Spin-offs: bootstrap an altcoin with a btc-blockchain-based initial distribution

[Peter R]

The altcoin's success is directly proportional to its destruction of bitcoin fungibility.  BTC on the BTC chain whose corresponding airdropped-altcoins have not been claimed are different from BTC whose airdropped-altcoins have been claimed.

I've been searching for "gotchas" with my proposal but I don't think this is it.  The nucleus is based on a snapshot of the blockchain's unspent outputs at a predefined time in the future (e.g, Block # XXXXX).  The keys you control that unlock the balance in bitcoin addresses at the time of the snapshot remain valid forever.  After the snapshot, nothing changes on the BTC side.  You just need to remember not to lose those private keys if you ever want to claim your share of the new alt-coin.  

Taking a "snapshot" of the blockchain has another useful side-effect: people will be incentivized to pull their coins from exchanges and 3rd party services for a few hours so they are guaranteed control of the share of the new alt-coin that those coins held in trust represent (at least until 3rd-party services establish clear protocol here).  If Warren Buffet understood bitcoin, he might say that we are creating an ocean tide so that we get to see who's been swimming naked.  If this proposal for coin distribution becomes considered "best practices" then perhaps our community will evolve to have quarterly "snapshot days" or "nucleus formation days."  Any alt coins can launch from the latest public snapshots of the blockchain, further simplifying this proposed distribution technique.  
  

[Peter R]

I'm sorry, but there is no other way to put it - this is idiotic.
...
But hey, if you get enough people to call you a genius...

Innovation comes from the community, each of us are just wheels in an incomprehensible machine.  domob mentioned here that he believes this idea has been around for some time: https://bitcointalk.org/index.php?topic=563925.msg6151659#msg6151659  I independently "invented" this technique only after being inspired by the insights in Daniel's paper on the coming demise of alt coins.  So where do innovations truly come from?

The purpose of this thread is to discuss the strengths and weaknesses of this bootstrap distribution technique.  

...what you are proposing is just a scheme to get greedy altcoin haters into altcoins or you simply don't understand anything. The altcryptos exist because the distribution of bitcoins via mining began to centralize, contrary to Satoshi's intentions (the intended 1 computer, 1 vote, was finished when mining was specialized). Now you are proposing to use bitcoin's blockchain as a good guide of distribution? How does that make sense to anyone? Practically there wouldn't be much of a difference between this and a premine (that has become considered as a scam in altcryptoland), so it doesn't really matter empirically, its the idea thats bad. Markets are indifferent to the problems of fairness and right, outght does not follow from is, come on, you should know that…

I think perhaps you are mis-understanding the proposed technique.  If you believe 1-computer/1-vote and have a technical idea to implement this, then you could launch your alt coin with an initial pre-mine based on the bitcoin blockchain distribution and immediately have a large potential user base that already has keys to coins!  Since your coin will obviously trade at a sharp discount to bitcoin, you may have the ability to purchase 10,000 of your alt-coins for 1 bitcoin.  If you are correct and the community agrees that your alt-coin is superior, then the exchange rate of your coin will increase thereby rewarding you for your contribution.  

Bitcoin's distribution represents an empirical estimate of the most efficient distribution of coins in a cryptocurrency.  My premise is that by using this distribution to bootstrap an alt coin, this blockchain-based coin will be superior to most alternatives (IPOs, lottery, etc).  Only time will tell whether this premise is true or false.  

An interesting property of this technique is that the average bitcoin holder can simply do nothing, and they will automatically piggyback any innovations in cryptocurrency.  Yet innovators that make real contributions will be rewarded by natural market mechanisms.  

Remember, if the use of cryptocurrency continues to grow, everyone here today will be rewarded for the contributions they made and the risks they took by holding bitcoin.  There's a saying…something about a small piece of a large and growing pie being preferable…

[Adrian-x]

Taking a "snapshot" of the blockchain has another useful side-effect: people will be incentivized to pull their coins from exchanges and 3rd party services for a few hours so they are guaranteed control of the share of the new alt-coin that those coins held in trust represent (at least until 3rd-party services establish clear protocol here). .....  Any alt coins can launch from the latest public snapshots of the blockchain, further simplifying this proposed distribution technique.  
  

