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

[impulse]

This is a true market test, and a beautifully simple one. In the same way that bitcoin proponents are powerless to stop anyone from cloning the code and creating their own blockchain, so too are alt-currency proponents powerless to stop the market from cloning their project and creating any distribution that they deem desirable. By on-boarding the existing community in a frictionless way, with much less pain than buying into an alt through cumbersome and untrustworthy exchange systems, the 'spin-off' chain has an immediate and I think significant advantage. This will be fun to watch.

[YarkoL]

actually, the initial distribution makes all the difference.

Do you mean in terms of efficiency? Can't comment on that, coz I'm not that much of an economist.

But it seems to me that the value of a coin would be commensurable with the amount of them picked up by savvy people soon after being dumped by indifferent people. And then there's the problem of distinguishing between indifferent holders and savvy holders.

[cypherdoc]

actually, the initial distribution makes all the difference.

Do you mean in terms of efficiency? Can't comment on that, coz I'm not that much of an economist.

But it seems to me that the value of a coin would be commensurable with the amount of them picked up by savvy people soon after being dumped by indifferent people. And then there's the problem of distinguishing between indifferent holders and savvy holders.

actually, i don't care what the market decides on how much an aether will be valued at by the open market.  no need to distinguish.

if it decides ether is the best use case, fine, i won't have anything invested to lose from my aether going to zero.  the market will have spoken.  but if Peter's economic assumptions are correct and i get even richer from aether going to the moon, while ether crashes to zero, i'm fine with that too.

my bet is the latter scenario plays out.

[cypherdoc]

actually, there's a third option.

both aether and ether go to zero b/c it was a worthless alt to begin with.

i'm VERY fine with that too.

[Peter R]

For the people here who are questioning the "fairness" of this proposal, I ask you to reconsider your assumptions after analyzing the economic incentives at play here:  

Let's say you truly believe that a proof-of-stake (PoS) system is better than a proof-of-work system and the market would be wise to adopt this if only given a chance.  When the PoS spin-off launches, many bitcoin holders will dump their "free coins" at say a valuation equal to 0.01% of the bitcoin market cap.  This means that for an investment of X BTC, you could amplify your wealth by a factor of 10,000X if you are correct and PoS becomes dominant.  You would be rewarded for your insight by natural market mechanisms.  You know most bitcoin users will remain impartial (they will be holders by default) so your PoS coin will naturally have a wide user base if it is in fact useful.  

Spin-offs also benefit the community as a whole:

-Bitcoin users that remain impartial to the experiment should appreciate spin-offs because they automatically get piggybacked to the new network with little effort on their part and without risk to their cryptocurrency wealth.    

-Alt-coins doubters should appreciate spin-offs because they represent free money that they can immediately dump on the open market.  

[impulse]

Let's also keep in mind that if this idea takes hold, other spin-offs will emerge with distributions based on Litecoin, Dogecoin and others. We would also presumably see spin-offs that allocate based on several popular blockchains. This is a fitness function and the market will decide if there is value here.

[Peter R]

...you have invented a way for bitcoin owners to steal new crypto-technology from the creators, but thats really easy in open-source, anyone can do it and they do... what you are claiming is that your way of theft is justified, and this is what I have a problem with.

Spin-offs are now real and are forcing members of our community to re-shape their view of reality.  The sooner people move to "acceptance" the more wealth they will preserve and the more productive our economy will become.  Spin-offs help to direct aggregate investment away from speculative alt-coins and into productive endeavours that strengthen bitcoin and its community. 



Remember, there is still money to be made by innovating with the spin-off method, should you come up with something genuinely useful. 

[impulse]

For the people here who are questioning the "fairness" of this proposal, I ask you to reconsider your assumptions after analyzing the economic incentives at play here:  

Let's say you truly believe that a proof-of-stake (PoS) system is better than a proof-of-work system and the market would be wise to adopt this if only given a chance.  When the PoS spin-off launches, many bitcoin holders will dump their "free coins" at say a valuation equal to 0.01% of the bitcoin market cap.  This means that for an investment of X BTC, you could amplify your wealth by a factor of 10,000X if you are correct and PoS becomes dominant.  You would be rewarded for your insight by natural market mechanisms.  You know most bitcoin users will remain impartial (they will be holders by default) so your PoS coin will naturally have a wide user base if it is in fact useful.  

Spin-offs also benefit the community as a whole:

-Bitcoin users that remain impartial to the experiment should appreciate spin-offs because they automatically get piggybacked to the new network with little effort on their part and without risk to their cryptocurrency wealth.    

