There is an ecomomic law (that I identified, not sure if economists actually recognize it) that people use the currency that is most convenient for whatever kind of trading they are doing.
There is no reason for anyone to prefer altcoins for trade unless they are useful for something bitcoin isn't (which I haven't really seen yet).
Demand for trade is the only difference between bitcoin and a hot potato stock in a company with 0 earnings and 0 capital. In other words, in the long run, absolutely essential.
In summary, altcons have no reason to exist unless they can do something bitcoin can't.
Unless altcoins can freely float with any other altcoins. Then an altcoin simply becomes a stock in a network effect that altcoin can sustain. There's a reason why Dogecoin (as a "joke" as it is), has almost a $10 million market cap, and it just over a week old.
Next year, we'll start seeing altcoins pop up for anything and everything. The marketcap doesn't have to be millions.
A few days ago, I was talking to my co-workers about DOGE, because I'm pretty into it. This morning, when I walked into work:
"Hey, remember how I was saying DOGE had a $2MM market cap the other day and you were laughing? Today it's $12MM. It's now the 8th biggest altcoin (and is almost 7th)."
http://coinmarketcap.com/ has the whole list of altcoins and the numbers and graphs for them, if anyone is interested in this kind of thing.
DOGE specifically has changed my entire perspective on cryptocurrency. It's incredibly interesting.
This happened early on, but there's pretty significant volume being traded. A quick add-up of a bunch of the orders shows about 40 BTC that you could actually get. And there's one seller on Cryptsy willing to buy 44 BTC worth of DOGE alone.
Dogecoin changed my perspective on cryptocurrencies personally. I battled with the concept of altcoins: why they have value, and whether they aren't just taking away the value from one cryptocurrency. The change it instilled is that crpytocurrencies can simply function as an investment in an any idea/concept/theme. So far all coins were "arbitrary", centered around vague ideas: 'feathercoin', 'litecoin', etc. Some had technical improvements, but its power were just a belief. Dogecoin is the first coin where there is a much more clearer purpose behind: that of the doge meme. It means we will start seeing a cryptocoin for anything and everything. It's a way to create a world of public shareholding... of anythin.
Memes are, almost by definition, temporary fads. That seems like a terrible thing to build a currency around. What happens when people get sick of Doge?
Just because some coin's last trade was at $100 doesn't mean someone who holds 1 million of them is worth $100 million... volume and depth is important too.
Amongst other things, altcoins and anonymous exchanges are perfect for bitcoin laundering. For example, the thief of Sheep marketplace instead of tumbling his coins endlessly through the blockchain (and being watched doing so) could've just waited for an anonymous exchange to open that he could've deposited into and and bought new altcoins (maybe he could even setup the exchange.) On the other hand, people that had their coins stolen could've owned such an exchange and tracked the thief's altcoins out of the exchange.
But every altcoin has a set of pro and cons. They're just like flavours of Linux, and how hard is it to switch over as a miner, user or admin? The real power of altcoins how I see it will come when a second generation of altcoins comes into existence. Perhaps some way of retracting stolen or lost coins would be an interesting feature, perhaps tying coins to an email address for approval of spending or a resending of lost keys.
> Amongst other things, altcoins and anonymous exchanges are perfect for bitcoin laundering. For example, the thief of Sheep marketplace instead of tumbling his coins endlessly through the blockchain (and being watched doing so) could've just waited for an anonymous exchange to open that he could've deposited into and and bought new altcoins (maybe he could even setup the exchange.) On the other hand, people that had their coins stolen could've owned such an exchange and tracked the thief's altcoins out of the exchange.
At first I thought you might really be onto something on this, but you aren't.
To put it simply: BTC->LTC at ex1 and then ex1->ex2 and then LTC->BTC is no more anonymous than BTC->BTC at ex1 and then ex1->ex2 and then BTC->BTC.
In both cases the two exchanges have to collaborate to reveal your identity. But in one case they have two be aware of 2 blockchains instead of 1. No big deal.
Demand for trade is the only difference between bitcoin and a hot potato stock in a company with 0 earnings and 0 capital. In other words, in the long run, absolutely essential.
I would say that political ideology is another big difference. The early adopters of Bitcoin were largely of a certain ideological bent that made them predisposed to wanting Bitcoin to succeed. When have you ever seen this kind of behaviour around a penny stock?
I agree. many ideologues who invested in bitcoin probably had no rational theory of how money attains value to justify what they were doing. Instead, they justified it with an ideology that isn't necessarily correct.
But the thing you quoted me saying is what ultimately does provide a rational justification for bitcoin having a market price.
So basically what I'm saying is those ideologues got the right answer on their math homework, despite having made some mistakes in the calculations.
However not everybody who invested in bitcoin is a mistaken ideologue. I'm not (though I'm not anyone important, just a guy). Certainly Satoshi was not. He acutally "worked the problem correctly" and got a valid answer.
I dub that economic law 'Saves Me Time'. I have X amount of time on this planet. If your whizdoodle saves me more time and brings me more joy than someone else's whizdoodle, I'm going to use yours. Period.
Still, I think Bitcoin provides much more value than any altcoin.
true, but expect Gox to introduce ltc soon, and then probably Coinbase and BTC China. The debate will shift from is bitcoin needed/useful to are altcoins needed/useful? Interesting times ahead. The $10,000,000 per bitcoin notion will be gradually diffused into other coins, and there'll be winners and losers, and it'll get ugly as blockchains are attacked, pump and dumps, powerful people takes sides, and misinformation put out. Bitpay and the Winklevoss' have already stood by bitcoin (at least publically.)
> The debate will shift from is bitcoin needed/useful to are altcoins needed/useful? Interesting times ahead.
And the answer is "no." Though as they say, the market can potentially stay irrational for longer than you (in this case, I) can stay solvent. So what you are describing could happen for a while.
> The $10,000,000 per bitcoin notion will be gradually diffused into other coins, and there'll be winners and losers, and it'll get ugly as blockchains are attacked, pump and dumps, powerful people takes sides, and misinformation put out.
And those are the reasons that bitcoin is literally always going to be better as a means of trade and store of value. Those coins don't have any advantages but they have all the disadvantages you mentioned. The more widley used/mined/liquid bitcoin is, the more advantage it has. And I don't mean social network effects, I mean the things you are talking about.
I read there are only about 3500 setups mining bitcoin. It's too difficult to do on a homemade setup. Then again, I don't know how the pools are operating in this concept. If you're a young guy wanting to get into cryptocurrency, you're not going to get into bitcoin except as a way to get or dispense of another crypto from fiat (that's what makes bitcoin valuable - as a trendsetter and gateway.) Other altcoins may not offer any significant benefits to bitcoin on the whole, but vice versa too... I can think of things I don't like about bitcoin including a massive blockchain (13 gb) that takes days to download. To me the differences in algorithm choice and number of confirmations is a side issue (perhaps I should take them more seriously) to other things including demographics of adoption, regulatory environments, adoption and market perceptions.
It not really about the lines of code: its the way and context the software with its blockchain has been implemented, developed and brought to light.
There is no reason for anyone to prefer altcoins for trade unless they are useful for something bitcoin isn't (which I haven't really seen yet).
Demand for trade is the only difference between bitcoin and a hot potato stock in a company with 0 earnings and 0 capital. In other words, in the long run, absolutely essential.
In summary, altcons have no reason to exist unless they can do something bitcoin can't.