Regardless, it's a good time to be a cryptocurrency investor. We're still in 1996 in Dot Com Bubble time.
Maybe it will get replaced, maybe not. But there's no question to me that Bitcoin is by far the most decentralized, most secure, safest option of all the cryptocurrencies, including the nasty miner situation happening right now.
Ethereum is in second place, but the dev team has worked hard to maintain full control over the direction of the protocol, including frequent hardforks and promise of future hardforks.
Ethereum offers a lot that Bitcoin does not, but if the valuation were to pass Bitcoin's I think it would be fair to state that it's because the market has chosen to prefer low security, low decentralisation, high (yet unrealized) innovation potential over a decentralized payment system.
I wouldn't consider it a bad thing for bitcoin, and I also wouldn't consider Bitcoin dead or misplaced if it gets passed by ethereum in market cap. The decentralization is what is meaningful to me, and I don't know anything else remotely close.
It's not like the research is exclusive. Note that any research done on bitcoin can also be shared and used on other projects. Litecoin for example, which is a fork of bitcoin, is now benefiting from bitcoin's R&D by using Segwit first.
Likewise, other blockchains can teach a lesson for bitcoin. For example sha256 proved not to be a good hashing algo because the reliance on ASICs, which centralizes mining. Another important area in research is the development of other greener forms of blockchain security such as Proof of Stake, which will most likely replace Proof Of Work once perfected.
In a way, when I think of bitcoin, I think of it as this whole massive umbrella project that includes all the alternative blockchain projects too, that can all share their research / experiences / ideas with each-other. This is the beauty of open source software.
Theoretically speaking all algorithms are able to be optimized by ASICs. ASIC resistance is not about making ASICs impossible, it's about making them expensive. But any secure global PoW currency is going to have enough mining reward to drive ASIC development.
The really ASIC resistant algorithms will have an R&D overhead of hundreds of millions. Which means if one player can get in really and keep their R&D secret or patented, they can amortize costs and more easily block newcomers. Overall, even without intentional barriers, you will have a much more centralized coin in the long run.
For any coin intending to become worth billions or trillions, you really want to embrace ASICs and design a PoW that makes it as easy as possible for newcomers to profitably develop and manufacture ASICs.
It's a weird concept to accept but actually the really interesting and useful property of PoW is that you can provide a proof that you destroyed physical resources (provably wasting electricity) which are committed to one and exactly one interpretation of history.
Stake based systems lock or burn or manage coins, but there's no provable tether from those coins (defined only within the system) to the real world.
PoW has an undeniable tether to the real world in the form of waste.
Say there's a PoW currency A, and PoS currency B.
Alice mines A.
Now Bob wants currency A, but he can't afford to mine currency A, because he needs special hardware.
So Bob exchanges currency B for currency A with Alice. Alice now holds some currency B, and Bob is happy with A. Now the question is, would Alice see that she "destroyed physical resources" for currency B? (Yes, to Alice she had to destroy physical resources)
Later, Alice wants to transact with Charlie, who also holds currency B. She transfers her B to Charlie, that was bought using A. Would Charlie care that Alice had to "destroy physical resources" to get B? (No, that information is useless in a PoS system)
Some time in the future, currency B becomes very popular (as it's just as secure and not wasting resources like currency A). Alice wants more B too, so she exchanges her B with the masses. Eventually, currency B takes over A in popularity, and by that time, Alice has exchanged all her A for B. The question is, would Alice now view that to get B, she had to "destroy physical resources"? Would that fact matter if she continues to transact with Charlie?
There is no reason for Alice to want B, a less secure money than A which they already hold. If Alice were perfect mathematician, this exchange would never occur.
Oh, and then there were cryptocurrencies C, D and F too, but that's a different thought experiment.
If a transaction does not do this, it can be guaranteed to be insecure.
>Faster block times means she'll get her coffee sooner
Maybe. Or maybe the merchant doesn't get paid for coffee at all (because faster blocktime means more orphans)!
Sorry, didn't mean to bring out the ASIC debate so strongly - my point was mainly that the research is not exclusive, and can be shared between projects, as in the litecoin using Segwit example.
It's kind of weird to compare Bitcoin to Ethereum. They are both blockchain-based, but they're in completely different categories. It's like comparing shares in Exxon to an account of Wells Fargo. Sure, you can use them both as a unit of accounting but they're not really the same.
Ethereum is an autonomous app hosting corporation. Bitcoin is an autonomous ledger hosting corporation. They will succeed in their respective markets based on demand for ledgers and apps, the utility of decentralization in those two spaces, and their usability relative to competitors.
Ethers can be used as a currency, but so can oil, corn, and Beenie Babies. Bitcoin's purpose is currency, and the ecosystem around it is optimized for that purpose.
Ethereum's purpose is executing computational contracts, and the ecosystem is optimizing for that. You can compare the two the way you compare boats and fish, but anyone who puts them in the same category without caveat is really missing the bigger picture.
Each primitive operation needs its own blockchain for its value to be determined accurately. When multiple token are implemented over a single blockchain, for eg colored/custom coins, it cannot accurately measure the value of a unit.
In case of functional language, one could perhaps imagine a lisp blockchain with paul graham's 7 primitives implemented as an opcode (stack based interpretor is irrelevant), which would be turing complete but will suffer from the problem of determining the true value of each opcode; the cheapest one will always be abused as evident on ethereum (suicide function's cheapness was spammed).
Both of these are highly contentious if not outright wrong.
Bitcoin's network is the most centralized at the moment. Bitmain is a great example of that. As for security, Ethereum is currently spending more $$ per block than Bitcoin to secure the chain.
