rpietila Altcoin Observer

[Peter R]

It doesn't have that big of a future.  If a developer wants fame or recognition, they will start their own coin rather than stay in BTC's shadow.  If a developer wants profit, they will start a coin, buy while it's low or have some kind of IPO or something, then build features to increase their worth.  It's not really something that interests traders as much either compared to the altcoin penny stock lotto.

It is very possible that spin-offs don't have a big future.  This would suggest to me that the economic majority prefers bitcoin exactly as it is.

I disagree that developers who want fame and recognition are best to work on alt-coins.  The biggest developer names in crypto are individuals who work on bitcoin--and these developers who have already made a name for themselves will be in demand as long as crypto is in existence.  If you want to establish a name for yourself--perhaps hoping to get scooped up by BitPay or start a consulting business--you are probably better to innovate for bitcoin than you are for altcoins because there is a vastly larger user base that will be interested in and talking about your work!  

[Peter R]

Are the tokens distributed based on your bitcoin holdings, such that you sign a message (where?) to receive the tokens?

A "snapshot" of the Blockchain is taken at a certain blockheight, and a giant file (snapshot.bin) is created that lists all the addresses along with their balances.  This file can be audited by anyone to confirm its accuracy.  This file becomes Block 0 for the spin-off.   

We are debating the fine details, but staking your claim could be as simple as opening up your bitcoin wallet, and producing a bitcoin-signed message of the ASCII string:

    "claimto <spinoff_address>"

The value of spinoff_address could point to an address you control in the new network, it could be your deposit address at an exchange, or it could be an address controlled by someone you want to sell your spin-off too.  You would then copy the signature produced by your bitcoin wallet and paste it either into your spin-off client, or to a web-based "spin-off TX push service."  This would push your claim onto the spin-off network and assign your share of the spin-off premine to the address you specified in the ASCII string that you signed. 

Does this make sense?

[the_darkness]

Are you saying that bitcoin's users likely number in the tens of thousands at worst then?  This sounds like hyperbole. 

No I think it probably is somewhere in the hundreds of thousands. Total wallets is around 1.7 million and I'm assuming that most people, like myself, have more than one. I'm not trying to be hyperbolic, but just trying to point out that Bitcoin, even though it is by far the most likely cryptocurrency to succeed long-term, is still tiny in terms of its userbase.

I believe it is the method the market will select, regardless of my perception of fairness.  The more I study alt-coins, the less likely it seems to me that any open-source and decentralized crytpocurrency could out-compete bitcoin or a bitcoin spin-off.
...
A very credible argument can be made that a new user benefits most strongly by joining the dominant network.   The largest network would tend to have the widest acceptance, greatest liquidity, largest market capitalization, and the strongest user base (allowing the new user to benefit as per Metcalfe's Law).  If bitcoin tends to appreciate on average at a faster rate than a basket of alt-coins, this only gives more reasons for new users to prefer bitcoin.

I guess this depends on how you define the market. If you limit it to current cryptocurrency users, which overwhelmingly is made up of people who hold at least some Bitcoin, then you are right that probably anything linked to Bitcoin would likely have an automatic built in userbase. What I am trying to say is: what about people who don't even know about Bitcoin now? Why would they have any incentive to join a system that favours a relatively tiny group of what in their view are "early adopters"? (This issue is even more sensitive given the current complaints regarding wealth concentration, the 1% etc. in fiat currency.)

[Peter R]

I have been following your spin-off idea since its inception and I have to say it's a really interesting one and I would love to see it implemented, just to see what happens. Are there currently any plans for such an implementation? Unfortunately my coding knowledge is zero but I'm willing to support such an endeavour by donating BTC.

We are working towards a spec for the spin-off protocol at the moment, but it will take some time.  Hopefully soon we can come up with a more "decentralized" scheme for donations, as I have received more than a few offers now (which I've so far declined).  Thank you for the offer!

This then begs the question of which protocol would be a good candidate for the first try. I suppose it should be one which offers some features which are incompatible with Bitcoins core protocol and thus can't be implemented on the Bitcoin blockchain. This thread has made me painfully aware of how little I know about the alt-coin universe so I don't have any suggestions for likely candidates. Any ideas?

