Topic: Altcoin - the alternative cryptocurrency? - page 4. (Read 11150 times)

If someone told you that economic growth depends on money supply they are plain ignorant!

As far as my understanding goes, that's accurate. If the economy and currency are growing at the same pace, prices remain stable and everyone goes about with business as usual.

With a deflationary money, it's like Gresham's law again. Assume the economy as the bad money and the deflationary money as good. The good is held more because it appreciates in value relative to the economy. Eventually, there's no money to circulate, so the economy grinds to a halt. Altcoin provides a translation layer between the deflationary currency and the broader economy.

So long as the different facets remain freely tradeable, the economy functions smoothly. Without a central human authority mucking around with the money supply, the two forms of money won't be able to get so out of whack as precious metals and fiat currencies are today.

If one currency has been widely adopted, then the money supply must follow the increase in total amount of traded goods/services in the whole economy, so a constant increase in money supply is required to maintain price stability

But what if this currency has not been widely adopted (like bitcoin) or maybe never will be? Then I think defaltion nature tends to keep it's economy scale limited, not the other way around (economy scale getting bigger and the currency get more valuable)

This is exactly what I've been considering since the Bitcoin run up to USD$30. Bitcoin is deflationary. It is the digital equivalent of precious metals, particularly gold & silver. That's wonderful as a store of value and a metric of value, but not well as a means of exchange.

A store of value must remain stable or appreciate. It is an asset, not a liability. This is what Bitcoin achieves by being deflationary.

A metric of value must also remain stable, regardless of whether it appreciates or depreciates. The key is that it is recognizable and universally comparable to anything it is held against. In this respect, Bitcoin is not very effective, but easily could be as it gains widespread adoption. For now, gold remains as the ultimate metric of value, until we start thinking of items in terms of how many BTC they're worth.

A means of exchange only needs to be relatively stable on a momentary or short-term basis. It can be literally anything, from a seashell to a glass bead to a dollar. Its purpose is to facilitate an agreeable rate of exchange wherein acceptance of it indicates confidence that it can be exchanged for something else during its usable lifetime. Modern fiat currencies fit this role.

The Altcoin concept is exactly the appropriate complement to Bitcoin. Americans may find it harder to understand the dichotomy between a store of value and a means of exchange because the dollar has been used as both for so long while the rest of the world has seen many local or regional currencies rise and fall. However, throughout most of history, gold and silver were used as savings or stores of value while other items (bronze, copper, paper certificates, etc) were used as currency or means of exchange.

That isn't to say that gold and silver can't be used as currency. Indeed, they very well can. But consider whether you'd rather carry a briefcase full of coins that weighs over 100kg or a wallet full of dollars and Euros weighing only 50 grams. Convenience trumps security for users when it comes to computers and it also trumps value when dealing with short-term exchange in currencies. Only when convenience is no longer worth the loss in value does that switch, usually temporarily.

In the near future, we might see people being paid in Altcoin and buying goods with it while they hold Bitcoins for long-term savings. That isn't because Altcoins weigh less than Bitcoins. Rationale for this comes from the fact that Bitcoin's structure is rigid, while demand for an exchangeable medium can vary wildly. That is a major reason for failure of adherence to the gold standard. Demand for one property of money (means of exchange) outpaced that particular utility of gold.

With Altcoin (or whatever it will be called - my vote is for "Skrill"), an unlimited expansion of supply allows for demand to determine the inflation rate (it also makes lost coins irrelevant to anyone but the owner). The underlying structure is still the same as Bitcoin, but the distinction is that there is no ~21mm unit limit. That flexibility afforded is the critical factor - the "other side of the coin" (pun intended).

Assuming a set inflation rate is a mistake. Mining for Bitcoins now is an inflationary process and will be until the ~21mm unit limit is attained. Only at that point will Bitcoin truly become a deflationary form of money. Until that point, demand will dictate the expansion rate on a cost/benefit basis. If it is profitable to mine, miners will do so. Otherwise, they will not, until such a point as it becomes profitable again. Very simple. The same will apply to Altcoin wherein the inflation rate might be rapid initially, but the profitability of mining Altcoins will dictate the expansion of the supply. That profitability is determined by the demand for Altcoins. Also very simple.

So long as the Altcoin and Bitcoin systems are structurally intact and remain decentralized, Gresham's law will arrive at a balance where Altcoins act as the primary digital means of exchange and Bitcoins act as the primary digital store of value (means of saving).

