How to profitably create Bitcoin forks without causing economic chaos

[etotheipi]

I agree about burning bridges, and how it's probably not a good idea.    However, I'll journey down this thought experiment a little more:  The BTC destruction script mentioned in (1) could include a list of transaction IDs/hashes of the forkcoins that are taking their place.  If forkcoin is anything like BTC, the forkcoin minting process (even if completely different than BTC) should still have uniquely identifiable coinbase/creation transactions where currency units are injected into the system.  Then you can easily get a 1-1 mapping of BTC destroyed to forkcoins created.

[d'aniel]

I agree about burning bridges, and how it's probably not a good idea.    However, I'll journey down this thought experiment a little more:  The BTC destruction script mentioned in (1) could include a list of transaction IDs/hashes of the forkcoins that are taking their place.  If forkcoin is anything like BTC, the forkcoin minting process (even if completely different than BTC) should still have uniquely identifiable coinbase/creation transactions where currency units are injected into the system.  Then you can easily get a 1-1 mapping of BTC destroyed to forkcoins created.

Yeah, my thought was that as long as people are using it, to not burn the bridge.  Further, all newly created forkcoins must come into existence through the central bank; otherwise it can't ensure the 1-1 mapping of BTC in its reserves, to forkcoins it has released into circulation.

[JoelKatz]

They could even make a business model out of this by charging a fee for issuing or redeeming.

Redeeming? I thought we were talking about a one-way bitcoins->forkcoins system. Are you suggesting there should be some way to go from forkcoins->bitcoins? Where would the bitcoins come from?

[kjj]

I agree about burning bridges, and how it's probably not a good idea.    However, I'll journey down this thought experiment a little more:  The BTC destruction script mentioned in (1) could include a list of transaction IDs/hashes of the forkcoins that are taking their place.  If forkcoin is anything like BTC, the forkcoin minting process (even if completely different than BTC) should still have uniquely identifiable coinbase/creation transactions where currency units are injected into the system.  Then you can easily get a 1-1 mapping of BTC destroyed to forkcoins created.

Yeah, my thought was that as long as people are using it, to not burn the bridge.  Further, all newly created forkcoins must come into existence through the central bank; otherwise it can't ensure the 1-1 mapping of BTC held out of circulation by it to forkcoins it has released into circulation.

But if the exchanger is merely holding onto the bitcoins, no one will trust it.

[markm]

So don't trust it, "Nemo". Set up a cron job that will sell back to it any of its coins that manage to somehow come into it's reach that will sell them back to the politburo or developer or promoter or cult or whatever that claims they are worth something.

You can tell how much they think they're worth by how much they'll buy them for, that is how markets work, isn't it?

Do you believe World of Warcraft (or Diablo 3 or whatever) actually plans to buy back WoW-Gold (Or diabloons or whatever) for anywhere near the number of dollars people (or even they themselves) sell it for?

If not, then how close to the amount they sell it for will they buy it for? (What is their "spread"?)

Does anyone trust them to buy it back?

Does anyone buy it at all? Even at less than a dollar for a million coins?

Do you trust Berspank / the Fed? If no, then you won't be buying or accepting any federal reserve notes, hmm?

Etc.

I thought I read somewhere once upon a time about trust having to be,,, uh,,, something... uh... uhn... uhn'd?

I wonder if that was anywhere near the place where I read something about the predictive power of the past...

-MarkM- (Do you people trust pyramid schemes to pay off for them? Do they buy into them?)

P.S. Notice that many of the "new" blockchains are not yet open to the public, specifically due to concerns about the expense of mining compared to the relative strength of potential "enemy miners". Once all their coins are minted, or maybe before, more access to the blockchain might well seem more economically viable than it does during startup periods in which they might feel relatively vulnerable to predatory miners.

[d'aniel]

Mark,

I agree that this looks all too familiar.  Your elf/orc comment definitely made me think "ring of power".  But "it'll be different this time around!"

Now we have on-demand public auditability.  We have the ability to spread trust around in an cryptographically enforceable way.  And there are no laws compelling one cryptocurrency over another.

And it's exactly like you say: if you don't trust the new coins' central bank, yet they offer something really valuable that bitcoins don't, then only hang onto them as long as you need to, and keep your value stored in bitcoins.  If they break their 1-1 backing, call shenanigans, and GTFO.  If they stop redemption in violation of their constitution, dump their coins on the market ASAP.  And the short sellers would no doubt always be on the prowl.

Basically, I think it boils down to this: If the political/financial establishment decided to loosen its grip tomorrow and allow a relatively distributed group of trusted organizations to act as a central bank, creating a Bitcoin clone fully backed by, say USD, then what do you think the market would choose: Bitcoin with its wild volatility, or USDcoin that introduces no practical risks, other than the underlying backing?  Even if the goal is an unbacked, decentralized currency, piggybacking off the USD value metric and then gradually shedding the backing is likely a much better way to get it than what Bitcoin is being forced to go through.

