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Author Topic: 2013-08-22: Mises Circle: The Problem With Altcoins: Why None Can Succeed  (Read 3726 times)
n8rwJeTt8TrrLKPa55eU
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August 23, 2013, 02:45:48 AM
 #1

Well worth reading and pulls no punches.  Similar in spirit to Gavin's recent blog post, but much more formal, lengthy, and detailed.

Quote
Thus, the altcoin communities are not just embarrassing, but dangerous. Desperately wishing to be taken seriously despite having nothing worthwhile to offer, they will say absolutely anything to convince other people to join them. They persist in saying things easily refuted by economic logic, common sense, or verifiable facts. They become belligerent when challenged. This is all they can do because they have nothing of value to offer. They are great at conning people because they have succeeded in conning themselves, and it is impossible to tell where self-deception ends and outright lies begin. This is bad for Bitcoin and bad for the people who are fooled.

http://themisescircle.org/blog/2013/08/22/the-problem-with-altcoins/
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August 23, 2013, 07:38:07 AM
 #2

The author makes the mistake of thinking that because nobody has stumbled upon a currency better than bitcoin, none exists.

Lets take a look at history of the light bulb. Thomas Edison did not invent the light bulb. The light bulb was invented 70 years prior to Edison's light bulb. Over that 70 years many people tried to improve the light bulb to make it viable. It was Edison that finally succeeded. Since his bulb was the first truly commercially viable bulb, and because of its rapid adoption and revolutionary nature, we can think of it as the bitcoin of lighting -- the bit-bulb.

Now, if the author were writing about light bulbs, he would write, "why are people developing alt-bulbs? None will ever be as successful as Edison's bit-bulb." Of course, he would be terribly wrong. Now, after 100 years of trying to improve on the bit-bulb, complete replacement of the bit-bulb by the fluorescent alt-bulb (and followed by the LED alt-bulb) looks imminent.

The purpose of alt-coins are lies not in the coins that have been developed, but in the coins that will be developed.

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August 23, 2013, 08:20:44 AM
 #3

The author makes the mistake of thinking that because nobody has stumbled upon a currency better than bitcoin, none exists.
No he doesn't. You don't seem to have read it very well.

He clearly states that it would have to be orders of magnitude better than bitcoin on its' best day to even get a start against the momentum bitcoin currently enjoys. He's right, too. Can you even begin to estimate how many man-hours of 'selling' the bitcoin concept we coiners have done to merchants to get them to start accepting bitcoins?

Now Imagine doing that all again to get them to change to the next coin, but with more resistance because they would now see it could be replaced often... We'd likely kill digital currency altogether that way!

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August 23, 2013, 08:31:50 AM
Last edit: August 23, 2013, 10:31:35 PM by Akka
 #4

Lets take a look at history of the light bulb. Thomas Edison did not invent the light bulb. The light bulb was invented 70 years prior to Edison's light bulb. Over that 70 years many people tried to improve the light bulb to make it viable. It was Edison that finally succeeded. Since his bulb was the first truly commercially viable bulb, and because of its rapid adoption and revolutionary nature, we can think of it as the bitcoin of lighting -- the bit-bulb.

Now, if the author were writing about light bulbs, he would write, "why are people developing alt-bulbs? None will ever be as successful as Edison's bit-bulb." Of course, he would be terribly wrong. Now, after 100 years of trying to improve on the bit-bulb, complete replacement of the bit-bulb by the fluorescent alt-bulb (and followed by the LED alt-bulb) looks imminent.

But nobody is trying to develop a new Bulb.

To stay by your analogy all that is being done is to take the existing light bulb and change the socket in which it fits.

Also the Author says that an altcoin that offers similar advantage over Bitcoin as Bitcoin does over Fiat would have a chance of success. But so far none does or even tries to.

As for using them for experimenting, there is this: https://en.bitcoin.it/wiki/Hardfork_Wishlist

So far no altcoin has even dared to tried one of those, because that could backfire, better to just copy the existing design and only change the "socket". --> Profit!

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August 23, 2013, 11:32:32 AM
 #5

Any Mises followers are unlikely to appreciate Freicoin, which is the only novel alt coin to interest me that much. I still own zero Freicoins, though. It's not impossible that some alt coin idea will catch on, but none of the others have, even Litecoin has an acceptance struggle. I think it's ok to have them around, they don't really threaten Bitcoin at all, as they haven't crossed the threshold from "live experiment" to being actively used. The free market principles seem to be working pretty well here; Bitcoin wins 99% market share as it overwhelmingly has the best properties, as we currently perceive it anyway.