However there has been a few forks to mitigate DDoS attacks.
It was an application that failed.
The hardfork that came after the burning failure of the DAO moved account values from the DAO to a new contract.
The protocol remained the same.
The underlying code is overridden for a single block before reasserting it with full authority but it does not affect the protocol.
The clients and nodes in the network communicate and operate just as before, in fact, a client without the hardfork code can still receive and process the hardfork block but reject it due to not being compatible with it's consensus machine.
However, this is one layer above the protocol that makes up the Ethereum network. The protocol is merely interested in the validity of a block, not how to achieve this conclusion.
If you wrote a client that simply accepted all blocks as valid, it would accept this hardfork without problem, sans not having a correct balance record anymore.
What it would not accept is one of the newer hardforks because those actually changed the protocol and EVM to some extend, making it not understandable to old clients. Those could be interpreted as actual protocol changes.
1. Multiple popular clients implementing the same consensus algorithm. In theory, this means that bugs show up faster and you end up with something closer to the designed specification. In practice, if you ever find one tiny little difference (even a case where one has a bug and the other doesn't) you can fork the network and take advantage of the nodes that will be on the minority chain.
Eth defends this by suggesting you run multiple clients. Well, now you've doubled the resource requirements, and you force users to come up with some contingency plan in the event that the clients disagree. And if the two clients you pick are different from the two clients of much of the rest of the network, you can still fork the network.
2. Super complex contract vm. The thing so far has been a massive magnet for bugs. Bitcoin's relatively simple contact engine still has vulnerabilities being discovered in 2017 (mostly minor performance issues at this point), eth is likely to be finding bugs in their much more complicated (both theoretically and in practice) system.
3. Asic resistant PoW. No PoW is asic resistant in theory, you can always make hardware specifically specialized to your task. All it means is that eventually someone will figure out how to do it, and when they do the up-front cost may be billions of dollars - a cost that only one player will ever be able to afford, especially if they keep all their optimizations secret. Bad choice unless you think you can switch to PoS in time, but that's a bad idea for a completely separate set of reasons.
4. Centralized dev team with obvious conflicts of interest and no scruples about interfering with the networks operation to get stuff done. If a government decides to compromise when Ethereum, you could get pretty far by compromising just three people (Lubin, Wood, Buterin). Bitcoin has no such group, the devs are an amorphous blob who all suspect eachother of being CIA and would never accept a proposal merely because of the name of the submitter.
5. General support for hard forks. If you wanted to get a bad change into bitcoin, you'd mostly need to hard fork. The community actively resists hardforks. Change is very hard, but at least that means bad change is also very hard.
6. Really sketchy blockchain download. You trust a hash from a miner and then start downloading blocks after that. This means the miner can easily cheat you. Also means you can get started a lot faster, but it's a big security problem.
7. Really bad scalability. Much worse than Bitcoin's. The EVM is very expensive, and a simple transaction is going to tax you computer a lot more than on Bitcoin. Doing 1M txns per day will probably not be possible for most nodes, and Eth is within an order of magnitude of hitting. Eth also doesn't have a flagship application yet, but all of the current ones under construction do not play nice with the scaling constraints. BTC is struggling to do payments. How will will eth cope when it's doing:
And who knows what else
Scalability is a security concern, because when the shit hits the fan you are going to have a bunch of incumbents pulling every which way to make scaling work. Eth has already made massive compromises to keep up with their current load. It's going to get worse. My guess is that eth will continue to favor scaling over security, and they will end up in a 12 full nodes worldwide type of situation. That's very very very much worse than Bitcoin's situation of 12 miners.
8. In general, eth culture just doesn't consider security. They think blockchains are largely magic shields that do all the hard work for you, and despite being bitten a bunch of times already they continue prioritizing innovation. Fine, but you asked why I think bitcoin is more secure, and a culture of mistrust and slow adoption goes a long way to achieving security.
I could probably find another 10 things to talk about but I'll stop here. Ethereum has selling points over Bitcoin, but they are not security or decentralization by a long shot.
3 people control 95% of all hashing power on the network!
Myth. There is not even a single thing you can do with ethereum that you cannot with bitcoin. OTOH, you can do money with bitcoin, but you can't do it on ethereum because neither is it a true blockchain nor is it immutable ledger or decentralised either.
I know you can do it on Bitcoin too, but has anyone done it? It took a team less than 2 months to build this OTC market on Ethereum.
Bitcoin can do one type of money with extremely rigid parameters that is volatile and not efficient for payment transfers. Ether is similar but at least has lower transaction costs, but Ethereum is well on it's way to host a hundred other types of money by the end of 2017.
>Ether is similar but at least has lower transaction costs
Myth. Do the math. Ethereum is much more expensive at similar parameters.
Crowd-funding is an already popular use case for blockchain contracts, as well as the creation of tradable tokens built on top of the platform. Decentralised exchanges are a nice idea but to my knowledge they are outclassed by the speed of centralised servers. Decentralised, "fair" casinos (such as Edgeless) are also possible with smart contracts but I think they won't be able to compete with traditional casinos that have an edge but offer large and enticing welcome bonuses.
For a quick overview of some of Ethereum's Dapps you can look at:
Replacing X, when X is a task performed by a human is not an easy task for any technology.
Take for instance Automobiles replaced Horse Cab drivers, but it created Automobile drivers. So have cars really replaced the drivers? In a way they have, and in a way they haven't.
Today Smart contracts are being used to performed mostly financial transactions. Our main problem remains the same what it was in front of the Internet in early days. They wanted their refrigerator to be able to automatically order milk once it runs out of it, but it turned out that IoT wasn't even a thing then.
