The claim that Mastercoin1 will not become secondary to Mastercoin2, and using bitcoin as an example is really not the best argument. The community revolving Mastercoin1, the first to market exposure, and branding will all play a role in helping Mastercoin1. Unfortunately if bitcoin was premined among satoshi and co, and was hoarded in hopes of speculative riches, litecoin would be the big player today. People underestimate the adoption role distribution methodology serves. This is one of the key reasons Ripple has not received mass adoption by the bitcoin community so far (Not to say Ripple1 and Mastercoin1 won't be successful).
Additionally since the claim here is that Mastercoin is a unit of measurement, there is in fact a huge incentive for competing Mastercoin networks. In the end, the only advantage I see Mastercoin1 having is a speculative advantage which will probably pop along with the first big market crash. Associating a separate value to Mastercoins is a self-hindering feature which is really only there to serve an ROI pathway for the original investors (something which I recognize was needed for the crowdfunding to succeed, capitalizing purely on people's dreams and hopes of getting rich...not their altruistic motives). Yes I understand the claims of why mastercoins "NEED" a value, but it sounds to me more like circular logic and a crippled solution.
I don't agree with it. I think separation from Bitcoin is a good thing when trying to create a unit of measurement because it allows Bitcoin developers to focus on making Bitcoin a unit of account. Bitcoin is not more valuable than Walmart credits if Walmart has a higher market cap and is in greater demand, but with Mastercoin the Walmart corporation can issue their Walmart credits directly to users through Mastercoin. Amazon coin or Google coin through Mastercoin would work just fine over Mastercoin. You or I could also issuer our credits through Mastercoin.
I don't think the price and speculation of Mastercoin is important because it's not something which functions in a way which can be popped easily like Bitcoin can be, because I believe Mastercoin will be backed by real goods and services and not just people putting USD into it as an investment. What matters is the ability to get an abundance of goods and services. The price of the dollar is only of value when compared to the price of something else like gold or silver (which originally backed the dollar). The price is a result of having a unit of measurement. The unit of measurement sets all the prices of all the issuers. What matters for us is to have the ability to issue credits which represent the true value of our goods and services which can be redeemed by someone else while also having a market place where we can access credits which represent the goods and services of anyone else. Goods and services ultimately create the value for Mastercoin (not Bitcoins). Bitcoins are just the transport layer to carry the information which represents the true value which is the goods and services that those credits represent.
If I can buy Google or Walmart credits with my Mastercoins and the Mastercoins somehow are less effective at it then that can be adjusted to make Mastercoin more effective. The price of the Mastercoins in dollars does not matter if I can get the same amount of goods and services.
The value of Mastercoin is what matters and that buying power matters in relation to the redeemed goods and services of issuers, not the credits from issuers. Meaning the Mastercoins are used to allow issuers to issue credits in the first place and any large corporation could issue credits which are more expensive than Bitcoin because price is measured by whatever is backing Mastercoin's escrow and not necessarily exclusively Bitcoin.
Colored Coin is a technology but it's design in my opinion is ugly and unnecessarily complicated. Maybe it will work but I don't see how it can work without the value going somewhere. If someone is issuing credit or currencies then it's got to be backed by something somewhere and represented somewhere. If it's backed by Mastercoins then you'd say it's represented by Mastercoins which act as the unit of measurement. If I wanted to issue a currency or credits through Colored Coin then perhaps it's possible but I don't know what their specification is or how they intend to do it. I'll believe it when I see a prototype.
Colored coin technology is actually superior to Mastercoins in terms of being "backed". You can color whatever amount of bitcoins you would like as a single unit, directly. So for example 15 btc = 1 goldcoin; that goldcoin is in fact 15 bitcoins forever.
I don't believe it to be superior. What Colored Coins will do is cause less people to use Bitcoin as a currency and more people to have to use Bitcoin as a unit of measurement (which it's not designed for and shouldn't do).
Bitcoin is a unit of account, a credit/currency designed by Satoshi and issued by miners. It's not in my opinion going to be capable of being good at being both the unit of measurement and a currency at the same time for the same reason that gold and silver weren't good at being both a unit of measurement and a unit of account at the same time.
We moved from to fiat currency for a good reason, we moved to vouchers for a good reason, it was to move beyond the limits of what gold and silver could do. You couldn't issue virtual gold and virtual silver without a voucher or credit or fiat system to allow you to issue pieces of paper which represent gold or silver. Silver went from being a unit of account to being a unit of measurement and that was one of the greatest changes in the economy because it allowed any shop keeper to issuer their own credits, their own currency, their own voucher backed by their own goods and services with silver being used merely as a measure on the value of their goods and services. Nothing in the economic eco-system was more valuable than gold so gold was used merely in comparison to everything else. My goods and services are valued as 20 pieces of gold, 20 pieces of gold is relatively stable and does not change drastically, so we can use 20 pieces of gold to know exactly how much my goods and services are worth. But when people actually buy my goods and services they use my vouchers, my credits, my currency, not 20 pieces of gold.
Bitcoin could try to take on the functionality of gold but it's hard for Bitcoin to be programmed to function like gold while also allowing it to function like a currency. It's basically saying that Bitcoin will be divided in such a way that on the one hand you will have a perpetual coin (Bitcoin), but also a credit coin (user currency), and that Bitcoin will somehow be able to act as a unit of measurement for the credit coin. I'm skeptical that Bitcoin being what it is and the focus development is currently going that it can achieve that.