Vires in numeris
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August 23, 2013, 08:14:26 PM
 #6

Any Mises followers are unlikely to appreciate Freicoin, which is the only novel alt coin to interest me that much.
I appreciate Freicoin because it shows that critical mass of the network effect of media of exchange can empirically be very low and does not require any particular economic theory. I must admit that I was myself surprised.
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August 23, 2013, 08:19:07 PM
 #7

Nobody is really inventing a new "lightbulb".

They're just changing the filament color and the socket sizes/voltages and calling it "new".

If any altcoin had any innovations that were truly worthwhile, the main bitcoin client would fork to include it, therefore invalidating the existence of the alt-coin in the first place.

The only alt-coin that has any purpose beyond outright bamboozlery is Namecoin, and it won't flourish until the ISPs come under attack from governments desperate to control citizenry.

fortitudinem multis - catenum regit omnia
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August 23, 2013, 08:28:43 PM
 #8

The only alt-coin that has any purpose beyond outright bamboozlery is Namecoin, and it won't flourish until the ISPs come under attack from governments desperate to control citizenry.

Forgot Namecoin, I have an appreciation for that alt too.

I'm keen on this specific purpose coin concept, as the blockchain has a secondary purpose. Makes sense with web domains, but I'd like to see the CA system done like this.

Maybe the SCIP Proof-of-Execution cryptography could address a distributed Certificate Verification service? Sounds sort of possible... but I still haven't wrapped my head around the details.

Vires in numeris
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August 23, 2013, 08:51:04 PM
 #9

I used to think like the author, that alt-coins are useless. That was before BBQcoin cured my cancer.

But seriously, great article. To replace bitcoin, and alt-coin would have to have an advantage compelling enough to overcome the network effect of bitcoin.  It may happen eventually, but I doubt it. Bitcoin's problems can be fixed without the need to start over with something else.
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August 23, 2013, 09:04:35 PM
 #10

I used to think like the author, that alt-coins are useless. That was before BBQcoin cured my cancer.

But seriously, great article. To replace bitcoin, and alt-coin would have to have an advantage compelling enough to overcome the network effect of bitcoin.  It may happen eventually, but I doubt it. Bitcoin's problems can be fixed without the need to start over with something else.

I don't think trying to replace Bitcoin is the right way of doing an alt-coin, Namecoin kind of proves that (kind of). Complementary purposing is the only worthwhile design decision for an alt-coin IMO

Vires in numeris
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August 23, 2013, 10:08:58 PM
 #11

I like litecoins because so far anyway, I've never had to wait an hour for confirmations, like I have had to with bitcoin.

I'm grumpy!!
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August 23, 2013, 10:25:49 PM
 #12

I like litecoins because so far anyway, I've never had to wait an hour for confirmations, like I have had to with bitcoin.

Instant gratification doesn't mean it will scale. But go ahead, risk your own money.

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August 23, 2013, 10:26:47 PM
 #13

The author makes the mistake of thinking that because nobody has stumbled upon a currency better than bitcoin, none exists.

Lets take a look at history of the light bulb. Thomas Edison did not invent the light bulb. The light bulb was invented 70 years prior to Edison's light bulb. Over that 70 years many people tried to improve the light bulb to make it viable. It was Edison that finally succeeded. Since his bulb was the first truly commercially viable bulb, and because of its rapid adoption and revolutionary nature, we can think of it as the bitcoin of lighting -- the bit-bulb.

Now, if the author were writing about light bulbs, he would write, "why are people developing alt-bulbs? None will ever be as successful as Edison's bit-bulb." Of course, he would be terribly wrong. Now, after 100 years of trying to improve on the bit-bulb, complete replacement of the bit-bulb by the fluorescent alt-bulb (and followed by the LED alt-bulb) looks imminent.

The purpose of alt-coins are lies not in the coins that have been developed, but in the coins that will be developed.


I'm sorry, but that metaphor was terrible. In no way is anything you said applicable. Pulling out a name like Thomas Edison doesn't help your argument.

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August 23, 2013, 10:33:07 PM
 #14

I like litecoins because so far anyway, I've never had to wait an hour for confirmations, like I have had to with bitcoin.

Instant gratification doesn't mean it will scale. But go ahead, risk your own money.

Has nothing to do with "instant" gratification, as neither coin is "instant".

What becomes a problem is when I am trying to do an exchange with someone at a coffeeshop, and we're both on a schedule, and we're both waiting for over an hour for just 3 confirmations.

Waiting an hour for confirmations is no big deal for online shopping where you're gonna wait for shipping anyway, or if you're buying something big, but who's wants to wait that long to buy something small and on the go?

If I wanted to really risk my money, I'd put all my eggs in one basket.

