Are Altcoins Undermining Bitcoin's Credibility? 267
An anonymous reader writes The editor of a Bitcoin advocacy site believes the proliferation of altcoins (cryptocurrencies other than Bitcoin) is harming Bitcoin's long-term potential as an alternative to traditional currencies. Posting at BadBitcoin.org, a site that seeks to expose online scams that target Bitcoin users, the pseudonymous ViK compares altcoins, including the Internet meme inspired Dogecoin, to a pump-and-dump scheme where developers create their own version of the Bitcoin wallet and blockchain and then "pre-mine" or generate a significant number of cryptocurrency units before the altcoin's official release. Later, when their value has risen, the pre-mined altcoins are exchanged for Bitcoin or in some cases converted directly to cash. While critics of cryptocurrencies in general might find ViK's comments about the altcoin "tulip" mania ironic, the self-confessed Bitcoin fan is nevertheless calling for an altcoin boycott: "The easiest way to stop them is to not participate. We all know that they only have one purpose, and that is to make Bitcoin for the so called developers."
Bitcoin credibility? (Score:2, Insightful)
It's all funny money... (Score:5, Insightful)
All of this is funny money.
Bitcoins are just in your imagination.
USDollars are merely imagined by the USGovernment.
Gold has no real value other than using it for things like electrical contacts, etc.
None of this is real money.
If you want real value, get a basket of eggs, hatch the chicks, raise them up, feed them pasture, your other asset - you are landed I hope - and they'll lay more eggs. Now you're in business and can feed yourself. When you succeed at that start feeding other people and they'll give you something of real value like a pork chop or firewood to stay warm with. What ever you do, don't accept cash, bitcoins, gold or other fraudulent currencies for your eggs. You want real value for your real things.
hilarious (Score:2, Insightful)
Anyone who supports any sort of crypto currency could say the same about bitcoin. Early adopters/(founders?) of bitcoin still control a huge number of bitcoin, so how is that not a pump and dump scheme itself?
I'm not a fan of crypto currencies at all.
Re:It's all funny money... (Score:5, Insightful)
USDollars are merely imagined by the USGovernment.
Oh they are "merely imagined" by a lot more than just the US Government. And that's why they have actual value.
Hate to be the one to point this out... (Score:5, Insightful)
But they said the exact same thing about Linux distributions in the 90's, after the post Redhat influx of distros. What we learned from that experience, and some of us knew it at the time, was that the more people you have working in their own isolated environments, solving the problems that are important to them... the more innovation you have in the greater Linux space. It's the trickle down effect in open source software, and it's what makes a product or product ecosystem stronger. And we're seeing the same effect in the Bitcoin space. Just look at the proliferation of Scrypt variation, Gravity wells, different variations on proof of work, proof of stake, and others. Like Linux, Bitcoin is more than a bundle of software products, it's an entire ecosystem. To dismiss that, and say that there should only be about Bitcoin seriously misses the way open source innovation works. The rest is all marketing, which is bullshit by definition.
Re:Bitcoin credibility? (Score:0, Insightful)
Gold and perhaps silver are credible currencies.
Re:Bitcoin credibility? (Score:4, Insightful)
not to mention that he's doing it wrong: you put your hotel on Boardwalk first, since you get the most money AND the most likely landing there thanks to the "Advance token to boardwalk" cards.
But they aren't the best investment anyway; you'd do better putting your hotels on Orange, then Red/Yellow, then Light Blue... [businessinsider.com]
Tsk, tsk....
Re:Bitcoin credibility? (Score:5, Insightful)
Clearly Bitcoin has enough credibility for people to value it at hundreds of dollars.
No -- clearly Bitcoin has enough potential for people to value it at hundreds of dollars.
There's a difference. The price of Bitcoin was driven up in the past couple years mostly on the basis of what it might become, not so much what it already is. That's not "credibility" as a currency -- that's potential value as a speculative investment.
You may not think much of it, but as long as there are people willing to exchange it for traditional currency or goods and services that's enough to keep it viable.
Again, that's not why it has most of the value it has today. Most of the growth has been because there have been people willing to exchange traditional currency for it, not the other way around.
Currencies can get their value from at least three components: (1) "inherent" ulility value of the basic material, (2) utility value of the currency as a medium of exchange, and (3) speculation due to investors and people happy to buy the currency because they think other people will ultimately need the currency for reasons (1) and/or (2).
Paper dollars, for example, have almost no value of type (1), but they have a lot of type (2), and the U.S. dollar is popular enough around the world that lots of people view it as a safe enough investment for (3), which keeps its value higher than if it were only the internal currency of the U.S. Gold has some value of type (1) (i.e., applications requiring its properties, like jewelry and applications which use its conductivity and resistance to corrosion), and it functions in limited capacity in (2), but most of the increase in gold's value in recent years has come from (3).
Now take Bitcoin. It has absolutely NONE of (1). Until relatively recently, it had extremely few everyday applications where it could be used for (2), and still there are significant problems to be overcome which will make it easy for average people to deal directly in it as a currency in safe and secure fashion. So the VAST majority (maybe 99% or more) of Bitcoin's value is about (3) -- random speculation as an investment, effectively gambling on the idea that it will eventually become widely adopted.