On the other hand, replacing telegrams and faxes with email was a lot easier task. Doing things which have no pre-internet equivalence (for instance camming) were a lot more easily integrated.
Same here, the main and the easiest use of Smart Contracts would be in the fields where there is no current usage exists. Currently Smart contracts are being used for some lightweight usages for instance performing trades of cryptocurrencies. Today ENS is launched where they are using Smart Contracts to implement domain registry systems. Tomorrow maybe decentralized uber would be made possible. None of these tasks are really 'replace a lawyer' tasks.
Similarly, changing the SQL protocol is orders of magnitude more difficult than changing, say, the GraphQL protocol, but does that mean GraphQL is likely to take over SQL? Or is it just a symptom of the fact that SQL is more popular than GraphQL in the first place?
A crypto currency that no one uses is really easy to change, because no one will be affected. Framing this as a significant competitive advantage, however, misses the point, since the nimbleness is a direct result of no one using it.
A more salient example is the TCP/IP protocol! You cant juat update it, since it's required for everyone to agree on it!
I was pointing out that popular protocols are much harder to change than unpopular ones. But claiming that this fact will cause the unpopular protocols to take over the popular ones doesn't make much sense. By that logic the least popular protocol is the most likely to win -- completely backwards, as far as I can see.
I don't know of any stores that take ETH, while plenty take BTC. BTC also completely runs the economy of the DarkNet.
I believe all cryptocurrencies are somewhat propped up by speculation, but BTC is still the preferred currency for the vast majority of people using cryptocurrencies for the actual exchange of goods and services. That's how BTC derives its value (+ speculation, but very few people are willing to speculate at $1500 USD per coin).
As for the other cryptocurrencies, I would say that a lot of their value comes from people wishing to get in on the next "BTC" for $20-$80/coin.
Bitcoin is "digital gold" while Ethereum is a bit like "digital oil". So the main value of Ethereum should (in theory) arise from decentralised apps and smart contracts.
Therefore, if use cases like (for example) Bosch's proposed idea of using smart contracts to eliminate fraudulent odometer tampering or Santander's experiments with allowing their customers to buy digital tokens from their bank account takes off, that's where the value will come from - not necessarily DarkNet stores or other transactions.
I'm not at all judging the technical merits of one cryptocurrency versus another.
Provided you use one of a limited selection of providers compared to using credit cards.
>I can meet up with people locally and sell BTC for cash [effortlessly]
Depending on where you are located.
>I can't do that with any other cryptocurrency.
You can do both of those things much more easily using traditional currencies. In both those cases you are getting a worse deal than just using normal cash for the services desired.
That's why you can't judge any cryptocurrency for that because they are all universally shit at it.
Compared to the none of them that take ETH.
> Depending on where you are located.
Or irrespective of where you are located if you are trying to offload ETH because nobody wants it.
> That's why you can't judge any cryptocurrency for that because they are all universally shit at it.
There are varying degrees of shit and BTC is the only one that even comes close to being a real currency rather than a speculative one.
No one's arguing bitcoin has the same level of adoption as USD for facilitating trade. They're arguing that it has more than zero and that ETH has zero.
Two comments up you argued that having fewer options inherently means you're getting a worse deal than someone with more options. Bitcoin is an extra payment option in n>0 situations. "n is small" is true, and a reasonable point when evaluating the usefulness of bitcoin. "n is small and therefore n is zero" is a little less reasonable argument, but seems to be what you're arguing.
And not a payment situation at all in almost all solutions.
"n is small and therefore n is not useful compared to x" is what I'm arguing. You cannot depend on n when the ability to use it as a means of payment is so inconsistent. That goes for any value of n not just Bitcoin.
That is complete codswallop. My VPN is cheaper when paid with btc than with PayPal or credit/debit card or Stripe.
Why would you meet up with someone to sell cash for cash?
So your VPN also accepts credit/debit cards? That means I have more choice in VPNs as a credit/debit card user. So you're getting the worst deal.
>Why would you meet up with someone to sell cash for cash?
Because you need a different currency? Why would you meet up with someone to sell cash(bitcoin) for cash?
Also, Monero is also on equal terms with Bitcoin when it comes to dark net markets. Another crypto with an actual valuable distinguishing feature (true anonymity) has more of a use case than Bitcoin here.
Which is only possible because of the features provided by SegWit.
Don't trust. Verify.
Litecoin is based on Bitcoin Core's codebase and therefore inherited it as well. Due to various reasons it's activating on Litecoin before Bitcoin.
I said the latter more to illustrate the relationship between segwit+bitcoin and segwit+litecoin than segwit itself.
This is not coming from a Bitcoin Maximalist, by the way (not presently a fan of Bitcoin either.) Just thought I'd point out how bizarre it is that Litecoin even has a price at all when the software is functionally similar to Dogecoin. It's only real claim to fame is that it copy-pasted the code earlier than most other cryptocurrencies and hence now survives as a zombie currency backed by the souls of all the bag-holders foolish enough to invest in it (much like how Yahoo continues to survive to this day.)
Can we all just agree that Litecoin is a way over-hyped and silly excuse for a cryptocurrency? Silver to Bitcoin's gold? I can't think of a single problem that Litecoin actually solves compared to ... well, anything. At best: you could say its a speculative instrument tied to the cancerous block size debate. But other than that - is good marketing really worth the price of $21 USD a coin? I can see a lot of people getting screwed by this when the currency inevitably crashes again ...
