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> What is being missed by your analysis is that the value in a blockchain comes more from the network than the tech. That is the reason why anyone can't just c
by zrm 9y ago
> What is being missed by your analysis is that the value in a blockchain comes more from the network than the tech.
That is the reason why anyone can't just create a new coin and expect everyone else to value it, but that doesn't mean there can't be any viable competitors. And if a competitor with a sufficient advantage got popular enough, it could take the lead.
For example, the hack Bitcoin used to become popular was to be deflationary, which encourages speculation. That got the value up before it was cool, but it stays deflationary -- even gets more so -- once it's popular, and the consequent speculation causes high volatility. Once you're popular, being deflationary becomes a liability instead of an asset.
It's possible for a coin not to be deflationary and have the supply set by computing costs. If the value of the coin falls below the energy cost of creating them, people stop creating more of them and the value stabilizes there (so it doesn't keep going down). But as demand for the coin increases the value rises above the threshold and people start mining again (so it doesn't keep going up).
That stability would be a huge advantage. But it's not possible to convert Bitcoin to that because its deflationary nature is priced into its value. Making it non-deflationary would make it worthless to speculators, which would eliminate most of its current valuation.
So all it would take is for a non-deflationary coin to become popular enough for people to trust it not to disappear overnight and the people using it for transactions rather than speculation would prefer it over Bitcoin.
- omio 9y agoThat wouldn't work because mining blocks also validates transactions.
- zrm 9y ago> That wouldn't work because mining blocks also validates transactions. It's possible to validate transactions with proof of work and compensate the work with transaction fees rather than the creation of new coins.
- spookthesunset 9y ago> creation of new coins. If your crypto-coin starts life with all the coins instantly sprung into existence, that means everybody gets to buy their coins from you--the founder. There is a name for this--it is a pre-mine scam. All you do is mine most of the coins yourself, then go pimp your coin so it gets some buyers, and sell them all off for a sweet profit.
- zrm 9y agoIt isn't that new coins can't be created, a coin may be worth e.g. $100 and it costs $101 in electricity to create another one so nobody does until the demand for coins increases. But the amount of work required to validate a transaction need not be as much as it takes to create a coin, and people will continue to be willing to pay someone 5c to do 4c worth of computation to validate their transaction.
- Udik 9y agoYep, a non deflationary currency would be precisely one that has its coins created all the time, instead of in a predefined amount as bitcoins. (You can think of mining as "discovering" one of the predefined bitcoins instead of creating a new one). The problem is that for a currency to be slightly inflationary, as it should be, you need to tie it to an economy and make political decisions about it- and then you're back at square one.
- lojack 9y agoDifficulty is adjusted approximately every two weeks, so the network would self adjust to a reduced mining rate. Mining isn’t used to validate transactions. You can validate transactions without mining. It’s purpose is to secure the network. The network validates transactions using asynchronous cryptography and nodes only transmit valid transactions. Mining secures those transactions from being overwritten.