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But one of the biggest selling points of Bitcoin itself was mathematically limited supply. A new cryptocurrency appearing every day fundamentally undermines the

But one of the biggest selling points of Bitcoin itself was mathematically limited supply. A new cryptocurrency appearing every day fundamentally undermines the value proposition. Blockchain may have value as a decentralized ledger in other areas, but “lots of blockchain based currencies” aren’t really one of them since it’s self-sabotaging.

chrisco255 9y ago
Not really. Network effects matter. Otherwise we would see social networks and other free services replaced on the regular.
- paulgb 9y ago
  > Otherwise we would see social networks and other free services replaced on the regular. Don't we? I can think of a dozen or more social networks of one sort or another that I've belonged to in the last decade or so.
  - chrisco255 9y ago
    And how many of those have the market cap of Facebook?
    - k_sh 9y ago
      From 2007: "Will MySpace Ever Lose Its Monopoly?"[1] Past performance does not beget future success. [1]: https://www.theguardian.com/technology/2007/feb/08/business.comment https://www.theguardian.com/technology/2007/feb/08/business....
      - varjag 9y ago
        2007 was 11 years ago. That's glacial on tech timescale.
      - adventured 9y ago
        MySpace prospered for four years, that's it. And by prospered I mean, never made money, never became self-sustaining at all. Facebook is still expanding in its 15th year. MySpace never earned a profit pre Fox acquisition (the Google deal gave it a one time bump). In historical terms, MySpace is barely a bump in the road, about the size of an Ask.fm type service (ie trivial in today's hyper scale). It's like looking back and thinking Excite was a juggernaut and therefore a supporting piece of evidence that Google is going to die soon. Facebook will earn ~$20 billion in 2018 and will end the year with $50 billion in cash. That's 86 times what MySpace sold to Fox for. MySpace peaked in size at a mere 75 million monthly active users. Facebook is nearly 30 times larger. MySpace then is to Facebook now, what AltaVista at its peak is to Google today.
      - chrisco255 9y ago
        That doesn't mean that creating a new social network automatically besets the network effects of the most dominant platforms. I realize that platforms sometimes get replaced. It is early days for crypto, to be sure. It certainly hasn't reached maturity yet. However, there are examples of other monopolies (AT&T, Microsoft, GE, etc) that have lasted for many decades.
  - s73v3r_ 9y ago
    How many of those do you still use on a regular basis?
- nosuchthing 9y ago
  Network effects, yes like how BTC is owned by a tiny pool of oligarchs who need other users to transfer real capital in for their zero sum pyramid scheme. One important point: if we actually include all 7 billion people on the earth, most of whom have zero BTC or Ethereum, the Gini coefficient is essentially 0.99+. And if we just include all balances, we include many dust balances which would again put the Gini coefficient at 0.99+. Thus, we need some kind of threshold here. The imperfect threshold we picked was the Gini coefficient among accounts with ≥185 BTC per address, and ≥2477 ETH per address. So this is the distribution of ownership among the Bitcoin and Ethereum rich with $500k as of July 2017. In what kind of situation would a thresholded metric like this be interesting? Perhaps in a scenario similar to the ongoing IRS Coinbase issue, where the IRS is seeking information on all holders with balances >$20,000. Conceptualized in terms of an attack, a high Gini coefficient would mean that a government would only need to round up a few large holders in order to acquire a large percentage of outstanding cryptocurrency — and with it the ability to tank the price. With that said, two points. First, while one would not want a Gini coefficient of exactly 1.0 for BTC or ETH (as then only one person would have all of the digital currency, and no one would have an incentive to help boost the network), in practice it appears that a very high level of wealth centralization is still compatible with the operation of a decentralized protocol. Second, as we show below, we think the Nakamoto coefficient is a better metric than the Gini coefficient for measuring holder concentration in particular as it obviates the issue of arbitrarily choosing a threshold. ...However, the maximum Gini coefficient has one obvious issue: while a high value tracks with our intuitive notion of a “more centralized” system, the fact that each Gini coefficient is restricted to a 0–1 scale means that it does not directly measure the number of individuals or entities required to compromise a system. Specifically, for a given blockchain suppose you have a subsystem of exchanges with 1000 actors with a Gini coefficient of 0.8, and another subsystem of 10 miners with a Gini coefficient of 0.7. It may turn out that compromising only 3 miners rather than 57 exchanges may be sufficient to compromise this system, which would mean the maximum Gini coefficient would have pointed to exchanges rather than miners as the decentralization bottleneck. Conversely, if one considers “number of distinct countries with substantial mining capacity” an essential subsystem, then the minimum Nakamoto coefficient for Bitcoin would again be 1, as the compromise of China (in the sense of a Chinese government crackdown on mining) would result in >51% of mining being compromised. https://medium.com/@balajis/quantifying-decentralization-e39db233c28e https://medium.com/@balajis/quantifying-decentralization-e39...
s73v3r_ 9y ago
The limited supply was really only a value proposition for a small group of people. Most are not interested in deflationary currencies.
- brightball 9y ago
  For a decentralized currency, the limited supply is the only value proposition that made it viable. Otherwise the currency itself becomes flooded by mining rather than purchased with other forms of currency, which leads to more miners trying to cash out than people trying to buy in, which leaves the currency itself into a constant, downward price based on sheer supply and demand. Any type of currency that doesn't have something limiting the supply (not fixed, but at least constrained) becomes valueless by default. Even if Bitcoin is limited, if cryptocurrencies themselves are not then we're all just giving people a license to print money. At least with the Federal Reserve there is a governing body limiting the supply of new dollars entering into the system.