Today, Litecoin has locked in support for Segwit, and in about a week it will be possible to create Lightning Network transactions using Litecoin.
This is largely due to the efforts of the creator, Charlie Lee, who was able to build consensus among the community to activate Segwit.
Contrast this with the inability of the Bitcoin Community over the last few years to get any improvements added.
You may think this is a bad thing because Litecoin has a more centralized authority governing it, or you may think it's a good thing because Litecoin has a way to improve itself, but either way I'd argue Litecoin has very recently become more than what you described.
Being almost identical to Bitcoin actually increased its value as its results can be a good indication for Bitcoin as well.
As a cryptocurrency, it's pretty much of no use but as a real world play ground for newer features for Bitcoin, it's pretty optimal and it just proved it has a room to stay than being irrelevant.
You basically just said it's Bitcoin's more progressive, more nimble cousin.
The original announcement of Litecoin  shows that it is closer to being a Tenebrix clone.
It was Tenebrix, a coin which has long since faded into obscurity, that introduced Hashcash with scrypt as an alternative PoW. Also, with others already having reduced the block interval time, there appears to be little if anything innovative about Litecoin.
Honestly, most of the world's economic trust is backed by similar bag-holders, just without the use of proof of stake algorithms. Yes, one could argue that hard goods are an amount of tangible trust that can represent value, but most of the value in today's systems comes from human backed trust, which itself is irrational. Take the Fed for example.
A bag-holder, by any definition, is simply an individual that believes a given fact, irrationally. Here, the irrational belief is that cryptocurrencies like Litecoin can give way to rational desirable outcomes in the future. This is based on a mostly rational assumption crytpocurrencies are designed to provide a rational and clear means by which value can be established among those who participate in a group using the technology. For example, if I send you 1 Litecoin, then everyone in our group can immediately come to the rational conclusion you now have control of 1 Litecoin, assuming you control the private key to that address, of course. In other words, we agree to use this thing because this thing appears to be rational.
It only becomes irrational when we start talking about adding fiat currency values into the mix. Those values themselves are based on human established trust, so must be irrational by definition. Again, I point at the Fed. The way the Dollar's value is calculated, in part, is by analyzing 100K different products sold on the markets. Who picked these items? Who decided how much they are worth? What ruler was used to measure their worth?
Either we can continue down the path of handling irrational beliefs the old way, by electing group leaders (or leaders electing themselves) to speak for the group and it's collective value, or we can adopt new ways of instantiating trust by letting computers do it in a way that can be proved to be almost, but not quite, completely rational.
> Can we all just agree that Litecoin is a way over-hyped and silly excuse for a cryptocurrency?
No. As I've pointed out now, the belief that our current economic systems "make sense" is irrational. I think it's far better if we all agree that something needs to be done about it, that something might be slightly irrational in the short term, and that cryptocurrencies, like Litecoin, may present a rational means by which we measure value in the economy of the world, moving forward.
As is clear from its current market cap, it would seem others agree with me, and disagree with you.
Note: I use the terms rational and irrational frequently nowadays. When I use the terms I am referring to the concept of either an "unknown amount of work ahead" or a "known amount of work ahead". Programmers may liken this concept to the the P versus NP problem. While not equivalent, they both represent an idea that an unknown or overly large amount of work can be "collapsed" into a known amount of work, and thus calculated at a given cost.
Last year, litecoin was stilll "the first altcoin historically, which is just a duplicate of bitcoin and is mostly unmaintained". This year, it suddenly became bitcoin's staging area.
For those not aware, there's an ongoing heated debate in bitcoin about scalability issues that just seems to be unable to find consensus between several concurrent solution propositions. Litecoin came and implemented one, so we now can see how it performs. They are now moving on to implement lightning network, which is an other feature proposed for bitcoin for a long time. That being said, it will stop being "bitcoin's staging area" the minute bitcoin will go with an other choice that the one that was tested in litecoin. What litecoin would do? I don't see it asking miners to rollback a feature.
There's an other fundamental to consider : as for now, litecoin is more scalable than bitcoin. This means that should bitcoin fail spectacularly because of its scaling problems, litecoin would be the safe replacement choice, as it's exactly the same thing, but without scalability issues - due to mentioned features recent add. It would be a bit sad not to replace bitcoin with a more modern coin, like ethereum, but that's still something that could make litecoin relevant.
Bitcoin already has a staging area, called testnet3. The coins in this network are worthless.
Actually lower supply, with payment channels taking litecoin off the market.
These trade like commodities, not stocks. Commodities with an extremely transparent supply.
2. In Litecoin's case: its activation of Segwit may attract BTC core and other BTC enthusiasts.
3. Ethereum's recovery from DAO hack. I personally think the swift hard fork in this scenario was a great call, and it really convinced me of the leadership at the Ethereum Foundation.
4. Second generation proof-of-stake systems are increasingly looking like they'll work. A movement away from proof-of-work as a consensus algorithm I find crucial to the long term success of any cryptocurrency.
5. BTC ETF (and Ethereum ETF certainly also going to be denied by the SEC) application and the Winklevii garnered cryptocurrencies a lot of attention.
Overall, I think people are finally metaphorically grasping the concepts around cryptocurrencies. As a result of this, several currencies are coming out that are rapidly outpacing BTC in innovation, especially Ethereum.
They have nefariously manipulated media communications for years to fool people into only accepting a soft fork because they've convinced people a soft fork is somehow safer and any hard fork is automatically contentious. As long as a hard fork is never initiated, they retain write access to the github repo and therefore maintain control of the "default" Bitcoin client. And as long as Greg Maxwell is in charge, he can continue to receive funding for his startup (blockstream).
