wastage (lost wallets/coins) would see the Bitcoin supply decreasing naturally. Other alternatives would be syphoning off a small proportion of the transaction fee and destroying it.

I could see there is a moral conflict presenting itself over 'destroyed' coins, but IMO, the currency would serve as money better if it could give and take a bit over time.

hopefully!

I think bitcoin is pretty cool, and my issue is mainly as to the exact nature of the value proposition it provides. That it provides value, I have no doubt, the question is where.


that's the rub for me. A bitcoin has no value in itself that I can see. I wouldn't want to own them for themselves, and judging by the level of debate neither do many others. What it can do though, if a bitcoin can be redeemed later for a little bit of gold, is to allow transactions in gold (or whatever) to be cleared between two parties without the need to contact the clearing house. So I would like to be able to take my bitcoins and at some later date be able to exchange them for a previously agreed quantity of gold or dollars.

Bitcoins give us a non centralised double-spend database that is maintained by the community. That does raise for me some issues of how these people would be comensated for their CPU cycles if they are not actually minting the coins tho...

Which is basically why I was thinking of creating a competitor that gave out its currency based on maintaining accurate accounting for transactions. The value is then derived from the integrity of the transaction itself.

.. and presumably, value also comes  from the privacy aspect. privacy, security and simple realiable automated transactions - what you'd expect from a crypto currency!

That's exactly where the bitcoins come from.  Solving a block "verifies" transactions, making the community as a whole confident in the system.  Thus, you are awarded 50 bitcoins in exchange for, effectively, the "confidence" you just "sold".

you CAN trade confederate dollars for something of worth.  You can trade reichmarks for thinks of worth too.  Not because these things are money anymore, they aren't, they are collectible commodities.

Well, it's resolution that matters, not quantity. We have enough gold in the world. With modern technology, there is no reason you couldn't own part of an ounce of gold or transfer parts of a gram of gold around, and you can indeed do this today.

I'm having a hard time figuring out a way to do them all. Privacy, security (including the reliability of the overall structure), and simplicity seem to operate on the typical triangle graph - you can maximize two of them at the cost of the third.

You can have pseudonymity, though, in place of pure privacy.


No, it's a giant Rube Goldberg device with that as its superficial aim, wasting an enormous amount of computing power in order to do so. You are literally burning coal, discarding most of the waste, and stamping the remainder with a seal of authenticity to use as a vehicle of trade. Even worse, you have no idea how much you will burn - but you know how much waste you will be using.

There is also the war of computing resources aspect - right now anyone with more than ~1mhash/second of computing power can co-opt the system. When I - relatively poor - am doing 5khash/second, that does not instill in me a great deal of confidence.

Once all of the bitcoins are used up, the only reason to compute blocks any longer will be to grab transaction fees. This also runs the risk of destabilizing the overall system

There is no incentive whatsoever to trade, outside of novelty. It is only worth as much as you believe in it. If you believe, as I do, that it is a naturally deflationary currency, then your only incentive to spend it will be to cash out before it peaks and collapses.

The ten minute resolution time on these things seems quite arbitrary. Why should it take any longer than a minute, at most?

To me and I suspect others, bitcoin is nothing more than an interesting proof of concept. Followers of the Austrian school of economics will probably eat it up, making it worthwhile to at least toss a toe into the ring.

Some Mouse, I'm inclined to agree.

Decentralised credit clearing is however fundamental to a free private money system - and I think bitcoin makes some useful progress towards this goal, if not the final word.

Are you familiar with the ripplepay concept?

I read it, it looks like it would require far too much cooperation from financial institutions.

It does give me an idea for a way for people to trade security for privacy in a transaction, however.

These two paragraphs seem contradictory to me. In the first the problem is that there is too much excess computing power required to get the stamp. In the second the problem is that you only need 1mhash/sec to give false stamps.

The beautiful thing about it imo is that as incentive to list false transactions increases the difficulty  will rise right along with it. If we had static difficulty you could certainly say "Geez, we're burning so much to accomplish such a trivial thing" after a while with more interest it might be about right, but then as it grows more and the difficulty of sending false blocks does not increase you could say "It takes hardly anything to tip this beast over" But in the current model this doesn't happen because the difficulty is linked to the most recent observation of power being dedicated.

why?