That's not "credibility" -- yet. Maybe someday every Bitcoin early adopter's dream will come true, and it will pay off and that value will convert from (3) to (2). But I'm not gonna hold my breath, and I'm certainly not going to go out and buy virtual "money" whose value is currently mostly held up by a small number of investors. Say what you will about the "fiat" nature of the dollar or whatever, but you have hundreds of millions of people worldwide that depend on that value everyday, and they all have an interest in keeping it afloat. Bitcoin? I have no idea who holds most of the value, but I know it's concentrated in a much smaller group of people, and I have no reason to think that they won't dump and run screaming if trust in the "magic money" dies next week.
ASICs drive out CPUs and GPUs ... (Score:4, Insightful)
What does this even mean? Asic proof?
ASICs (Application-specific integrated circuits) represent specialized hardware specifically designed for a particular task, in this context the ASICs are designed to mine coins. ASICs outperform (both in speed and power consumption) CPUs and GPUs making ASICs far more profitable.
:-) 24/7 mining some coin.
Coin proof-of-work algorithms have some sort of difficulty setting to control the number of coins being awarded during a time period. The more mining horsepower there is the higher the difficulty goes. This rising difficulty level makes the mining calculations take longer. So as the total capability to do work (all the CPUs+GPUs+ASICs) goes up the difficulty goes up. An individual CPU, GPU or ASIC earns fewer coins per hour as difficulty rises but the total number of coins generated remain roughly constant over time.
ASIC-proof algorithms attempt to leverage the fact that ASICs are specialized. They try to incorporate things found in CPUs and GPUs but not in ASICs. The motivation is to allow CPUs and GPUs to profitably mine something. The problem is that the things missing from the previous generation of ASICs used to design the ASIC-proof algorithm have been finding their way into newer generation ASICs.
So the short story is that some alt-coins were partially motivated by CPU/GPU miner that were driven out of bitcoin mining. Newer generations ASICs are now taking over alt-coins and CPU/GPU miners are once again being driven out.
Those great deals you find on ebay for a used high end GPU. It very well may be a GPU that was over clocked and run just below the point of spontaneous combustion
Not credible enough for merchant's to hold ... (Score:4, Insightful)
Clearly Bitcoin has enough credibility for people to value it at hundreds of dollars ...
But not enough credibility for merchants to hold/keep the bitcoins they receive from customers.
Merchants tend to use merchant services offered by various bitcoin exchanges. Basically the merchant does all their pricing and accounting as normal in whatever fiat currency they use, dollars, euros, etc. When a customer indicates they wish to pay in bitcoins the merchant sends sale info to the exchange, the exchange converts the price from fiat to bitcoin and provides a payment address to send bitcoins to. This payment address is the exchange's, the merchant never touches a bitcoin -- lucky for them if they are subject to IRS jurisdiction but that's another story. When the merchant receives the coins they credit the merchant's account with the original fiat amount specified regardless of any particular fluctuation that may have occurred in bitcoin's price.
In short. The merchant prices and does accounting in fiat currency and receives fiat currency in payment. The only thing new is that their payment processor is a bitcoin exchange rather than VISA or Mastercard.
Re:Self Serving Story? (Score:5, Insightful)
Adding to this, a number of existing altcoins do, in fact, attempt to address bitcoin's weaknesses. Litecoin attempts to resist customized hardware mining and also make the blockchain update faster. Primecoin solves a somewhat useful mathematical problem instead of completely wasting computer cycles like Bitcoin does. There are other examples.
Anyway, it only seems natural that as time goes on, better and better cryptocurrencies will be incrementally developed. To ask everyone to use ONLY what's the first iteration of this tech would be silly.
Of course, there are "me-too!" cryptocurrencies as well, typically with only minor 'improvements' and designed to make the creators rich. I'm all for educating people about how they could be taken advantage of. But boycotting? Come on.
Re: Self Serving Story? (Score:2, Insightful)
People seem to think the story is already told and Bitcoin has some kind of manifest destiny. Digital currencies haven't even touched 99% of the world's population, maybe more. We have so far to go right now, it's foolish to write anything off, simply because it's not Bitcoin.
Re:Self Serving Story? (Score:2, Insightful)
The market must be free! (from anything that stands between me and exploiting others more efficiently)
Re:Self Serving Story? (Score:4, Insightful)
He does have a point though, and I don't understand why people haven't seen it before.
If you create a currency that is backed by nothing but knowing a very large number, then you can back a infinitely large number of currencies by an infinitely large number of different large numbers (or even the same large numbers). That means that there are inherently infinitely many alt coins out there, and these things are inherently worthless.
It's not really that alt coins destroy bitcoin's credibility, it's that bitcoin itself has no credibility in the first place, and neither do these alt coins.
Re:Self Serving Story? (Score:3, Insightful)
One ponzi currency claiming the other ponzi currencies are bad for exactly the same reason the first currency is bad is really rather silly. If you want to play in the ponzi currency field, then go ahead but be warned it is legally and criminally dangerous and at least you are accurate in they "are all doomed".
The easiest way is to not participate. (Score:2, Insightful)
Why don't we apply this to ALL craptocurrency?
It's a waste of time, computing power, energy and programming time needed to alter payment backends for this e-funny-money.
If nobody participates, they all collapse like the speculating-their-asses-off house of cards that they are.
Re:Self Serving Story? (Score:3, Insightful)
They haven't seen it because supporters of bitcoin are blinded by ideology. They can't see that their rejection of "fiat currency" should cause them to reject bit coin as well. Ironically it's because they have faith in bitcoin itself. :)