Hi,

Looking at the current valuation of Bitcoin against the dollar, I know I'm not the only one to find Bitcoin to be overpriced given the size of its economy.  Therefore, there are strong indications that the current valuation (even taking into account the recent slump) is largely driven by speculation about the future value of the Bitcoin currency.  However, and though I love Bitcoin as much as the next guy, realistically speaking there are some strong arguments as to why Bitcoin -- at least in its current incarnation -- might fail.  Moreover, I suspect that speculators may not be adequately pricing the risk of a Bitcoin failure into their investment.  If this risk is properly taken into account, then the true valuation of Bitcoin against the dollar should be much lower than the current (almost) parity.

And what arguments for Bitcoin's failure are these?  Well, foremost is the risk of a second genesis or the rise of a competing system based on similar principles (or even the same code base!), particularly if backed by a strong player (think Google).

Hypothetically speaking, suppose Google were to announce gCash: an electronic currency very much like Bitcoin, but with builtin support in the Chrome browser and accepted as payment in all of Google's services.  They could even throw in builtin support for cooperative mining in the standard client to encite people to use Chrome all the time.

Bitcoin's economy is currently so small that it would be dwarfed overnight by gCash.  In a sense, Bitcoin's philosophy and principles would win, but the current block chain would either fade into oblivion or become such a niche player that its valuation would come down drastically, reflecting the true size of its tiny economy.

Now, I used Google only as an example, as I have no indication they actually have such plans.  The point is that the risk of such a scenario is not zero, and I reiterate my initial point that speculators may not be pricing it adequately.

Of course bitcoin is high risk, and might fail due to any number of factors.

See post "The beginning of the beginning of something great".

a healthy dose of skepticism is always good for any new innovation, but the emergence of another block chain has been discussed on this board before.

The general belief was, the moment google or someone else starts offering g-cash, many exchanges will start offering conversion service between btc and g-cash. In the end, it's not about block chain, it's about people, it's about user base and their preference.

P2P currency concept itself is inherently anti-corporation, g-cash if ever exist will more likely go Q coin route than bitcoin.
http://en.wikipedia.org/wiki/Tencent_QQ

I don't think a second block chain would be any problem for Bitcoin. Nevertheless, it might be interesting to start one up, just to illustrate that point. What do people think?

(We can't count testnet as an alternative block chain anymore, now that it gets reset for the convenience of the testers.)

First... silver and gold have similar properties, why are they both valuable?

Second... I don't think it really matters which block chain is prevalent as long as at least one is. If that happens, there will be some early adopters of the winning chain and some late adopters. As long as there continues a decentralized system such as Bitcoin, I don't see a problem.

Starting a new block chain tends to imply the new block chain having much less "strength", making it easier to gain >50% network power.

Yeap, which is why if Bitcoin is to sustain its current valuation on a foundation more solid than just speculation about a golden future which may or may not come to fruition, then the size of the bitcoin economy must grow.  Unfortunately, I see people more obsessed with mining than in actually putting Bitcoin to use in the real world.


My feeling exactly.  Which is why I think that if a big player (the "Google" in my example) were to launch a Bitcoin-like currency, they could overnight create far more momentum than Bitcoin currently has.


I don't believe that gold winning the ultimate throne was mere happenstance.  There were other reasons why societies eventually converged on gold and silver.  If you look at all the elements, gold occupies a sweet spot when it comes to a number of useful properties for currency: it exists in solid form, it does not rust, it is rare but not too rare, it has a relatively low melting point, etc.  If history were to be re-run, I would venture that gold would re-emerge as the winning element.

First mover advantage in so far the gathered momentum is difficult to overcome.

Nonsense. Bitcoin today are worth .80 USD.

Maybe that's only because some people owe bitcoins to someone. I don't think the debt claim is true, but you don't show that by saying the price of a coin.