But yea, crippling layer 1 intentionally and misleading people for their own benefit is incredibly fucked up.
Many of the other alts have most of their volume on the exchange Poloniex which claims to be US based but offers no transparency on their operations. They offer margin trading. The fincen registration number listed on their terms page is not valid. The office address listed is for a corporation registration company in Delaware.
IMO the whole thing is a powder keg. At least it's exciting to watch.
The current thing driving it might be a combination of factors, among which is the North Korea situation with chinese investors moving funds into cryptcurrencies?
1. Chinese investors see crypto as a way of moving currency outside of China. The Chinese government has recently cracked down on movement of money outside of the country.
2. The rise of populism could drive people into crypto. The rise of actors like Donald Trump, Marine Le Pen, Geert Wilders (although defeated) implies major currency instability, especially around USD, EUR.
On (2), from what I understand Gold has become less of a good hedge against world economic stability as well.
Not to mention that every single one is an experiment that feeds back into the collective knowledge of what makes a good cryptocurrency, even as any individual one can only choose a single set of all the known tradeoffs.
I'm not quite up to current developments in the crypto coin communities, however my perception from the outside is that Ethereum has replaced Litecoin as the leading altcoin.
Is this incorrect?
How well does Litecoin fare against the congestion problems we've heard about from the Bitcoin communities?
Litecoin is an almost identical clone of Bitcoin. The network recently decided to implement a change (called SegWit) that will help with scalability (enabling https://lightning.network/). Segwit was originally planned for Bitcoin, but it turned out to be highly controversial and was therefore hasn't been activated for Bitcoin yet.
In my opinion, Litecoin will be the best scaling crypto-currency in a few weeks.
I feel like this is moving goal posts. Take for instance Litecoin has a market not because it is used by various businesses but because it provides faster clearance to bitcoin exchanges (due to faster transaction times). Sure exchanges are dealing on a lower security network but they're ok taking that risk because the value they derive from it (i.e. more profits) is higher than the insurance it would cost them if something were to go wrong.
Similarly, people use Monero because it provides them with the much needed privacy features. They may anchor back in bitcoin to purchase goods, but it doesn't change the fact that the reason why Monero is valued isn't "pure speculation".
Ethereum is currently being valued like a startup, it's product are expected to be very much useful in the future. Almost none of these products really care about Ethers being used to buy and sell goods on Craigslist or on Tigerdirect for computers. Take for instance Golem.
You're claiming that only real valuation of good is if it is being used to exchange for real goods or else it is pure speculation, BECAUSE bitcoin has a clear advantage in that field. It's like Dash saying "No cryptocurrency is as good as Dash because all cryptocurrencies have long names, and only Dash has a short name, so it will be easier to adopt because the name can hang on easily on to your tongue.".
You'd have to merge the order books of all exchanges for a particular coin, and execute the order against that. I'm fairly certain that by this measure, Bitcoin is multiple orders of magnitudes more liquid than all other crypto currencies combined.
Many crypto tokens are dividend producing assets, just like most separate corporate bonds have yields.
Sure there may be somebody wishing the dutch east india company's bonds were successful in underpinning global finance for 500 years, but the reality is that it pioneered a high yielding asset class.
In crypto, there are investible assets, and many people want them as they can gain decent yield from them. Those networks don't require mass transactions per block to be valuable. But you can also create applications on those networks to make them even more valuable.
This makes their networks more secure quicker as well as turning nodes into investments in themselves. The amount of that currency you can earn in a year is the yield. This promotes price appreciation on the markets, and for those fearing mass dumps and market corrections it is prudent to realize that node operators all have different time horizons, just like any dividend investor in stocks.
This is all complementary to whatever else you would like to use those networks for.
With yields being around 8% annually, there is plenty of room for other market participants to discover these networks and accept lower yields.
Key words to look for are Supernodes, harvesting, masternodes, staking
When any network with those things become valuable and liquid enough then ICOs can happen with those currencies being the funding mechanism for the next leg up.
Each of these phenomenons have to be evaluated individually, for their interesting and their most dubious aspects. Yes many ICOs are organizations with no more backing than the blue skies of Kansas, but they don't have to be dubios. It helps to see the ecosystem as a whole, and this ecosystem is a new evolution of capital formation.
Would have loved to have grabbed some LTC when it was dirt cheap, but I'll settle for getting in early on Coinbase. Did that shortly after Coinbase added Ethereum at $11, and it's now trading at $89.
Funny how people get pride from copy/pasting Bitcoin's code.
Is there a reason I should start using these currencies? Aside from trading currencies to make a few bucks?
If you look at Greece where savings accounts got a haircut and ATM withdrawals were frozen, or Venezuela where staple commodities and health care are now in cases only available for Bitcoin due to their currency crisis, the robustness of it is apparent.
It does have technical risks, but those are simple and easily understood. Personally, I am excited about ethereum, which turns the global mining network into a Turing complete engine for arbiterless smart contracts, where payment is built into the process mechanically rather than obliged legally and bolted on by trust like in a traditional contract.
Until the owners (and there are owners) of Ethereum don't like the outcome of a particular contract and roll everything back for their profit/gain.
If segwit becomes merged, it suffer the exact same central authority criticism, but the divided community will likely cause a shock selloff.
The primary draw to cryptocurrencies as commodities is the mere fact that they exist. It's pretty much a universal constant that a speculative market will arise around anything that can be traded.
