The Alt-coin Narrative CycleIt is a commonly-held belief that Bitcoin is a technology and as such it could be de-throned by a better technology. Although I disagree, this belief drives the "alt-coin narrative cycle." The alt-coin narrative cycle represents "the search for the next bitcoin." I would argue that as we witness the life and death of more and more alt coins that we thought showed "promise," we get closer to accepting bitcoin as highly useful exactly as it is.
The alt-coin narrative cycle became evident to me with the explosion of Dogecoin in late 2013...
Dogecoin and the Birth of the Narrative CycleDogecoin was created as a joke, but the transparancy of that joke helped build a community behind it. People rallied around Dogecoin because it was a refreshing change from the dirty feel of the disingenuous alternatives being shameless promoted at the time. Dogecoin's user base rapidly grew, eclipsing the Reddit/r/litecoin subscriber base within weeks and shortly approaching (but never exceeding) that of r/bitcoin. The
community's work building the Dogecoin tipbot, the doge-dice gambling site, and sending the Jamaican Bobsled team to the Olympics showed that the coin was actually being used. At this point in time, the technology didn't matter, all that mattered was that the vibrant community was attracting new users.
But the technology
did matter. And now unless Dogecoin forks to become merged mined with Litecoin (or another solution), the doge will be dead within eight months due to the rapidly dwindling cost of launching a 51% attack. The market value of Dogecoin (in BTC) has fallen by approximately 75% since reaching its high in February 2014.
Dogecoin's rise taught us the importance of community. Dogecoin's fall will reinforce the how carefully every single parameters of a crytpocurrency must be chosen.
Auroracoin and CommunityAurocoin piggybacked Dogecoin more than most realized. The dominant narrative had become "community," and what better way to create a large community than by freely giving money to the people of Iceland (who had recently been the victims of the shenanigans played in the traditional financial system)! Aurocoin even made waves within Parliament, for
example, "during a parliamentary debate on March 14, 2014, MP Pétur Blöndal, vice-chair of the Parliament's Economic Affairs and Trade Committee (EATC), emphasized that potential tax evasion through the use of Auroracoin could impact Iceland's economy." The attention only served to increase the hype. Additional scrypt hashing power left Dogecoin in favour Aurocoin until the price hit a peak near 0.1 BTC on March 30, 2014 (approx 140,000 BTC market cap).
But it was all hype. We learned that you can't airdrop money to an indifferent community and expect it to have value. Today Aurocoin trades at 0.0006 BTC: it has lost over 99% of its value in less than two months.
Blackcoin and PoSWe were bored with "community" and the narrative switched to "the wastefulness of bitcoin mining" as a soapbox for proof-of-stake (PoS) consensus mechanisms. Experts in the community already knew that decentralized anonymous consensus by PoS was thought to be impossible; no one had a reasonable solution for the "nothing at stake" problem. Had Dogecoin completely failed by this point and the community had finally realized the importance of
technical soundness, I don't think Blackcoin would have garnered attention. But we are humans and we must learn everything the hard way.
Blackcoin exploded in price and later Nxt advocates used the attention that Blackcoin was receiving to push there PoS system. They claimed to have solved the nothing-at-stake problem, using a confidential algorithm that would be revealed at some point in the future. This became known as the Nxt "secret sauce." The PoS narrative even captured the hearts of long-term bitcoin supporters such as Stephen Reed who launched a campaign to convert
bitcoin to PoS by 2016 in order to "save electricity."
Recently we got a whiff of Nxt's secret sauce. It stinks. Now interest in proof-of-stake coins is dwindling. The market value (in BTC) of Darkcoin has fallen 76% after hitting its peak on April 14, 2014.
Darkcoin and PrivacyPrivacy has always been important to the bitcoin community and perhaps it was only a matter of time before this narrative was exploited. Darkcoin is the first example of this: it is a bitcoin-derived coin that uses master nodes to create giant coinjoin transactions, thereby obscuring the link between sender and receiver.
Darkcoin has seen enormous growth with a market cap exceeded by only Bitcoin and Litecoin. This is the power of narrative. But Darkcoin was illegitimately insta-mined, has closed-source binaries, is not
technologically innovative, and has a volatility-enhancing block reward equation
1. In fact, since Darkcoin transactions are essentially bitcoin transactions with forced coinjoin, I don’t see why wallets like Darkwallet can’t achieve similar benefits with little of the drawbacks. I predict Darkcoin will collapse, some will call it a scam, and others will say they shouldn't have invested in something they didn't understand.
But instead of seeing the protocol-enforced privacy narrative as narrative, people might look for a more technically-sound alternative to Darkcoin and without the insta-mine black eye.
The Final NarrativeThe alt-coin narrative cycle will continue to play out. In the end it doesn't matter: each cycle that plays out strengthens bitcoin. It teaches us that the simple, flexible and robust bitcoin protocol coupled with its diverse user-base and large market cap
is the most useful, if for no other reason than because it is used most often. And besides, if, in the distant future, a superior payment technology is identified, the Blockchain Ledger will be forked or
spun-off to this new technology. There will never be a need to "panic trade" out of the bitcoin ledger and into some foo-coin ledger.
Value is stored in the Blockchain Ledger. At best, alt-coins are vying for second place.
1The Darkcoin block reward decreases with increasing network hashrate and increases with decreasing network hashrate. This tends to further limit new coin supply during rallies (adding to the pump), and increase new coin supply when miners have lost interest (adding to the dump). 
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