chrisco255 9y ago

Not really. Network effects matter. Otherwise we would see social networks and other free services replaced on the regular.

paulgb 9y ago
> Otherwise we would see social networks and other free services replaced on the regular. Don't we? I can think of a dozen or more social networks of one sort or another that I've belonged to in the last decade or so.
- chrisco255 9y ago
  And how many of those have the market cap of Facebook?
  - k_sh 9y ago
    From 2007: "Will MySpace Ever Lose Its Monopoly?"[1] Past performance does not beget future success. [1]: https://www.theguardian.com/technology/2007/feb/08/business.comment https://www.theguardian.com/technology/2007/feb/08/business....
    - varjag 9y ago
      2007 was 11 years ago. That's glacial on tech timescale.
    - adventured 9y ago
      MySpace prospered for four years, that's it. And by prospered I mean, never made money, never became self-sustaining at all. Facebook is still expanding in its 15th year. MySpace never earned a profit pre Fox acquisition (the Google deal gave it a one time bump). In historical terms, MySpace is barely a bump in the road, about the size of an Ask.fm type service (ie trivial in today's hyper scale). It's like looking back and thinking Excite was a juggernaut and therefore a supporting piece of evidence that Google is going to die soon. Facebook will earn ~$20 billion in 2018 and will end the year with $50 billion in cash. That's 86 times what MySpace sold to Fox for. MySpace peaked in size at a mere 75 million monthly active users. Facebook is nearly 30 times larger. MySpace then is to Facebook now, what AltaVista at its peak is to Google today.
    - chrisco255 9y ago
      That doesn't mean that creating a new social network automatically besets the network effects of the most dominant platforms. I realize that platforms sometimes get replaced. It is early days for crypto, to be sure. It certainly hasn't reached maturity yet. However, there are examples of other monopolies (AT&T, Microsoft, GE, etc) that have lasted for many decades.
- s73v3r_ 9y ago
  How many of those do you still use on a regular basis?
nosuchthing 9y ago
Network effects, yes like how BTC is owned by a tiny pool of oligarchs who need other users to transfer real capital in for their zero sum pyramid scheme. One important point: if we actually include all 7 billion people on the earth, most of whom have zero BTC or Ethereum, the Gini coefficient is essentially 0.99+. And if we just include all balances, we include many dust balances which would again put the Gini coefficient at 0.99+. Thus, we need some kind of threshold here. The imperfect threshold we picked was the Gini coefficient among accounts with ≥185 BTC per address, and ≥2477 ETH per address. So this is the distribution of ownership among the Bitcoin and Ethereum rich with $500k as of July 2017. In what kind of situation would a thresholded metric like this be interesting? Perhaps in a scenario similar to the ongoing IRS Coinbase issue, where the IRS is seeking information on all holders with balances >$20,000. Conceptualized in terms of an attack, a high Gini coefficient would mean that a government would only need to round up a few large holders in order to acquire a large percentage of outstanding cryptocurrency — and with it the ability to tank the price. With that said, two points. First, while one would not want a Gini coefficient of exactly 1.0 for BTC or ETH (as then only one person would have all of the digital currency, and no one would have an incentive to help boost the network), in practice it appears that a very high level of wealth centralization is still compatible with the operation of a decentralized protocol. Second, as we show below, we think the Nakamoto coefficient is a better metric than the Gini coefficient for measuring holder concentration in particular as it obviates the issue of arbitrarily choosing a threshold. ...However, the maximum Gini coefficient has one obvious issue: while a high value tracks with our intuitive notion of a “more centralized” system, the fact that each Gini coefficient is restricted to a 0–1 scale means that it does not directly measure the number of individuals or entities required to compromise a system. Specifically, for a given blockchain suppose you have a subsystem of exchanges with 1000 actors with a Gini coefficient of 0.8, and another subsystem of 10 miners with a Gini coefficient of 0.7. It may turn out that compromising only 3 miners rather than 57 exchanges may be sufficient to compromise this system, which would mean the maximum Gini coefficient would have pointed to exchanges rather than miners as the decentralization bottleneck. Conversely, if one considers “number of distinct countries with substantial mining capacity” an essential subsystem, then the minimum Nakamoto coefficient for Bitcoin would again be 1, as the compromise of China (in the sense of a Chinese government crackdown on mining) would result in >51% of mining being compromised. https://medium.com/@balajis/quantifying-decentralization-e39db233c28e https://medium.com/@balajis/quantifying-decentralization-e39...

s73v3r_ 9y ago

The limited supply was really only a value proposition for a small group of people. Most are not interested in deflationary currencies.

brightball 9y ago
For a decentralized currency, the limited supply is the only value proposition that made it viable. Otherwise the currency itself becomes flooded by mining rather than purchased with other forms of currency, which leads to more miners trying to cash out than people trying to buy in, which leaves the currency itself into a constant, downward price based on sheer supply and demand. Any type of currency that doesn't have something limiting the supply (not fixed, but at least constrained) becomes valueless by default. Even if Bitcoin is limited, if cryptocurrencies themselves are not then we're all just giving people a license to print money. At least with the Federal Reserve there is a governing body limiting the supply of new dollars entering into the system.