Blockchains are neither fast nor cheap; their value is trustlessness, not performance. The SWIFT network handled 15 million transfers per day in 2015 , Bitcoin's current maximum is around 600k per day/~7 transactions per second. That being said, the Bitcoin-limit is self-imposed (1MB per block), but even so the security of the network weakens as storage requirements for nodes increase, so some limit is required, in my opinion.
The value of crypto currencies is in the decentralized/trustless medium of exchange. I think, in the end, we will use various clearing protocols on top of Bitcoin, in order to circumvent the slow on-Blockchain settlement (just like VISA handles consumer-to-merchant transactions instead of SWIFT). It's very much like gold: perfect as a store of value, but relatively cumbersome to transfer from person to person.
At least, that hope is why I myself dabble. I also think it's why there's so much enterprise investment in ethereum.
Bitcoin is available anywhere the internet is available (so it cannot be censored), and has a relatively low, flat transaction fee. This gives it utility in money transfers. It is also secured with cryptography and anonymous (yet not completely un-traceable), giving it utility for storing value.
Really, the only reason not to use Coinbase right now is if you think that US banks will "crack down" on them as well and not accept any transfers out.
PS: I am a Bitcoin enthusiast, and I am not criticizing Litecoin, I just want to understand the possible advantages it could have.
You might get lucky but you can always resend with fees to push it through.
Ponzi Scheme: "...Money from the new investors is used directly to repay or pay interest to earlier investors"
Bitcoin does not fit the definition of Ponzi scheme for numerous reasons:
- There are no paid dividends to anyone
- The purpose of using bitcoin isn’t to recruit new participants
- There’s no centralized body that funnels money up to the top
- Unlike Ponzi schemes, Bitcoin retains value and continues to function even if no new participants join the ecosystem
Bitcoin fails the litmus test for a Ponzi scheme in any number of ways. The boring reality is that it is just a value transfer network that grows more useful the more people join it (much like a telephone network grows more valuable the more people are reachable on it).
The ponzi aspect of it is that it's inherently worthless and people who bought in early are paid off by money (or even bitcoin) coming from later suckers.
A better analogy would be buying gold which produces no dividends.
An even better analogy would be pyrite.
In reality, we'd probably buy the top 10 coins weighted according to some measure, and rebalance once a week. We would send out investor updates and let you know what the weights are, along with performance over the past week.
We're YC and our previous idea didn't work out, and this is something we're considering pivoting to. If we get enough interest we'll start one!
The MVP of your proposed idea is easy; the legal version is hard. If you do the MVP and don't put in an effort to get legal the happy case outcome is the SEC sends you a very annoyed letter and you shut down; there are a number of less-happy outcomes.
(If you're going to spend a few years getting intimately familiar with how to operate mutual funds writing software to do that might be more interesting than anything in crypto, since it doesn't require any speculation to envision a future where mutual funds run the world and are run on Excel spreadsheets and bubble gum.)
>>> It would be cool to do it in such a way that you ship the crypto "fund" as a binary that users run on their own server, kind of like a smart wallet. The program would make automatic trades to rebalance some BTC you initially deposit. You could "withdraw" BTC with a sale (implementation detail) whenever you wanted.
My immediate concern would be ensuring the fund was large enough to support the counter party risk that everyone would take on as their tokens cycled between BTC and whatever else was in the index. If it's not large enough and you have a significant enough event that triggers a higher-than-normal BTC pull out you may end up in a situation where some number of the users are stuck with tokens that they can't do anything with.
The second concern I have is how you'd manage to avoid a situation of a eventual "death by a thousand cuts", wrt all of the token-specific fees that are automatically deducted for each transaction. Every trade the tool makes -- if conducted on-blockchain versus through a centralized service/layer -- will gradually erode the user's capital.
If you tried to aggregate the trades off-blockchain to avoid the individual transaction fees for every trade you introduce a whole new set of risks and challenges.
Finally, if you're doing everything on-blockchain, you need to consider that the "settlement time" for each transaction won't be consistent. The different tokens will take different amounts of time, and even within the same token there's going to be wild variability. For example, within the last two months I've had different BTC transactions take anywhere from 1 hour to 2 days to reach six network confirmations. I always include a (nominally) higher than the minimum required transaction fee to ensure I'm not actively dropped by miners, and it's as much a function of luck as it is lots of other variables that would be outside of your direct control. You could pay a larger fee per transaction in the hopes of getting the miners to prioritize your trades, but that leads you back to my early point about "death by a thousand cuts".
>> I wouldn't think there would be legal requirements there.
For the person running the software there are almost certainly going to be tax implications at a bare minimum (and all sorts of other local regulatory and legal "land mines") that they would need to consider.
If you'd like to charge money for the binary in the form of a perpetual license fee, you may be ok. I expect that you would eventually run in to regulatory issues if you set it up to charge a trading fee or subscription fee (ostensibly for "financial services" such as assisting with the matching of traders). It all depends on how quickly your tool reached a point where it was successful enough to draw the attention of some regulator, somewhere.
IANAL / IANAA, but I spent a number of years working full-time in the cryptocurrency space, so I've seen a bunch of great ideas up-ended by even the perceived threat of legal action.
I enjoy discussing these topics, so if you or anyone else would like to chat about it off HN, my contact info is in my profile.
Let's be absolutely clear: your coins are only worth what someone is willing to pay. And when the one and only true "run on the bank" of one of these currencies happens, it will happen within the span of less than an hour. All these people who are buying to eventually cash out are going to blink and wonder what the hell happened.
Take BTC as the example right now. All over the place, people are showing regret for not buying in a few years ago. No average BTC "shareholder" is going to be able to cash out for more than mere pennies. The majority of coins are owned by big players, and you are effectively dumping your cash into their pockets by buying into it.