-Alt-coins doubters should appreciate spin-offs because they represent free money that they can immediately dump on the open market.  

I think that "fairness" is irrelevant, nothing is fair. This is likely inevitable, so as market participants we need to evaluate the likelihood of various scenarios, and spin-offs make grass-roots alts look potentially weak. At the very least this mechanism could create such a vast amount of alt-chain spam that the whole alt community could be rendered valueless, except those that actually offer tremendous innovation.

[Nxtblg]

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!

Just one logistical question: how do you reach Bitcoiners? Pseudonymity is great, but it does put a real logistical crimp on your plan.

I can see hacks based upon vanity addresses: remember "Enjoy" and "Sochi" in the address part of the dust bin? It might be worthwhile to set up a vanity that signals an announcement - something, maybe with "New" "Side" and "Chain" for a triplet of dust mites 

[cypherdoc]

For the people here who are questioning the "fairness" of this proposal, I ask you to reconsider your assumptions after analyzing the economic incentives at play here:  

Let's say you truly believe that a proof-of-stake (PoS) system is better than a proof-of-work system and the market would be wise to adopt this if only given a chance.  When the PoS spin-off launches, many bitcoin holders will dump their "free coins" at say a valuation equal to 0.01% of the bitcoin market cap.  This means that for an investment of X BTC, you could amplify your wealth by a factor of 10,000X if you are correct and PoS becomes dominant.  You would be rewarded for your insight by natural market mechanisms.  You know most bitcoin users will remain impartial (they will be holders by default) so your PoS coin will naturally have a wide user base if it is in fact useful.  

Spin-offs also benefit the community as a whole:

-Bitcoin users that remain impartial to the experiment should appreciate spin-offs because they automatically get piggybacked to the new network with little effort on their part and without risk to their cryptocurrency wealth.    

-Alt-coins doubters should appreciate spin-offs because they represent free money that they can immediately dump on the open market.  

I think that "fairness" is irrelevant, nothing is fair. This is likely inevitable, so as market participants we need to evaluate the likelihood of various scenarios, and spin-offs make grass-roots alts look potentially weak. At the very least this mechanism could create such a vast amount of alt-chain spam that the whole alt community could be rendered valueless, except those that actually offer tremendous innovation.

yes, fairness and ethics discussion have no place here.

only the free market can and will decide if what Peter proposes is correct.

[smooth]

So the initial distribution does not really matter much.

http://en.wikipedia.org/wiki/Coase_theorem

If you believe the conditions of the Coase theorem apply, then the conclusion is that the initial distribution with the least costs is best. Using bitcoin as a distribution mechanism makes sense because it is secure. That wouldn't be true if you try to do a "per person" airdrop, because then you need to verify IDs and people will try to cheat, both of which are costly. A zero-premine also might make sense, although the race to be the first to mine might be wasteful.

[Peter R]

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!

Just one logistical question: how do you reach Bitcoiners? Pseudonymity is great, but it does put a real logistical crimp on your plan.

Au contraire my friend.  Every bitcoin user controls private keys that allows them to sign a message to prove ownership of their share of the pre-mine.  

This is a pseudonymous and trustless method to distribute ownership of the pre-mine in proportion to the distribution of unspent outputs at the time the snap-shot of the blockchain was taken.  

The interesting thing is that even if a bitcoin user does nothing, their share is always there waiting for them (provided they don't lose their keys).  Lazy or indifferent bitcoin holders naturally become spin-off holders, thereby increasing demand to hold the spin-off compared to the non-spin-off.

[Adrian-x]

... there is still money to be made by innovating with the spin-off method, should you come up with something genuinely useful.  

This is why it will work market driven innovation is the counter balance to unfair distribution (and cryptography is the security that prevents the preservation of initial power distribution structure.)


I was toying with the idea of motivating miners and future growth and preventing a dumping collapse for my ideal alt.

Here is one way i thought to align incentives, so low balance holders or new proponents would secure the network while minimizing money velocity to the growth of the alt economy. The spin-off alt would have a transaction fee in a reverse relationship to difficulty. Say miners get a 10% transaction fee while mining difficult is very low (independent of block creation) the early dumpers incentives mining not just investment speculation.  As proponents grow mining grows and fees reduce to end at say a 0.1% of the total alt economy.

The result is mining is incentivised to take advantage of the flood of liquidity in the alt once birthed.

[smooth]

you have invented a way for bitcoin owners to steal new crypto-technology from the creators

Absurd. The creators give their permission by releasing under an open source license.