1) Ultimately if the alt based on a blockchain snapshot became huge you couldn't use all un spent output seed as a time stamp to minimize the need for everyone to download the Bitcoin as it bloats.

2) Another idea to considered to address "fairness" in an alt seed based on the Bitcoin blockchain is only include un spent outputs that are found between block X and block Y. That way you can excluded the lost Bitcoin, stolen coins in storage the thief doesn't want to move risking his identity and whales who have huge wallet that are inactive.

3) the snapshot could reward a target in the Bitcoin community.  If you wanted to do charity alt  i.e. you beleve that the alt should not be given to those with large holdings of Bitcoin you could only include un spent outputs in the Bitcoin blockchain with a balance with less than. 0.05 or something. 

[Adrian-x]

Bitcoin's distribution represents an empirical estimate of the most efficient distribution of coins in a cryptocurrency.  My premise is that by using this distribution to bootstrap an alt coin, this blockchain-based coin will be superior to most alternatives (IPOs, lottery, etc).  Only time will tell whether this premise is true or false.  

What I understand from this is you get the past benifit of Bitcoin distribution and user base; You get the future benifit of giving the whole crypto coin community an opportunity to innovate with potential participation from the whole Bitcoin community; New comers get an opportunity to mine coins leveraging the upside innovation in alts. You need not reword Bitcoin holders disproportionately to early miners by setting a different cap.

This address the exponential growth in alt coins copy improve and repeat, while eliminating scam coins and encouraging innovation.

Take quarkcoin say I think it works better Bitcoin in every way, I invest in it believing the market will use the best coin. Then someone comes along and improves it. Now my quark collapse and market innovators are fragmented and only the early adopters of quark2 benifit. 

Now if the team of quarkcoin include quark2 user base and quarkcoin in quark3 the market will benifit by maximizing cooperation in innovation. Choosing the best risk is lower given the exponential innovation curve we are about to see in crypto coins. Net benefits go to adopters of crypto coins and the innovators not the scam coins.

[Peter R]

Another useful property of this technique is that it makes the bitcoin blockchain robust to 51% attacks.  

In the very unlikely event that the bitcoin network came under an unrelenting 51% attack, people would simply use the most promising clone.  Since users have the same slice of that pie too (unless they traded), there is no need to "panic trade into litecoin," for instance.

It is becoming clear that the value of bitcoin comes from the community's shared belief that the blockchain is an accurate ledger.  Since this is the most secure and redundant digital file in the history of mankind, it would be very difficult to destroy (just think how hard it is to get all those embarrassing photos off Facebook LOL).  The blockchain is like DNA that can rebirth our decentralized money again and again and again.  

The largest remaining technical threat then becomes a crack of the secp256k1 curve to permit fast solutions to the elliptic curve discrete logarithm problem, but even this would not be catastrophic (and about as likely as fusing atomic nuclei to create gold in a cost-effective manner in my opinion).

[pening]

Isn't the real purpose of most if not all alt-coins to bypass the distribution of Bitcoin?  Didn't on the bus in time, let's make another bus. While i can sort of see the value to Bitcoin of what is being suggested, I'm not sure why i'd want to bootstrap penigcoin in this way.

[Peter R]

Isn't the real purpose of most if not all alt-coins to bypass the distribution of Bitcoin?

Vitalik Buterin (a founder and promoter of Ethereum) spoke to this point in this video (11:50 onwards): http://ytchannelembed.com/video.php?id=dpwhT63EkZ4&t=

"I never had a chance to do anything with bitcoin in 2009 and 2010.  I never even heard of it." -- Vitalik Buterin

"It's not a matter of whether the system [distribution] is technically fair; it's a matter of whether it is actually fair." -- Vitalik Buterin

The impression I got from watching that is that Vitalik believes he has an answer to the subjective question "what is actually fair?"

I believe that if cryptocurrency continues to grow, everyone here who chooses to participate will be rewarded for the contributions they made and the risks they took by holding bitcoin.  It is simply my premise that the bitcoin blockchain represents our best estimate of the most efficient distribution and a clone of any promising alt (should one emerge) based on bitcoin's blockchain distribution would become the dominant coin [without causing any inflation as bitcoin holders automatically becomes stake holders to an equal % in the new coin].