BTC's Nakamoto "promises" they will never cash out their enormous share. How nice of them. The community can monitor Nakamoto's wallets all they want. I can't wait for him/her to cash out their BTC, and screw over the entire system. I'm just sitting here ready to laugh.
Even if 5% of all Bitcoin are dumped on to an exchange / multiple exchanges, it would cause short term panic but you'd still end up with sellers buying back in at lower prices because of the fixed supply. And let's face it, if you're smart enough to create blockchain technology / Bitcoin, you're probably smart enough not to sell your entire portfolio in one swoop on an open market without communicating with anyone...
The current bubble will come to an end and we'll enter a bear cycle at some stage - it's a given... but it's pretty unlikely the technology will just go away and fade in to oblivion given the number of people working with it and potential (or in some cases realised) use cases.
Is about as disruptive a technology as there has been since the internet itself - so if you're waiting for it to fall apart I think you'll be waiting longer than you realise...
That's not so different than what can happen in real life with currencies, isn't it? So at least the goal of treating Bitcoin like a currency has been met.
Those that got in early enough or have already cashed out usually keep their mouth shut. For those who regard it as a speculative asset and only want to get rich and now lament that they missed the early adopter phase, yeah, such people exist. I know several of them personally. It's always interesting to argue with them and yes, it would be better if there were regulations to protect them.
Greed is a bad investment strategy and it's only profit if you are willing to take profit. But people that push out the profit taking will always complain about not getting enough and most of them will get burned.
> BTC's Nakamoto "promises" they will never cash out their enormous share. How nice of them. The community can monitor Nakamoto's wallets all they want. I can't wait for him/her to cash out their BTC, and screw over the entire system. I'm just sitting here ready to laugh.
I see, you are not a true Buttcoin believer. Let me paraphrase an old meme: If Bitcoin succeeds, you won't have to cash out.
Jokes aside, Satoshi never made a promise to not cash out. It's likely, he/she/them are dead or lost the keys to their private wallet. Even in the unlikely case of Satoshi still being alive and having access to the coins, the minute this coins move, the price will plummet. And you can be sure that many people are watching these coins, a move will be noticed. Immediately.
This aspect of BTC specifically makes me roar with laughter. The fact that anyone is willing to hope that Nakamoto's coins are "lost", discounting their very real value should he/she be sitting on that cash cow. What a great con on their part. You say trading of those coins will be noticed "immediately". The transaction log will cement that trade before (well, as) it's noticed. The only thing people will notice is the aftermath. Those who are personally monitoring the blockchain with automation will notify themselves within 5 minutes, while the public at large won't figure it out for hours. By the time the "BTC is now worthless" headlines hit the major news outlets, it will be too late for the average user to cash out.
But tell me how to cash out any of those bitcoins that are supposed to be Satoshis without crashing the price? Just because it's on the blockchain doesn't mean anything as that only shows that those coins have changed ownership. They haven't been converted to fiat at that time.
Being able to sell on exchanges usually takes a few confirmations and by then, enough people will have heard the news of the coins moving and the price will already have plummeted significantly. Sure, those old coins would still be worth something but the actual monetary gain would be much less and Bitcoin itself might not survive such an event.
You could of course trade those coins over the counter, just sell the private keys or another method of an off-chain transaction but that still leaves the issue on how to cash out eventually?
Although seeing the impact of Alphabay (market) adopting ETH, there seems to be a huge market for cryptocurrencies and it probably won't go away until governments start legalizing/regulating harder drugs.
Anybody knowledgeable enough to invest in multiple cryptocurrencies is smart enough to know they need complete control over the primary keys. Otherwise, your investment could vanish at any moment.
I leave my fiat money in banks because I judge that the risk of the bank disappearing and taking my money with it is lower than the risk of my house getting burgled, catching fire, etc. Likewise, it's entirely reasonable to think that a competent Bitcoin broker is more secure and safe than my half-assed attempt to keep my own keys and risk losing access to my coins through my own incompetence.
That's the entire problem. Bitcoin has existed for eight years, and for a long time virtually nobody knew about it. Not a single bitcoin broker could demonstrate competency yet. It's better to stay out of this market if you think you can trust them.
Done correctly you are absolutely better off with your btc stored at home
I can now tell you don't own and know nothing about Bitcoin. This discussion is pointless and has now ended.
I am not talking about if it is a good idea to hold paper gold or btc, just if people would by paper btc.
Granted, risk is higher with cryptocurrency given its infancy; I won't dispute that. But if we trust brick & mortar banks to have adequate security policies and practices to deal with fiat currency, then the amount of trust we need to place in a competent exchange isn't multiple orders of magnitude higher than that. Just as there are security policies to mitigate risk in the world of cash, so are there policies to mitigate risk in the cryptocurrency world.
Maybe the risk with an exchange is one order of magnitude higher at the moment vs fiat; that seems like a reasonable amount. But 2-3+? No, particularly given the risks already present for fiat currency. And while we're at it, consider hardware failure risk if you're storing your own wallet files. What's an average failure rate for a storage device per year? 1-3%? Great, I'm sure you have backups. Not every user can be bothered, but any competent exchange will. Or - on the crypto side - what amount of value would be at risk due to an event like a hard fork? That's a risk at the currency level, not at the wallet/key level.
The overwhelming majority of businesses don't live or die based on the opinions of the paranoid; they succeed or fail based on the opinions of the average customer.
Neither does Polychain Capital, the cryptoasset hedge fund backed by Andreesen Horowitz and Union Square Ventures.