How much do you actually understand about the system, Some Mouse?  Calling it a "giant rube goldberg machine" demonstrates a very poor understanding of the mathematics and verification that the system uses.  It's not just some "arbitrary crunching of numbers".  As for the 10 minutes vs 1 minute, lowering said limit exponentially increases the ease by which someone can invalidate the system.  Satoshi simply chose 10 minutes to strike a balance between unreasonable transaction confirmation times and unreasonable instability and spoof-ability.

Correct. Transferring a number securely and announcing a new number to take its place requires rather little in the way of computational resources.


Also correct. It means it takes rather little effort for a group of people to topple the system right now, or worse, when there is very little value to be gained by just running block generation - since it won't be producing coins, only collecting on relatively rare transactions.


It seems to be a scheme for coordinating a large number of in between transactions? At least it intends to handle real value, though. It would require their cooperation.


Every time a block is generated, everyone who lost tosses all of their work, correct?

The overall security of a single transaction does not and should not require the dedicated resources of a single computer. It is intensely wasteful.


The decision to make this game about who has the most processing power is plenty arbitrary.

Each coin will be allocated in this arbitrary way exactly one time. Every future allocation will be based on voluntary transfer, usually gifts or in exchange for value.

Yeah, the initial distribution is arbitrary. To me it is vastly better than someone saying "This is the money you all must use; only I can create it and I can create as much as I want."

The initial distribution will end up being unimportant. If BitCoin succeeds it will be the people who provide value who are the BitCoin rich.

If it ends up being a fail and is rarely used for trade then the generators will have most of the Coins, but they won't be worth much.

It was just as arbitrary for the people who would follow gold rushes.  Some would strike a huge vein, others would spend months without finding so much as a gold flake.  Granted, this could be increased by putting more effort into it, or cooperating and splitting the dividends.  Which you can do in bitcoin.


This quote in particular demonstrates you're not aware of the reasoning behind satoshi's choices.

Take some time to learn how mathematics and security works, get rid of the Holier-than-thou, "I'm just here for shits and giggles" attitude, then come back.

Right, but there are other ways to guarantee distributed integrity of currency generation. The current process is intensely wasteful.


I wasn't referring to satoshi's specifc method in that sentence, I was referring to the concept of securely verifying a transaction.


Claiming I know nothing about "how mathematics and security works", calling me "Holier-than-thou", making insinuations about my purpose here, and telling me to go away in the same sentence speaks volumes on its own.

I am here because I agree with the basic premise - a distributed solution to our flawed financial system - but disagree with its structural foundation - using computing power as the baseline.

I am not interested in dueling character assassination attempts.

I reacted poorly to what I deemed to be an arrogant attitude.  If that was not your intention, I apologize for being so quick to bristle.  Arrogance (even just perceived arrogance) is not something I deal well with. >_>

As for securely transferring a number, this is done with efficiency.  However, in order to guard against duplicate announcements, desynchronized clocks, verifiable history, and specifically malicious users (which, in any computer system, you must assume there will be no end to the malicious attacks), you have to have a stronger framework than simply "transferring a number securely and announcing it."

You need to be careful about being too attached to the first solution presented. To use a math analogy, it runs the risk of finding a local maximum - deviating from the solution presented a slight ways is of course bad, but if you went further, you might find something better.


I'll probably make a new thread with my proposal and see if there is interest.

=P I'm quite aware of local-maxima phenomenon.  I was simply defending the current system as not "arbitrarily difficult".  Each aspect of the solution has a purpose.  Whether said solution is the best was not what I was debating.  If you've got an alternative, feel free to share.

Credit existed under the gold standard as well.  As the division of labor exploded during the gold standard the need for localized liquidity arose that the physical movement of metal could not keep up with; hence bank notes and credit forms of currency which traded at some discount to physical gold.  To say that credit was invented after gold is only true insofar as we go back to the beginning of humans using any form of exchange medium.

Credit has always existed.  Fractional reserve banking existed under the gold standard, locally.  They will exist under any potential bitcoin standard as well.  The issue with fiat currency is the consequence of the liquidity is can produce because of the incentive to produce money by those who issue it for their own purpose, ie. a theft of property by devaluing the currency units previously in circulation.

If communications technology had exploded at the same rate as the demands for money, digital gold currencies would have arisen and solved the liquidity problem by increasing the clearing rate of transactions.  They didn't, of course, and for a variety of reasons the system we have now was implemented.  Now that technology has caught up with the opportunity exists to swing the monetary pendulum back.