I think the idea would be to launch spin-offs of any potentially interesting new technology.  Enhanced privacy Crytonote based coins seem to be en vogue at the moment (although I consider their appeal dubious), so this is an option.  If Turing-complete coins start making waves again, a Turing-complete spin-off would also be a logical candidate. 

[Peter R]

What I am trying to say is: what about people who don't even know about Bitcoin now?

The answer I gave earlier applies to people that haven't heard about bitcoin too:

A very credible argument can be made that a new user benefits most strongly by joining the dominant network.   The largest network would tend to have the widest acceptance, greatest liquidity, largest market capitalization, and the strongest user base (allowing the new user to benefit as per Metcalfe's Law).  If bitcoin tends to appreciate on average at a faster rate than a basket of alt-coins, this only gives more reasons for new users to prefer bitcoin.

Why would they have any incentive to join a system that favours a relatively tiny group of what in their view are "early adopters"?  

This is the "I-don't-want-to-make-early-adopters-rich" fallacy.  It doesn't actually make sense.  The benefit to early adopters moving forward in time is exactly the same as to adopters who choose to buy today.  Early adopters may already be rich, but if that's true then it's already happened.  As of right now, it is just as risky to continue to hold, as it is to choose to buy.  

Consider this:  Alice and Bob each have $1,000,000 in financial assets.  Alice is an early adopter of bitcoin and holds half her wealth in BTC.  Bob just learned about bitcoin today, and holds 100% of his wealth in US treasuries and stocks.  The risk Bob takes by moving $500,00 into BTC simply puts him at the same risk level as Alice moving forward in time.  The fact that Alice's bitcoins performed well in the past has no bearing on portfolio allocation moving forward.  Alice choosing to continue to hold $500,000 in bitcoin is just as risky as Bob deciding to buy $500,000 of BTC.  

The public cannot make early adopters un-rich by not investing in bitcoin.  And by investing in bitcoin, the public makes early and current investors rich to the exact same degree from this point in time moving forward.

[Its About Sharing]

Are the tokens distributed based on your bitcoin holdings, such that you sign a message (where?) to receive the tokens?

A "snapshot" of the Blockchain is taken at a certain blockheight, and a giant file (snapshot.bin) is created that lists all the addresses along with their balances.  This file can be audited by anyone to confirm its accuracy.  This file becomes Block 0 for the spin-off.   

We are debating the fine details, but staking your claim could be as simple as opening up your bitcoin wallet, and producing a bitcoin-signed message of the ASCII string:

    "claimto <spinoff_address>"

The value of spinoff_address could point to an address you control in the new network, it could be your deposit address at an exchange, or it could be an address controlled by someone you want to sell your spin-off too.  You would then copy the signature produced by your bitcoin wallet and paste it either into your spin-off client, or to a web-based "spin-off TX push service."  This would push your claim onto the spin-off network and assign your share of the spin-off premine to the address you specified in the ASCII string that you signed. 

Does this make sense?

Stupid question - But can you sign a message using the private key from a paper wallet?

I understand what you mean, very clear explanation. Thanks for taking the time. Would this signing be for a specified time and then lost if not done?

Appreciated,
IAS

[r0ach]

It is very possible that spin-offs don't have a big future.

I just think you're advertising spinoff coins with distribution based on the existing BTC block chain in completely the wrong way.  They shouldn't be referred to as altcoins, their main usage will be an insurance plan for Bitcoin itself.  If and when things like transaction fee only block rewards fail to incentivize miners to keep the block chain secure, you can have a fully functioning backup system with 1% annual increase (or other magic number) ready to go.  The problem is, Satoshi doesn't like magic numbers even though he gave them to us with transaction fees.

In time, I think we will discover there are several numbers that need to be followed in crypto in regards to inflation and interest rates that aren't magic at all, and we'll have upper and lower bounds for what works and what causes disaster.

I'm pretty confident the magic number for PoS interest rates for a coin that's been fully mined will be somewhere between 2-5%.  Not that groundbreaking of an idea, I know, but there are many people making coins coming up with horrific economic numbers.