[Ragnarly]

I have some low IQ questions: The new alt-coins are given away at first. You can claim as many of them as you want, up to the number of bitcoins you have. At the beginning, the alt-coin has almost zero value.

If the alt-coin gains users, you profit by trading the alt-coin for Bitcoin? And/or a different alt-coin?

What incentive would someone have to create an alt-coin, if they have no competitive advantage in getting them (Apart from their Bitcoin holdings)? Or in other words, why would someone go to all the work of creating an alt-coin rather than wait for someone else to do it and then claim the alt-coin?

[cypherdoc]

Isn't the real purpose of most if not all alt-coins to bypass the distribution of Bitcoin?  Didn't on the bus in time, let's make another bus. While i can sort of see the value to Bitcoin of what is being suggested, I'm not sure why i'd want to bootstrap penigcoin in this way.

imo, most of the alts are scams preying on innocent investors who don't understand the tech or economic principles behind Bitcoin or the scam.

in that sense, they are hurting Bitcoin as the cryptocurrency space is a zero sum game given those conditions.  if the alts were valid or had merit, like perhaps Litecoin, their market caps would be much larger and gaining on Bitcoin.  we aren't seeing this. 

this free allocation of the altcoin currency to current Bitcoin holders will eliminate all premines or payouts to devs from the get go and reduce the genesis of altcoins to those that actually have technological merit which all of us are for. 

[Peter R]

Thanks for your comments Ragnarly.

I have some low IQ questions: The new alt-coins are given away at first. You can claim as many of them as you want, up to the number of bitcoins you have.

You are automatically allotted the same % of the alt coin pre-mine as your % ownership of bitcoin, at the time of nucleus formation.  No one but the controller of the bitcoin private keys can claim the pre-mine.  Even if you do nothing, you still remain a "holder" by default.  

At the beginning, the alt-coin has almost zero value. If the alt-coin gains users, you profit by trading the alt-coin for Bitcoin? And/or a different alt-coin?

Let's say the alt-coin launches and is trading at 0.01% of the bitcoin market cap.  Most people will just do nothing.  If the alt ever takes off, these people sleep soundly knowing that they own the same % in this new alt as they do in bitcoin.  

Now some people might say: "wow, NxT is trading at 0.4% of the bitcoin market cap, and this new alt is better because it has a more efficient coin distribution and a broader potential user base.  I think I'll buy some more of this alt coin."

Others will say: "this is stupid.  I'll just dump all this "free money" and then gamble my 0.1 mBTC at just-dice.com"

If more people decide to buy, the price will rise.  If more people decide to sell, the price will fall.  

What incentive would someone have to create an alt-coin, if they have no competitive advantage in getting them (Apart from their Bitcoin holdings)? Or in other words, why would someone go to all the work of creating an alt-coin rather than wait for someone else to do it and then claim the alt-coin?

It will be difficult to profit from what are known as "scam coins" and "pump and dumps," however, if you have a genuine innovation that is actually useful you will be rewarded by natural market mechanisms.

When your coin launches, it may trade at 0.01% of the bitcoin market cap.  You can buy 10,000 of your alt coins for 1 BTC.  If you continue to develop your alt, and if people begin to agree that it is useful, your 10,000 alt coins will be worth more than 1 BTC (possibly a lot more).

This proposed distribution method allows bitcoin holders to piggyback innovations in cryptocurrency, while still rewarding alt-coin developers for genuine innovation.  

[jbreher]

Does anyone have a better solution to determining what is actually fair than by allowing the experiment to unfold and people to participate on a voluntarily basis?  

'Fair' is a subjective concept, unique to each person's viewpoint. Discussion of 'fair' is useless.

I puzzle over your use of 'allow'. We don' care what mama don' allow, we'll clone our chain distribution anyhow. Or rather, anyone motivated enough to carry out this experiment will do so, and all of us trying collectively to stop it will be unable to do so.

