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August 23, 2014, 02:16:37 PM |
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Hi
someone posted this on reddit, I find it quite interesting as todays bitcoin model seems not sustainable long term. Mining means monopoly of the manufacturers and is environtment wise not ethical I think. For those reasons alone the future belongs to cryptos which do not require extensive mining.
Perhaps you can judge yourselves ...
WHAT WOULD A CRYPTO CURRENCY COLLAPSE LOOK LIKE?
Today the entity “Crypto currency” is split broadly into 3 groups, lets define them because each one is very important to the future of digital decentralized money.
Group 1. Monopoly mined long distribution Crypto currency.
These are much more like “Stocks” than money or currency , they have all the parameters of being a “payment system” but are generally fixed to a solid cap, i.e there will never be more than a certain hard wired cap, they also can not be priced because they are in effect price manipulated by the issuers (which hold a monopoly on the issuance)
Popular names include:
Bitcoin
Litecoin
Group 2. IPO “financial products” Derivatives and non crypto currency.
These products seems to have taken the idea of a the “Bitcoin monopoly” and generally expanded on it often these include products that use one monopoly crypto currency (Bitcoin) to “pay” for the other IPO issuance, these are certainly the murkier side to “crypto currecny” often honestly defined as complete Ponzi schemes and Shell games, some are quasi toted as “crypto currency” when they don’t even have a decentralized Ledger.
Popular names include:
NXT
ALL the protocols ( counter-party etc)
Ripple
Stellar
Ether
Crypto currency can’t be IPO’d the “trust” is literally shifted to; the trust and “good will” of an anonymous person on the internet.
Group 3. Crypto currency that has adhered to or is currently adhering to general principals of “neutral control”
These are Crypto currency that due to “good design”, “core code innovation” or sometimes just plain accident have been able to be mined but not be able to be controlled by a minority of people or a small group working in concert.
so this means that the issuance is not controlled by any single party so that is to say there is “neutral control” over the issuance of the units.
this and these Crypto currency are effectively priced by the free market.
I will give names and explanations:
Quark
Multiple Hashes (hash complexity) + a 6 month primary mining period meant that all units where dumped onto the market but were primarily mined by 1000’s CPU, this meant that the market quickly took effect of the roughly 240 million units and priced them immediately.
Myriad
Myraid uses an Hash complexity innovation that allows 5 different sectors to mine the entity all simultaneously this in effect means that no single entity (or mining group) can gain a monopoly over any part of the mining, and its working quite effectively, Myriad will have roughly 2 Billion units and the market is pricing them appropriately at this time.
Primecoin
Prime uses it Proof of Work system to find Prime numbers and the key innovation is this work is essentially completed by CPU – it seems to be sufficiently complex enough that effective monopoly has been difficult to obtain and maintain.
The Accidents
There are a host of marginal (former monopoly) crypto that by accident or “trust collapse” are now (more or less) floating in the free market and priced as such, these “accidents” are a microcosm of the events for group 1.
The pending collapse – :
All Monopoly systems (group 1) can hold a high price valuation only as long as they can hold on to that mining monopoly and have “trust” in their small group of monopoly issuers, as I write this that “trust” is breaking down.
so out of our iii Groups only group 3 is priced now by the free market.
The “Reserve” status of (group 1) crypto currency is the key reason why this collapse will be an “event”, because obviously Bitcoin and Litecoin have “first leader” brand status and primarily Bitcoin’s high (manipulated) valuation has caused it to be a key cross against many of its clones on most crypto exchanges.
we will likely see many exchanges literally collapse on a significant break down in price valuation.
Collapse Steps:
i - Monopoly starts to fail, volatility rises “flash” crashes as key “trust” members cash out.
ii - Volume becomes thin as the monopoly failure causes a “market freeze”, lets explain this:
this is caused by new players continually selling small amounts, and then as new players get access to larger amounts of the monopoly, the price manipulators become fearful of faking volume as a new player might dump a significant sell on a normally fake buy, so in a complete monopoly the buyer and the seller are the same entity, they are in effect only paying for trading fees (if that) to fake exchange volume, i.e selling back and forth to themselves.
however if and when the monopoly is lost a fake buy (or a set of fake buys) goes in and bam a new seller (outside monopoly) fills that whole group of orders.
what just happened?
the fake buyer was using capital they would normally recycle back into a sell now they have to find new capital (fiat dollars) to continue to try to manipulate exchange volume.
in a complete manipulated market this matters a lot, and capital can become very thin very quickly, especially if the market is as “holographic” as many assume.
iii - Stand off and collapse.
The market freeze causes other “trust” members to realize that the game is likely up, this causes a further standoff as new players are either building supply to dump or in a very market driven manner trickle selling.
once a declining trend begins some key “trust” players will know that it’s only a matter of time before new players dump and “get what they can”, so thus, some “trust” members may move and sell first.
this could result in a terminal decline of some monopoly crypto, as some, due to the flawed design with regard to the way they are mined will perhaps be unable to recover.
Summary & the effects.
Bitcoin is a Key “reserve” currency to many other cryptocurrency so a collapse (of monopoly and valuation) will have a large effect on most of the cryptocurrency in the market; many of the monopoly clones will simply collapse and disappear ( as they had no support and were only used as a vehicle to gain more Bitcoin)
In a monopoly collapse situation, the most truly decentralized are the most robust.
These are the crypto with decentralized support and well designed core code, and by definition and design are priced by the free market, they have a “community” of individual miners both solo and in pool groups.
key crypto brands stand to gain; these are of course the group that are already now defined, these are generally group 3, (and few possible others) there will certainly be disruptions but at this time we might say “reality” will define which crypto currency is robust and which crypto currency is a holographic monopoly.
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