My post further trying to explain proof of stake interest rates and magic numbers below:

Since almost everyone I see doesn't understand the economic implications of stake reward, let me explain it for you:

Looking at proof of stake in a vacuum, the stake reward creates decentralized inflation, meaning if everyone stakes, you stay at equilibrium.  What PoS is in a nutshell, is a tax on people who don't stake to support the network.  Everyone who does stake is unaffected, anyone that doesn't stake is punished.  It's not a comparable process to Bernanke throwing money out of a helicopter or anything like that.

Now that the implications of proof of stake in a vacuum are defined, you have to examine it's effects when placed in the real world.  Some people argue for a large stake reward, but if the coin is to actually be used as a currency, it's extremely inconvenient for vendors to have to deal with a monetary supply that has enormous percent changes each year.  If you used a number like 10%, well, the vendor now has to alter his prices by a large amount on a constant basis.  

When you consider the percent of coins destroyed through transaction fees (probably around 1%), and the amount of coins that people will lose per year through accident or death (conservative 1% low ball figure), a stake reward of 2-5% can mostly be ignored by vendors without having to alter prices on a constant basis due to the money supply.

[Peter R]

It is very possible that spin-offs don't have a big future.

I just think you're advertising spinoff coins with distribution based on the existing BTC block chain in completely the wrong way.  They shouldn't be referred to as altcoins, their main usage will be an insurance plan for Bitcoin itself.  If and when things like transaction fee only block rewards fail to incentivize miners to keep the block chain secure, you can have a fully functioning backup system with 1% annual increase (or other magic number) ready to go.  The problem is, Satoshi doesn't like magic numbers.

I think you've made a very good point here.  Spin-offs can be used as an insurance mechanism (or as a blockchain-preservation mechanism) to protect against a black swan that could affect the bitcoin network, or to permit some "tweak" that would be otherwise impossible.  I agree that I've been promoting them more as a non-threatening platform for innovation, but I should add balance by advertising their potential as an insurance mechanism too. 

[Peter R]

can you sign a message using the private key from a paper wallet?

Yes, and you can do it in such a way that your paper wallet stays "cold" if you wanted.  You would need to import the paper wallet's private key into an offline computer or a hardware wallet that you trusted, have the device sign the appropriate claim string, and then report back with the signature.  You would then broadcast this signature to the spin-off network either using the spin-off client, or a tx-push web service.  

If this made you at all uncomfortable, you could also move your real bitcoins to a new (cold address) before you make your claim, for then you know that the private key that claims the spin-off no longer has a real bitcoin balance associated with it.  

Would this signing be for a specified time and then lost if not done?

It would depend on the details of the spin-off launch.  There are arguments both for and against having a time-limit for making your claim (provided it is sufficiently long so as not to appear as a scam).  In either case, these details would be known at launch.  If the time limit is (e.g.) one year, you could choose to do nothing for 11 months and if the coin is dead just keep on doing nothing.  If the coin is doing something important, then you'll surely hear about it and probably decide to make your claim.  

[Cryddit]

I dunno.  

I think there's definitely a point about not wanting to suck in the bitcoin chain's uncertainty about how many coins are lost.  When someone explains to an investor that there's somebody out there who may have a million bitcoins - and nobody knows who it is or whether he's ever going to dump them on the market - And there's no way to keep track of who owns them now in case he's passed the keys on to, eg, members of his family who might have different ideas about what to do with them - The investor becomes understandably nervous.  It's like a large invisible hammer is hanging above the market, supported by nobody-knows-what.  

Maybe at some point Satoshi will need the money: perhaps he will decide he wants to retire on Mars.  And maybe not.  Maybe Satoshi will pass an inheritance to his niece, and she will decide she wants to buy Fox News.   And maybe not. And as much as 3 million other coins out there.... not held by any single pair of hands, but still nobody knows whether they are lost or whether the market will have to bear them.  

If I were to spin off an altchain, There'd just have to be a limit somewhere.  Whatever doesn't get claimed by a particular date ceases to exist in the altcoin chain, or it loses 20% of its value per year until claimed, or -- something -- just so that, at some point, we could write the unclaimed coins off the list and present a rational market where there's at least some idea what fraction is truly lost and what fraction is just in storage.  

