Though the article is correct with the obvious point that everyone can't create an alt-coin and strike it rich, the problem with that part of the article is that network effects empirically don't ensure that one currency dominates others. Even if you ignore the non-US currencies doing rather well because you think fiat currencies aren't relevant to the discussion, the 'competition' between gold and silver didn't have a victor either. Even fully-electronic payment systems have big competitors like Visa and Mastercard. That's not to say that network effects won't possibly make one currency dominant or eliminate a huge number of contenders. It's just to say that there's probably going to be room for Litecoin and some others.
The flawed reasoning comes because he wants to support a certain flawed conclusion:
In short, the altcoin phenomenon is the product of greed and bounded rationality. They deserve nothing but scorn, and anyone who wishes cryptocurrencies to improve the world should avoid them entirely.
This leads to him saying such things as:
One thing to be said for PPCoin, however, is that altcoins are a product of the proof-of-work system. Proof-of-stake would not have led to them. If Bitcoin had transitioned to a proof-of-stake system before it was valuable enough for ASIC mining to develop, perhaps there would be no altcoins.
Since the conclusion puts people into collectives, the reasoning will as well. That flaw appears throughout the article:
New ideas attract not only visionaries and pioneers but also charlatans and fools. The former group understands the nature and potential of the new idea and attempts to extend it in new ways. The latter observes the success of the former and expects similar results through blind imitation and empty hope, rather like the Melanesian cargo cults which arose after World War II when the American military abandoned its airports there.
This analogy is absolutely appropriate to characterize the many alternative cryptocurrencies modeled on Bitcoin, which are collectively referred to as altcoins.
This isn't just a semantic point. He repeatedly implies that he divines the unified motives of entire collectives:
Primecoin is a wuzzle. It tries to do two unrelated things at once, which, generally speaking, is the opposite of a good design. Its prime-based proof-of-work is nothing but another gimmick to make people forget that altcoins are a waste of time.
Altcoins can only be explained if we believe the purpose of cryptocurrencies is to make money rather than to become money. If you can trick people into investing in your new altcoin, then you can make a profit trading it or mining and selling it. All the arguments of the altcoin promoters serve as misdirection from that basic purpose. They have developed a series of fallacies capable of fooling newcomers into joining them, but they are all disingenuous.
It is a fact that the market makes stupid choices all the time, and there is nothing wrong with me saying so. This is because the “market” is just a collection of people all making decisions that are as foolish as the kinds of decisions that we know people actually make all the time.
Since the conclusion of the article is that the nonbelievers have sinned so badly that we should punish them to the extent that we literally scorn and shun them, apparently the market leads to really, really bad and horribly immoral things. You know, like supporting alt-coins.