Polychain Capital is a hedge fund that only accepts investments greater than $500k from investors wealthy enough to manage the risk. If op had something like this in mind, he wouldn't be gauging the interest of random people on HN. Still, I believe they're too tempting a target and it's only a matter of time before their holdings are stolen.
> ... buy the top 10 coins weighted according to some measure, and rebalance once a week
As a relatively sophisticated investor myself, I'm not against the idea, but whether or not I'd invest in it would depend heavily on the implementation. And as of now with that example portfolio, I definitely wouldn't invest in it. Having a large btc bias when all the major cryptos are already highly correlated with btc seems redundant, and rebalancing once a week seems like overkill. Also, marketcap is a poor indicator of returns, in case you're considering using it for weighting.
EDIT: also, the btc bias comment was meant to generalize beyond just that example portfolio, because as a potential 'customer', I felt it should be made clear that btc is what I hold when I want liquidity, therefore it seems redundant to allocate any significant portion of my investment portfolio into an asset that I'm already going to be maintaining for everyday use and casual savings anyway.
What do you mean with "We're YC" ?
i.e. let's say combined market cap is $40b today. Create a token called 'Coin100' and a crowdsale issuing 1 billion tokens.
Also I would suggest allocating more than 20% to ETH.
While litecoin was rising in previous months and its coinbase addition has been rumored, technical analysis two days ago shown compression and it was not expected to have any big move before tomorrow. Then, out of nowhere, ltc spiked, yesterday. 3 hours later, it was announced that litecoin was being added on coinbase.
The thing is, it only seems fair to me to be able to exploit insider news. Employees from a company are not affected by stock price change, at least not in a good way ; because when stocks go the wrong way, they'll certainly feel it by being asked more for less in their work. So it seems only fair that someone working in a company could benefit from knowing what is going on there : they would have a part of the pie, for once.
Because a market isn't fair if everyone doesn't have the same information available to them. Trading on insider information is literally stealing from those who don't have it. Imagine the CEO of a company knowing he's about to announce bad news and shorting his own stock ahead of the announcement to make millions from it, then buying it all up cheap at the bottom before announcing some large new government contract causing the price to rebound and making more millions again... all that money he's making, he's stealing from the general public by knowing what's going to happen ahead of time and using it to have an unfair advantage. Insider trading is like knowing the future, that's not a fair market.
That's funny because fairness was exactly what I had in mind to _allow_ insider trading, but using the point of view of fairness between investors and workers, rather than fairness between investors.
What would you think about allowing insider trading, but only once during career at company and only if you're not an executive? Or maybe just allowing it for a moderate amount of money?
Trump, Lepen, what is called populism (I hate that word) feed on that. People feel that what they produce is being stolen. I, for one, don't want to think that finance is a problem. I think it's going too far, though, and that History is taking its revenge (or that it's on a downtrend?).
I require your help here to stop the hate : can you think of something that allows to be fair to both those who own property and those who create its value?
EDIT : or, to get more conceptual : you're fair to everyone, or you're fair to no one. Fairness is not a thing that applies to only a few, it's the exact opposite, by definition.
I still don't understand what your complaint actually is? How are people who buy and sell stock being unfair to those who work at the company? The company got it's fair deal when it IPO'd and sold shares in exchange for money to operate. That investors later trade that stock back and forth between themselves doesn't affect the company who already got paid. If an investor makes money off a stock going up or down, it has no affect at all on the employees of the company so how exactly do you figure they're being treated unfairly?
> That investors later trade that stock back and forth between themselves doesn't affect the company who already got paid.
This is where we don't agree. I've seen plenty of times companies that made profit being moved to other countries where work is cheaper, or companies that were doing not so well asking salary cuts, then not giving salary back when things were doing better, and distributing bonus instead. Now that I'm in trading, I know why : this is a mean to produce "good news" and make stock rise. There is unfairness to employees, there, and people are getting more and more angry against finance because of that, this will end badly.
This is why I think allowing them to trade insider news - maybe with a moderate amount of money maximum - could defuse potential conflict. We could say to employees : "yes, stock value is a prime to us. But look, you can make good with it doing your own easy profits". It doesn't have to be about millions. Most employees would be very happy with an extra $500 here and there.
The message sent by making insider trading a crime could be heard that way : we're making money with your work that we don't really care about because we won't own stock from your company a year from now, we're deteriorating your work environment, and we'll punish you if you try to join the party.
It would harm shorters, but since those ones are wishing harm to the company, it still seems fair.
No, it isn't fair; this notion that shorters are somehow bad guys is bigotry. Shorters are just as important as those who go long in keeping prices accurate, they are not bad in any way and thinking it's "fair" to fuck them is a symptom you don't understand the market. Shorters don't wish harm on companies, rather they see companies are irrationally overvalued or see the company is doing something to risky or behaving badly and expect the stock price to fall. Don't be a bigot against trading one directly over the other, they're both the same.
And no, no insider trading at all, it's always stealing; you can't come up with a way to justify stealing. It's not ok to steal from investors to make up for being treated unfairly by your company.
I really don't think you understand the purpose of markets. If you did you wouldn't be having thoughts like this.
And banks are major actors because ... they have all the money of the world at their disposal. Should people be angry at banks and move their money from them (let's see... what recent financial innovation could allow people to withdraw their money from banks?), banks would be powerless. By the way, your overconfidence is typical of end of 3rd wave.
What would you think about allowing insider trading only on good news, that is, only buy on insider news? The only effect it would have would be miss opportunity for potential longers, but it would leave no one bag holding.