[Zer0Sum]

A very credible argument can be made that a new user benefits most strongly by joining the dominant network.   The largest network would tend to have the widest acceptance, greatest liquidity, largest market capitalization, and the strongest user base (allowing the new user to benefit as per Metcalfe's Law).  If bitcoin tends to appreciate on average at a faster rate than a basket of alt-coins, this only gives more reasons for new users to prefer bitcoin.  

The "network effect" argument for Bitcoin... is almost always made in a vacuum, disingenuously.

Bitcoin is a microscopic part of, in order:

(1) the internet

(2) PC/cellphone industry

(3) commodities

(4) commodity/securities exchanges

(5) banking and financial services

GLOBALLY, none of these economic sectors has a strong "network effect"... except for unusual outliers.

---------------------------------------------------------------------------------------

In 6 months...
BTC Cap to ALT Cap ratio has fallen from 20:1 to 11:1...
And there are now 300 functioning Alt Coins totaling $650 million Cap.

---------------------------------------------------------------------------------------

"If bitcoin tends to appreciate on average at a faster rate than a basket of alt-coins..."

This is FALSE... and you pulled this directly out of your ass.

It's only been possible...
To maintain a proper Alt Coin Index with 15-20 Alts since the fall of 2013... one may even argue early 2014.

It also depends whether the POINT of your Alt Index is to:

(a)  measure sector performance

OR

(b)  outperform BTC

If your goal is to outperform BTC with an Alt basket...
It would have been almost impossible to fail in 2014...
Because every high profile Alt that has crazy spiked would have been an obvious choice for inclusion...
And BTC is down 21% since December 31st ($735 to $580).

Are people simply not aware of basic numbers... or are Bitcoin fetishists wearing blinders?



  

[Mikez]

rpietile, nice to see you here, in the chaos.

[drawingthesun]

I believe alts based on the bitcoin blockchain would be flawed because of the satoshi distribution and also exchange distribution.

A solution could be to have a time limit to move your coin from the genisis block (containing all bitcoins as of x height) to the new chain.

Example:

Litecoin 3 is released. Initial coins are bitcoin as of block height x.

Now those bitcoins can only be transfered into the new chain (new address system) for perhaps 6 months.

At new chain x height (6 months) all the unmoved Bitcoins can no longer be moved into the new chain. Now the currency genisis has been set.

I see this as solving many issues. It becomes obvious if satoshi moved a million Bitcoins in litecoin 3.

Lost coins don't move over and bloat the new chain.

Most importantly. People have a good idea about the coin supply and the amount of uncertainties decreases.

[AlexGR]

I believe alts based on the bitcoin blockchain would be flawed because of the satoshi distribution and also exchange distribution.

There is no single system of distribution which doesn't present problems (or flaws).

I think it's a good idea in principle but I don't want the MtGox hackers and the FBI getting a million coins.

[drawingthesun]

I believe alts based on the bitcoin blockchain would be flawed because of the satoshi distribution and also exchange distribution.

There is no single system of distribution which doesn't present problems (or flaws).

I think it's a good idea in principle but I don't want the MtGox hackers and the FBI getting a million coins.

Perhaps they wouldn't even bother moving the new coins. As it's probably not even worth their time.

If it was mainly the FBI, satoshi and the exchanges moving the new coin then it would be obvious this entire idea to the bitcoins from x height was a bad one.

[SlipperySlope]

The "network effect" argument for Bitcoin... is almost always made in a vacuum, disingenuously.

Bitcoin is a microscopic part of, in order:

(1) the internet

(2) PC/cellphone industry

(3) commodities

(4) commodity/securities exchanges

(5) banking and financial services

GLOBALLY, none of these economic sectors has a strong "network effect"... except for unusual outliers.

I suggest the opposite of what you say is true.

Wikipedia . . .

In economics and business, a network effect (also called network externality or demand-side economies of scale) is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service is dependent on the number of others using it

(1) The Internet began as ARPANET which was a method to interconnect numerous incompatible networks - none of which survive today because users were drawn to the largest compatible network.