I'm grumpy!!
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August 24, 2013, 03:51:46 AM
 #15

who's wants to wait that long to buy something small and on the go?
The same people who wait that long while the cashier checks that the five-dollar note they paid with isn't counterfeit. Counterfeiters put a lot of effort into making their five-dollar notes look exactly like the real thing, you know; that's why you have to spend so much time checking. Oh wait, they don't. Nobody worries about counterfeit five-dollar notes because it's so much effort for such a small-time scam, and nobody worries about double-spends for low-value Bitcoin transactions for the same reason. Especially if it happens in a public place where there are witnesses and CCTV cameras everywhere making it more likely the guy will be identified and arrested.

If I wanted to really risk my money, I'd put all my eggs in one basket.
And If I wanted to really risk my money, I'd "diversify" by putting half my eggs my eggs in a second basket which is identical to the first one in almost all respects, except this one is full of holes.

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August 24, 2013, 04:26:39 AM
Last edit: August 24, 2013, 06:33:03 AM by freedomno1
 #16

The ones that succeed will bring something different to the table that has not already been seen before.
They include non-altcoin ideas that can be developed to work in connection with bitcoin

An alternative that I have noticed is the Mastercoin Project which aims to create a compliment to the bitcoin architecture.

A protocol layer on top of bitcoin (like how HTTP runs on top of TCP/IP). The coins of the new layer have:
•   Additional security features to make your money much harder to steal
•   Built-in support for distributed betting (no need to trust a website to coordinate bets)
•   Capability to hold a stable user-defined value, such as an ounce of gold or U.S. Dollar, with no need to trust a person promising to back up that value.

I advise that you have a look in their main thread https://bitcointalk.org/index.php?topic=265488.0 to know more about it, because it looks very promising and seems that getting in early has a lot of advantages too.
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August 24, 2013, 04:32:00 AM
 #17

Nobody is really inventing a new "lightbulb".

They're just changing the filament color and the socket sizes/voltages and calling it "new".

If any altcoin had any innovations that were truly worthwhile, the main bitcoin client would fork to include it, therefore invalidating the existence of the alt-coin in the first place.

The only alt-coin that has any purpose beyond outright bamboozlery is Namecoin, and it won't flourish until the ISPs come under attack from governments desperate to control citizenry.

+1

Its still a lightbulb. Bitcoin will evolve just like lightbulbs.

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August 24, 2013, 05:30:20 AM
Last edit: August 24, 2013, 06:46:18 AM by freedomno1
 #18

Bitcoin will evolve just like lightbulbs.

They will eventually be "phased out" and a different product will be pushed on us?

Governments around the world have passed measures to phase out incandescent light bulbs for general lighting in favor of more energy-efficient lighting alternatives. Phase-out regulations effectively ban the manufacture, importation or sale of current incandescent light bulbs for general lighting. The regulations would allow sale of future versions of incandescent bulbs if they are sufficiently energy efficient.

Not to burst your lightbulb but these damn things will pollute our landfills later and may be more damaging than the incandescent Smiley
http://www.ec.gc.ca/mercure-mercury/default.asp?lang=En&n=2486B388-1
http://www.scientificamerican.com/article.cfm?id=can-compact-fluorescent-lightbulbs-damage-skin

(Used Allusion)

Bitcoin is an incandescent but it can become a fancier CFL with extensions added to it such as mastercoin.
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August 24, 2013, 03:22:14 PM
 #19

who's wants to wait that long to buy something small and on the go?
Especially if it happens in a public place where there are witnesses and CCTV cameras everywhere making it more likely the guy will be identified and arrested.

You have obviously never reported a "crime" to the police...
And probably think cops look for lost dogs.

And the article...
Besides being the anti-thesis of entrepreneurial thinking...
It touts the "network effect" for tiny, tiny, tiny BTC...
While simply ignoring the "network effect" for 10,000 times larger USD.

It's probably single worst piece I've read in 2013 = Cults Fry Your Mind.
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August 24, 2013, 04:03:59 PM
 #20

who's wants to wait that long to buy something small and on the go?
Especially if it happens in a public place where there are witnesses and CCTV cameras everywhere making it more likely the guy will be identified and arrested.

You have obviously never reported a "crime" to the police...
And probably think cops look for lost dogs.


^this

Also, what about a 1~2 bitcoin transaction? I really don't want to wait over an hour for that to happen either, but I also don't want to be ripped off for $100-$200 either. In my case, I was selling 2 bitcoins, and the guy didn't just want to hand me $200 and trust that the coins were going to be in his account.

Seems like there are some people on here who are hell-bent on slamming alt-coins.

I'm grumpy!!
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