With Mastercoin the price of Bitcoins does not matter. If you use Colored Coins and the price of Bitcoins were to go down wouldn't that affect everything backed by Bitcoins? That is the problem I can see. The problem being that Bitcoin will be used for too many things and its use as a currency may create instability for it as a unit of measurement while Mastercoin will primarily be a unit of measurement so it does not have the same potential problems trying to be two things at once.
Maybe you see a way around this but when something is supposed to be a unit of measurement its supposed to provide stability but I don't see any way something volatile like Bitcoin can provide stability at this time when it has to be mined, has block reward halving events every 4 years, (I think Proof of Stake might work for stability but Proof of Work actually contributes to the volatility). Theoretically possible, but I don't think it's going to work in practice.
Oh the other hand, Mastercoin proposes a controversial feature of escrow backed currencies which my economic sense tells me cannot work. The issuance is not being measured on the value of Mastercoins; in reality it is being measured by the MSC to BTC relationship since BTC is where the trust and redeemability exists today. So if for example you issues gold through mastercoin, potential for loss of trust and catastrophic collapse can occur on 2 levels, both if BTC losses value AND if MSC losses value.
BuyMastercoin if I can redeem my Mastercoins for the products and services offered by the issuer what do I need Bitcoins for? If you're a car company and you offer Ford coins to anyone who has Mastercoins then what exactly would I need Bitcoins for if I'm trying to trade for car products? Okay you're a video game company called Nintendo and you offer Nintendo credits and I have Mastercoins so I trade for those Nintendo credits, so what exactly do I need Bitcoins for? When we have a decentralized market place I can trade Mastercoins for any kind of credits, any kind of currency (including Bitcoins but not limited to Bitcoins). And that is where I think we disagree.
I think Mastercoins do not need the value of Bitcoin because Mastercoins can be redeemed for the goods and services of the issuer. If you issue BuyMasterCoin credits, then anyone who owns Mastercoins could purchase your credits so why would Bitcoins be needed unless you believe Bitcoins are the only valuable form of credit that exists and in that case I don't believe Bitcoin is even as valuable as Visa or Mastercard. I don't think Bitcoin is even as valuable as Ford or Nintendo if you look at the market cap. What I'm saying is that Mastercoin will inherit the value of all the corporate privately issued credit, all the points, all sorts of virtual currencies, gift cards, private currencies, gold. Mastercoin as a protocol will allow the creation of a Local Exchange Trading System or a Community Exchange System. If trade is facilitated decentralized, and anyone can issue credit, there is no need to care about the price of Bitcoin because people will buy Mastercoins with cash the same way people currently buy Bitcoins with cash.
If you're saying right now it's easiest to buy Mastercoins with Bitcoin then sure. In the future corporations will be knocking each other over to issue credits/ gift cards and currencies on top of the Mastercoin protocol and if my understanding is correct they'll need Mastercoins to do it.
Regardless the only way to truly back an asset in the REAL WORLD is to have that asset on hand, or hedge the position elsewhere (otherwise it's a bucket shop). No magic voodoo self fulfilling prophecy escrow account can change that, and if it could you'll see JR receiving a nobel prize.
It has worked in the past. How do you think the economy used to work? What do you think banks did and how do you think vouchers came about? Originally if we are all business owners in a market then we all have goods and services we want to trade with each other. We cannot use gold or silver coins because those tend to get hoarded, rely on scarcity, and because of that are best used as a unit of measurement rather than as a unit of account. What happened was human beings who wanted to trade with each other first started with barter, but that wasn't very flexible, so they created a unit of account (money) to allow the tracking of cost and price, but the gold and silver form didn't function very well as money because while it could be stored forever that easily stored forever quality also made it easy to hoard.
Hoarded gold and hoarded silver is worthless to the economy. They eventually figured out to use gold and silver as units of measurement and to use trade vouchers and private credit currencies as units of account. So no one really needed to have gold other than to use as escrow to issue private currencies. Now each shop keeper could and did issue their own vouchers. The most valuable and useful vouchers were in the greatest demand, and everyone traded their goods and services for those vouchers. As a result everyone eventually started working for those vouchers. Those vouchers were actually backed by the goods and services of the issuer so if it's a bread voucher it's backed by bread and since everyone has to eat it means the bread voucher was extremely valuable to the economy. The unit of measurement (gold and silver) were only used to provide escrow and produce a price and cost for the goods and services offered by the issuer. The majority of people in the economy did not have to care about the price of gold and silver and did not own much gold and silver as it was used to measure the value of other things against it. A loaf of bread is worth a certain amount of silver, and that amount can increase or decrease by some percentage points, no one really cares the price of gold or silver because if the bread is more expensive then the bread can be redeemed for more gold or silver but if the bread is less expensive then the bread is redeemed for less gold or silver. That is basically what Mastercoin is doing with the user currencies. If the user currency is in high demand then the escrow produces more of them to adjust the supply to meet the demand. If its in less demand then the escrow destroys some of them to adjust.
As long as we can get plenty of bread, we have no reason to care about the price in Mastercoins because eventually you'll be able to trade swap credits/user currencies. If I have too much bread I can trade it for tickets to the concert or anything else I want in the market place.
So while colored coins is backed directly by bitcoin, Mastercoin issued coins are at much higher risk of speculative attack. That's not to say Mastercoins don't have their own advantages, but when it comes to representing value or a unit of measurement, MSC falls short.
Yes I do help run buymastercoin.com, yes I am realistic about the technology, NO I'm not hyping magic fairy tales of pots of gold at the end of the rainbow. Caveat emptor.
I think you do not fully understand the implications of the Mastercoin protocol. What Mastercoin is doing is actually old, it's not some new formula just because it's high tech. It's true it's never been done with computers and in a decentralized way, but it has been done before and its not what you think.