I don't ever see this happening, but down the road I do see new cryptocurrency startups that offer tangible benefits over Bitcoin wanting to piggyback off the existing BTC value metric.  Remember, they'd otherwise have to solve the damn hard nuts to crack of 1) initial distribution, and 2) finding a stable valuation through establishment.  I don't see any other quick fix to 1 and 2.

And if something like forkcoin happens sooner than later, I'd like to see the competition happen in a synergistic way, rather than rivalrous.  We're not only trying to create a new currency here with Bitcoin, but a new value metric as well.  That seems to be the truly difficult problem!  But it's made easier by competing currencies reinforcing the same value metric.

Edit: Added thought: If a precedent for introducing new cryptocurrencies this way were set, it would give people a lot of confidence that they are a safe store of value that they don't have to babysit, and would increase overall adoption.

[kjj]

So don't trust it, "Nemo". Set up a cron job that will sell back to it any of its coins that manage to somehow come into it's reach that will sell them back to the politburo or developer or promoter or cult or whatever that claims they are worth something.

You can tell how much they think they're worth by how much they'll buy them for, that is how markets work, isn't it?

Do you believe World of Warcraft (or Diablo 3 or whatever_ actually plans to buy back WoW-Gold (Or diabloons or whatever) for anywhere near the number of dollars people (or even they themselves) sell it for?

If not, then how close to the amount they sell it for will they buy it for? (What is their "spread"?)

Does anyone trust them to buy it back?

Does anyone buy it at all? Even at less than a dollar for a million coins?

Do you trust Berspank / the Fed? If no, then you won't be buying or accepting any federal reserve notes, hmm?

Etc.

I thought I read somewhere once upon a time about trust having to be,,, uh,,, something... uh... uhn... uhn'd?

I wonder if that was anywhere near the place where I read something about the predictive power of the past...

-MarkM- (Do you people trust pyramid schemes to pay off for them? Do they buy into them?)

P.S. Notice that many of the "new" blockchains are not yet open to the public, specifically due to concerns about the expense of mining compared to the relative stregnth of potential "enemy miners". Once all their coins are minted, or maybe before, more access to the blockchain might well seem more economically viable than it does during startup periods in which they might feel relatively vulnerable to predatory miners.

Do you want to try this again when you are fully awake, and after you've read the thread?

P.S.  Who is "Nemo"?

[d'aniel]

Say the existing developers wanted to roll out some awesome protocol upgrade they thought would greatly improve Bitcoin's worth - say they estimate by ten times - but want to avoid the delay of having to roll it out gradually, getting everyone to upgrade, and including legacy code in the new system in perpetuity in order to maintain backward compatibility.  They could use the method I've proposed here, charge a 2% conversion fee, and earn around $14M (roughly accounting for lost coins) at today's exchange rate to fund future development, if nearly everyone makes the transition.  This would pay 50 full-time developers $70,000/year for 4 years - around the time the next upgrade needs to be rolled out.

People obviously like and trust the developers, and I'm sure would be happy to pay a conversion fee, as it means further development which would likely continue to add value to their coins.

To make everybody happy, they could continue to support the legacy code for a few more years, and waive the conversion fee after say, a year, for anyone who hasn't made the transition.  That way they can avoid having this be seen as a money grab - people would only convert quickly if they were happy to pay the developers, or if the upgrade was really necessary or beneficial to them.

[markm]

It turns out that one of the currencies someone had me help develop is "devcoin", specifically aimed at funding open source development and with development of bitcoin relatively high up on the list of open source things to develop.

I do not see multiple currencies as competing, rather they are enriching the landscape.

Obviously trading between various currencies is osmething various people find appealing, fun, interesting, for some maybe even profitable. But dealing with fiat is a massive pain. So having a whole bunch of currencies that use the same API could open up the currency exchange field wonderfully by letting people do it without having to deal with fiat at all unless for some reason they like to, wish to, feel compelled to, or are compelled to.

I put Nemo in scare-quotes to indicate I didn't literally mean the character Nemo from the Jules Verne novel but, rather, more generically no-one (or was it sexist back then, no man?)

-MarkM- (As in no one would use...)

[Tanu10]

There's another way to accomlish the same thing.And well, for the ones that expand at the same rate, any way.

[cunicula]

Next big step to make money in this bear market apart from creating money from thin air by doing fork is airdrop.

[Talat10gu]

I don't support this doing at all because I believe that crypto must increase in its own and any correction and human-made thing will destroy it so much.

[vseslav90]

Forks are special thing that could bring benefits and I am sure that your article is useful but not for everybody as I can see. But I am not against of them.