I somewhat worry that this may lead to the death of the grand cryptocurrency experiment. From my initial take, it smells of inflation. New currencies created without limit, each with a strong incentive for Bitcoiners (or anyone who has holdings on whatever chain is being used to bootstrap the new currency) to use. Perfect incentive - they get the new coins at zero cost.

But this is possible, so the experiment must be done. The sooner the better. If the cryptocurrency revolution is due to collapse entirely in an inflationary death spiral, better now than later.

I hope I'm wrong about that.

[jkandah]

Wouldn't this be something similar to saying hey I want to launch a new app on the Apple App store.  Since Apple already has stock, I'm going to issue ownership of this new app to all of the people who own Apple stock (assume this is technically possible).

As a developer I have no incentive to launch this unless I own a lot of Apple stock.  Launching an alt-coin where you can claim more of the coins than the distribution of bitcoin is a huge advantage especially if you build something that is worth a lot and not a scam.

[cypherdoc]

Does anyone have a better solution to determining what is actually fair than by allowing the experiment to unfold and people to participate on a voluntarily basis?  

'Fair' is a subjective concept, unique to each person's viewpoint. Discussion of 'fair' is useless.

I puzzle over your use of 'allow'. We don' care what mama don' allow, we'll clone our chain distribution anyhow. Or rather, anyone motivated enough to carry out this experiment will do so, and all of us trying collectively to stop it will be unable to do so.

I somewhat worry that this may lead to the death of the grand cryptocurrency experiment. From my initial take, it smells of inflation. New currencies created without limit, each with a strong incentive for Bitcoiners (or anyone who has holdings on whatever chain is being used to bootstrap the new currency) to use. Perfect incentive - they get the new coins at zero cost.

But this is possible, so the experiment must be done. The sooner the better. If the cryptocurrency revolution is due to collapse entirely in an inflationary death spiral, better now than later.

I hope I'm wrong about that.

i don't think you're right about this.

if anything, this will discourage alts to be developed.  who will buy a scamcoin IPO when they can get the free scamcoin thru a blockchain distribution?  and this is one this ideas main features, imo.

it takes work to develop and profit from a truly innovative alt and this idea doesn't stop that part of the equation.  those devs can still be rewarded by buying up altcoins from those who dump their free altcoin distributions from lack of knowledge of the alts true potential (the dev himself is the best to have that insight) or who just want to cash in immediately from the free altcoins.

tl;dr  this should deflate the altcoin space to only those with true potential and merit.

[Peter R]

'Fair' is a subjective concept, unique to each person's viewpoint. Discussion of 'fair' is useless.

Agree.  That was the point I was trying to communicate.  

I puzzle over your use of 'allow'. We don' care what mama don' allow, we'll clone our chain distribution anyhow. Or rather, anyone motivated enough to carry out this experiment will do so, and all of us trying collectively to stop it will be unable to do so.

Agree.  "Allow" was a poor word choice.  

I somewhat worry that this may lead to the death of the grand cryptocurrency experiment. From my initial take, it smells of inflation. New currencies created without limit, each with a strong incentive for Bitcoiners (or anyone who has holdings on whatever chain is being used to bootstrap the new currency) to use. Perfect incentive - they get the new coins at zero cost.

But this is possible, so the experiment must be done. The sooner the better. If the cryptocurrency revolution is due to collapse entirely in an inflationary death spiral, better now than later.

I hope I'm wrong about that.

Disagree.

This has me more confident in bitcoin then ever.  It has convinced me that "inflation from alt-coin proliferation" is a red herring.  Any promising advance in cryptocurrency will absorbed by bitcoin in a non-inflationary way.  A clone launched from bitcoin's blockchain will win (because it represents the most efficient distribution) without causing any inflation.  (I personally also believe bitcoin is ideal exactly as it is.)

This will reduce the amount of alts to ones that have some genuine potential (in such a way that bitcoin holders are automatically stakeholders), and direct investment away from speculative alt coins and into productive advances to bitcoin.  
  

[cypherdoc]

Peter, you have to stop using that term "eat" and define exactly what you mean.

[Peter R]

Peter, you have to stop using that term "eat" and define exactly what you mean.

Thanks cyperdoc.  I borrowed this term from Daniel's essay on the coming demise of alt coins, but agree that it is unclear.  