There are a number of viable models for funding and/or monetizing open source development, but using a pre-mine to do it is new and largely untested. If it turns out not to be viable, that would not be all that surprising.

[impulse]

you have invented a way for bitcoin owners to steal new crypto-technology from the creators

Absurd. The creators give their permission by releasing under an open source license.

There are a number of viable models for funding and/or monetizing open source development, but using a pre-mine to do it is new and largely untested. If it turns out not to be viable, that would not be all that surprising.

Exactly, this makes as much sense as saying that the alts are stealing from bitcoin pioneers. Anyone involved with bitcoin should recognize the risks and rewards associated with open-source development and make decisions based on that knowledge.

[Nxtblg]

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!

Just one logistical question: how do you reach Bitcoiners? Pseudonymity is great, but it does put a real logistical crimp on your plan.

Au contraire my friend.  Every bitcoin user controls private keys that allows them to sign a message to prove ownership of their share of the pre-mine.  

This is a pseudonymous and trustless method to distribute ownership of the pre-mine in proportion to the distribution of unspent outputs at the time the snap-shot of the blockchain was taken.  

The interesting thing is that even if a bitcoin user does nothing, their share is always there waiting for them (provided they don't lose their keys).  Lazy or indifferent bitcoin holders naturally become spin-off holders, thereby increasing demand to hold the spin-off compared to the non-spin-off.

Evidently, I wasn't clear. So let me put it this way: what if you threw a convention, seamlessly distributed 10,000 good-to-go tickets, and nobody came because no-one knew where it was?

[Peter R]

Evidently, I wasn't clear. So let me put it this way: what if you threw a convention, seamlessly distributed 10,000 good-to-go tickets, and nobody came because no-one knew where it was?

Time will tell.  

What is interesting is that in the case where very few people knew about the spin-off, then there would be very few buyers and very few sellers.  If the price grew due to demand, more people would discover that they hold the keys to additional supply, and liquidity would grow.  If no one at all wants to buy the coin at any price, then the spin-off would die.  

I think the promotion of the spin-off's "launch" matters to a certain extent (obviously the spin-off needs miners in order to function), but I'm not sure how much it matters yet.  

[Nxtblg]

Evidently, I wasn't clear. So let me put it this way: what if you threw a convention, seamlessly distributed 10,000 good-to-go tickets, and nobody came because no-one knew where it was?

Time will tell.  

What is interesting is that in the case where very few people knew about the spin-off, then there would be very few buyers and very few sellers.  If the price grew due to demand, more people would discover that they hold the keys to additional supply, and liquidity would grow.  If no one at all wants to buy the coin at any price, then the spin-off would die.  

I think the promotion of the spin-off's "launch" matters to a certain extent (obviously the spin-off needs miners in order to function), but I'm not sure how much it matters yet.  

Okay, thanks for your answer. I didn't know my concern was a side detail to your plan. Agreed that the "come what may" approach will be interesting.

[YarkoL]

So the initial distribution does not really matter much.

http://en.wikipedia.org/wiki/Coase_theorem

My comment concerning the initial distribution was addressing the perceived unfairness of the distribution; why should we award nakamotos and other btc moguls with mountains of altcoins?

So I tried to say that wouldn't matter since that initlal distribution would quickly be replaced by another distribution that would reflect the value of the altcoin, as indifferent holders would dump their coins and interested parties would pick them up again dirt cheap. The price would then adjust to the demand.

Actually I believe that is the core meaning of Coase's theorem: valuable assets will end up being owned by savvy folks and the only thing separating them are the transaction costs.

[thezerg]

there will undoubtedly be Bitcoin naysayers from the free altcoin distribution who will dump their new found "free altcoin" for cash or other coin on the open market.  the devs are then just as free to scoop these up at bargain prices.

Also tech-savvy bitcoiners will hold/scoop them, and so we have a nearly instant gauge of market valuation, which will reflect on exchanges. So the initial distribution does not really matter much.

I hope Ethereum or some other unique altcoin devs will first take up this proposal voluntarily so we'll have a proof of concept. The clone route is a bit nasty.

this is exactly what we hope will happen.  this is a deterrent, or hammer, so to speak.

the altcoin devs would be wise to think through the economic incentives proposed here very, very carefully.  i only hope they come to the right conclusions.

Unfortunately, the right conclusion for an alt-coin dev seems to be to keep going with the alt-coin but hedge your bets by making sure your BTC converts and perhaps also buying some spin-off coin if the value price tanks.