(2) mobile phones, I suggest that Android is move valuable than Windows phone for developers because more people use Android.

(3) commodities, I suggest that sugar is more valuable than stevia for bakers because more people use the former.

(4) commodity/securities exchanges, I suggest that the NYSE was more valuable than the Philadelphia Stock Exchange for traders when the latter was still independent becuase the NYSE had more traders using it.

(5) I suggest that JP Morgan Chase Bank is more valuable than the local bank down my street for customers, because more people and businesses bank at Chase.

[spiffcow]

I think Monero has a real future.  All the same, I'd love to see someone combine the privacy of Cryptonote with GPU mining.  Botnets are a real problem for CPU mining, and ASICs are a real problem because they centralize the hashrate among a few players and don't help small time miners who eventually become users of the currency.  GPUs are really the best compromise.

[AlexGR]

All the same, I'd love to see someone combine the privacy of Cryptonote with GPU mining. 

With a generous bounty anything is possible. DRK gave 3.5k DRK bounty to get sph-sgminer (which was then used as the basis for all other coins with overlapping hashes, and later extended to new hashes as well).

[Adrian-x]

A very credible argument can be made that a new user benefits most strongly by joining the dominant network.   The largest network would tend to have the widest acceptance, greatest liquidity, largest market capitalization, and the strongest user base (allowing the new user to benefit as per Metcalfe's Law).  If bitcoin tends to appreciate on average at a faster rate than a basket of alt-coins, this only gives more reasons for new users to prefer bitcoin.  

The "network effect" argument for Bitcoin... is almost always made in a vacuum, disingenuously.

Bitcoin is a microscopic part of, in order:

(1) the internet

(2) PC/cellphone industry

(3) commodities

(4) commodity/securities exchanges

(5) banking and financial services

GLOBALLY, none of these economic sectors has a strong "network effect"... except for unusual outliers.

---------------------------------------------------------------------------------------

In 6 months...
BTC Cap to ALT Cap ratio has fallen from 20:1 to 11:1...
And there are now 300 functioning Alt Coins totaling $650 million Cap.

---------------------------------------------------------------------------------------

"If bitcoin tends to appreciate on average at a faster rate than a basket of alt-coins..."

This is FALSE... and you pulled this directly out of your ass.

It's only been possible...
To maintain a proper Alt Coin Index with 15-20 Alts since the fall of 2013... one may even argue early 2014.

It also depends whether the POINT of your Alt Index is to:

(a)  measure sector performance

OR

(b)  outperform BTC

If your goal is to outperform BTC with an Alt basket...
It would have been almost impossible to fail in 2014...
Because every high profile Alt that has crazy spiked would have been an obvious choice for inclusion...
And BTC is down 21% since December 31st ($735 to $580).

Are people simply not aware of basic numbers... or are Bitcoin fetishists wearing blinders?

Alt coin mining is quite profitable at the moment reportedly it has been like this since April 15 of this year. So not a long time.
It is an indication of this sector growing when one looks at the profitability of mining Bitcoin and the relative hardware investment.

The idea of a market cap representing a percentage of value is falce, value is a function of the market liquidity and velocity of the coin. So while the alt market cap has grown I don't know if it has grown in value as it isn't easy to liquidate that value.

So I don't think one can assume alts are growing faster than Bitcoin by looking at the market cap most alts actually trade for Bitcoin thus growing the Bitcoin network.

[Adrian-x]

The only argument I can see against spin-offs is that the distribution of wealth in bitcoin is somehow "unfair."  I don't think this view will garner much sympathy, however.    

So you are saying that Bitcoin, a cryptocurrency whose users likely number in the hundreds of thousands at most, is the be-all and end-all determinant of how any future cyptocurrencies should be distributed? What would be the incentive for any new users who did not happen to hold Bitcoin?

They can mine the new coin mining starts at block 0. Also buy it cheep if they believe it valuable when others dump it.

There may also be incentives like high transaction fees with low difficulty to incentives mining and reduce the flood of liquidity.