Here is what I meant by "eaten":

Take NxT for instance.  It is trading at near 0.4% of bitcoin's market cap, has a perceived legitimacy problem due to the PoS pre-mine, and has been losing market share since launch.  But let's imagine that the experiment eventually shows promise: for some reason PoS proves to be useful and everyone agrees.  

Someone can now modify the source code for NxT in a trivial way using the technique I proposed in the OP and relaunch the coin.  Since the NxT clone coins are distributed according to the bitcoin blockchain, this clone automatically has a greater user base than the original.  Bitcoin holders will retain the same slice of the cryptocurrency pie, but automatically be piggybacked to the new network.  There is no inflation as everyone retains the same slice of the total pie.  The bitcoin blockchain has now "eaten" the alt-coin technology. 

I would go as far as to say that it is risky for alt-coin developers to not use the method proposed in the OP if they actually believe their coin holds long term prospects.  If they bootstrap, then they will be rewarded if their coin is successful; on the other hand, if they IPO/lottery/etc they will ironically lose wealth the more successful their innovation becomes (as any serious value would emerge in the bitcoin-blockchain-based clone chain).  

[xDan]

This is freaking awesome. Good luck with it. Will rather user altcoins that use this method.

I'm sure a lot of altcoin creators who are in this mostly for profit or their personal idea of "fair" will hate this though.

[cypherdoc]

This is freaking awesome. Good luck with it. Will rather user altcoins that use this method.

I'm sure a lot of altcoin creators who are in this mostly for profit or their personal idea of "fair" will hate this though.

that's the whole point.  it takes a hammer to the scamcoins and allows only true innovative altcoins to prosper.

[YarkoL]

I would go as far as to say that it is risky for alt-coin developers to not use the method proposed in the OP if they actually believe their coin holds long term prospects.  If they bootstrap, then they will be rewarded if their coin is successful; on the other hand, if they IPO/lottery/etc they will ironically lose wealth the more successful their innovation becomes (as any serious value would emerge in the bitcoin-blockchain-based clone chain).  

I must be awfully dense, but it seems to me that this only applies to coins that have some technical innovation. Consequently an entire class of altcoins escapes the clutches of this framework.

As I said before, there are coins that have absolutely no technical merit, but they gain value from being aimed to specific community. For example, this one. If devs gain the trust of the communities that the coin is intended to serve, why would anyone in those communities switch over to the  bitcoin-blockchain-based clone chain? Especially if there is no IPO (but there could be premine).

Inspired as you are by the arch-altcoin-hater Daniel Krawisz, I believe you see little worth in that kind of coins, yet we'll be seeing their number increase, but AFAIK your scheme cannot stamp them out.

But don't get me wrong. I think the idea itself is genius if not genial.

[sickpig]

my first impression is that i like this idea much better than Hill and Beck's Sidechain proposal.

1.  the initial distribution is fair and codified.  
2.  Bitcoin holders have everything to gain and nothing to fear from any altcoin clone distributed in this manner.  they are free to evaluate the altcoin on it's own merits as to whether they hold, sell, or even mine their aether.

AFAICS first two points apply also to 2way peg sidechains.  

3.  it's a much more effective separation from an altcoin; no firewall needed.  i have my doubts about how BTC's can traverse back and forth btwn the main Bitcoin blockchain and a Sidechain w/o interfering with the main chain function long term.  i believe there will be some risk.

I suppose we have to wait for the "math" behind Back/Hill proposal to judge it properly.

4.  they have said they are forming a "company" with "core devs" who undoubtedly will be employed and/or shareholders.  this introduces potential bias and risk to Bitcoin from profit motives.

it's a possibility  

5.  Peter has introduced an ingenious way to set up a head to head competition btwn aether and ether that can be applied to any altcoin.  this has the potential to severely inhibit scamcoins and premines.  which is a good thing.
6.  altcoin devs still have an incentive to innovate.  if Bitcoin holders dump their free aether, as Peter suggests, the devs have the opportunity to scoop up cheap aether as testimony to the belief in the merits of their altcoin.

also 5 and 6 seems to apply to Back/Hill's design

i eagerly await more information.

me too.