The paradox of alt coin currencies

[84AJ]

Bitcoin is valuable because of its scarcity. The limited number of coins and the fact that it is controlled by software and agreement of the miners, unable to be manipulated by any government is what makes Bitcoin valuable. Trust in this is what drives Bitcoins value and growth.

However, recently there has been a lot of growth in competing crypto currencies, with people looking to invest in a cheaper option with more growth potential, to the point that the price of Bitcoin has been affected. This ammounts to uncontrolled inflation of the total number of crypto currencies undermining the scarcity and undermining the entire premise that gives crypto currencies value. As the number of crypto currencies approaches infinity the value of all currencies approaches zero.

The only moat is acceptance of one currency and not others, but with the establishment of exchanges this is defeated. It would be like using amex or visa or MasterCard, but the number of currencies is not limited by the system like the number of payment systems because the conversion can be completed by the user prior to the transaction. I see no real moat to stopping uncontrolled inflation by an ever increasing  ecosystem of crypto currencies.

There will always be an incentive to create a new currency every few years so that those new to the market can be an early adopter, rather than push up the price of an existing currency and make those who came before richer. Cryptos will become a payment system like paypal and not a store of wealth. Value will be stored in fiat currency and converted at point of transaction.

Therefore the growth in alternate crypto currencies paradoxically dooms all to worthlessness.

[Ix]

It doesn't doom "all" to worthlessness, it just dooms the ones that think that the idiotic notion of "scarcity" matters.

[84AJ]

Economics 101 says it does. Thats why the difficulty needs to increase as the hash rate increases

[generalizethis]

The talent pool of devs is the limitation. I want the best available, the most secure network, and if it does something different, even better. Very few coins have anything new to offer and are copy/pasting code from more developed coins--they are always playing catch-up. Innovation is limited and the talent tends to pool to those projects that are unique or doing something new or better.

[84AJ]

It dosent take a genius to copy paste and promote to the next generation who dont want to drive up the price of existing coins,
 ad infinite. As new coins grow they offer better returns and the existing ones suffer inflation.

[1kings]

Investors would always seek good opportunities, either in the short term or in the long term. Any coin that offers this would draw funds. BTC is going out of reach for small funds holders.

[howardhoward]

The paradox will remain - altcoins keep growing in value even if microscopically - because there's always going to be someone new entering it. Also as more people enter, the chances that people lose access to coins increases, thus recycling the value into the remaining.

[84AJ]

Only if the rate of money coming in is greater than the number of coins. There is a finite number of people and an infinite possible number of coins. When people realise this they will exit driving a crash

[lumeire]

Bitcoin is valuable because of its scarcity. The limited number of coins and the fact that it is controlled by software and agreement of the miners, unable to be manipulated by any government is what makes Bitcoin valuable. Trust in this is what drives Bitcoins value and growth.

Actually it's the Blockchain tech that makes BTCBTCBTC valuable, and all the possibilities that can be developed from it.

It doesn't doom "all" to worthlessness, it just dooms the ones that think that the idiotic notion of "scarcity" matters.

This notion actually makes BTCBTCBTC and most of the alts more of a speculator's tool than something with true value.

[84AJ]

The blockchain tech is useful but not interently valuable. If it was changed so that anyone could add as many coins to the network as they liked the value of the coins would be nothing.

[generalizethis]

It dosent take a genius to copy paste and promote to the next generation who dont want to drive up the price of existing coins,
 ad infinite. As new coins grow they offer better returns and the existing ones suffer inflation.

My point is that those coins will be run by non-geniuses. I'm not betting on morons just because they may luck out on the pump and dump circuit. If anything, more coins means big names continue gaining ground as they at least have brand recognition, much like blue chip stocks.

[Ix]

Economics 101 says it does. Thats why the difficulty needs to increase as the hash rate increases

A non sequitur to be sure. You pointed out yourself that digital currencies are essentially infinite, so what scarcity is there? None. (modern) Money is not a tangible resource, it is only a medium of exchange. Scarce resources will find their price on a supply and demand curve. Money sharing the same "scarce" property distorts the ability to find a price. There simply needs to be enough money - a stable or targeted supply.

[84AJ]

Thats my point of the paradox. They undermine the premise.

The supply of modern money is controlled by central banks to control the rate of inflation to promote investment and prevent hording.

[generalizethis]

Thats my point of the paradox. They undermine the premise.

The supply of modern money is controlled by central banks to control the rate of inflation to promote investment and prevent hording.

Your point hasn't materalized since 2008 and the earliest, most cloned coin is still the largest market cap, so you are probably missing the obvious.

[84AJ]

Because Bitcoin has the name and was growing fastest. The others were insignificant and likely to be fizzle out. But now they are starting to affect the price of Bitcoin. It is this increasing competition that brings into play the paradox making all crypto curriencies an unsafe investment driving people to pull their wealth out. Their growth is a threat to their growth.

[Ix]

Thats my point of the paradox. They undermine the premise.

The supply of modern money is controlled by central banks to control the rate of inflation to promote investment and prevent hording.

What premise? That a pyramid-like distribution is the only way to have a successful cryptocurrency?
It can't be that bitcoin is valuable because it is scarce, because that is certainly not true. Scarcity does not make something valuable, only demand does.

[84AJ]

Limited supply AND strong demand

[generalizethis]

Because Bitcoin has the name and was growing fastest. The others were insignificant and likely to be fizzle out. But now they are starting to affect the price of Bitcoin. It is this increasing competition that brings into play the paradox making all crypto curriencies an unsafe investment driving people to pull their wealth out. Their growth is a threat to their growth.

We are already seeing what? Bitcoin didn't drop from 90% of the total market value until POS and ETH arrived, which are innovations, not clones.

I'll believe your paradox is valid when I see it--my hunch is that Bitcoin will be replaced atop the leaderboard by disruptive innovation.

[shandi albert]

Yes, it is natural that this item is increasingly scarce and more expensive. This is economic logic alone,Bitcoin price spikes by more than 1,300 percent make many investors begin to consider Bitcoin for their investment.

[rezurect]

While you have a point, there are also altcoins who do bring something else to the table, things that bitcoin isn't able to do. At least not yet.