Another analogy could be to view the current Bitcoin adoption as the 1800s gold rush and the Altcoin concept as the birth of fiat currencies, minimizing the need to carry a pocket full of highly valuable gold.

I hope this ridiculously lengthy explanation helps in understanding why both forms are necessary for a modern society.

Think the situation other way around. The one being paid prefers bitcoins, but the one paying prefers altcoins. If this makes a currency fail, same could be applied to bitcoins, just the inverse.

Good point

Since the productivity is increasing, the labor contained in the product is decreasing. To keep the price stable, money supply should increase to counter this effect. If the money supply is constant, then deflation is unavoidable and will hinder the economy growth

this is WRONG.

BTC has DEFLATION BUILT-IN. read some theory.

I just can't see how people in a free market would choose altcoins over bitcoins. If given the chance of being paid an amount in BTC or ATC, I'd definitely prefer the BTC, which will store value better than the ever-expanding ATC. This preference for bitcoins would make altcoins fail.

I think the only way the altcoin idea could work would be through government backing. If a government were to legislate that debts can equally be paid in bitcoins and altcoins, then we'd be in a situation where Gresham's Law would apply, and people would tend to pay debts in the less-valued altcoins rather than in the more valuable bitcoins they'd hoard. And in that case altcoins would be a form of fiat money.

Suppose we reached the bitcoin maturity and all the 21 million coins are distributed. Now, the userbase starts growing: more and more people want to get their share of bitcoins too. Everybody wants to get rid of their fiat currencies and exhange them to bitcoins instead. The value of each bitcoin increases and prices will drop, deflation happens.

And I probably used the term "inflative" irresponsibly. Although there is a constant supply of new coins, there's of course nothing assuring that inflation will happen. "Forcing inflation" is something that cannot be done with cryptocurrencies.

The user base has nothing to do with inflation or deflation. The inflation or deflation is price of money measured in itself if the factor of time is included. The price of goods and services will drop, because labor productivity is increasing.

Forcing inflation into the monetary system is equal to forcing people buy goods and services they don't actually need! This is not economic growth. This is economic disaster. Because such a monetary system gives wrong signals to the rest of the economy including investors, manufacturers and consumers.

When you'll already have the 21 million bitcoins, but the userbase is still growing or the mined coins are lost, happens deflation. The prices of the goods and services will drop, because each of us will have less coins to spend in the long run.


Slightly because there are factors that can't be 100% predicted. If there are only a handful of early adopters, the prices of goods'n'services will be high because the coins are valued so low. Even if the implementation was meant to be inflative, deflation could happen if the userbase grows exponentially compared to the coins currently available.


It will take effect with Bitcoin too.


I believe that the main problem with currently available fiat currencies is that they're controlled by the governments. Yes, they're inflative just like Altcoin, but they are also very unpredictable. It's better to invest on gold, silver, shares etc. because there's no way to know whether your USD will be 95%, 75% or 50% of it's value after X years. Right, there's no way to know for sure with Bitcoin or Altcoin either, but they can only be manipulated by the market, not by some shady entity somewhere we don't even know.

E: Also, someone asked what do I have against Bitcoins. Nothing really. I do use them and I do believe they can succeed.

But there exists some problems too and forks are trying to solve them. How long it takes to maturity for example and also that the early adopters are holding huge amounts of BTC, but no-one knows exactly how much. They can manipulate the market to huge extent. As time goes by, not to mention coin loss that's constantly happening, the early adopters will actually become even richer. And even richer. And have even more power. The inherent problems that can come with deflative implementation: your coins are now worth 10USD, but tomorrow they are worth 20USD. Why on earth you would spend your coins today if you could just hold them back until tomorrow? But you really have no idea to buy anything tomorrow either, they're worth twice the next day etc.

Again, these are nothing that are impossible to overcome, but they can prove to be difficult obstacles and probably too unfair for some (like, making the rich ever richer and the poor even poorer) preventing widespread Bitcoin adoption. And I view a large(ish) userbase as a crucial thing.

Yeah.  We need to get right back to basics. I'm gona re-invent the wheel myself. LOL

1. There is neither inflation nor deflation with bitcoin. You know when you'll have 21 million coins and that is it. Lack of inflation is not equal to deflation!
2. Inflation that is offered here with altcoin is not 'slightly' but 100% predictable. I don't understand how 100% predictable inflation helps?

That's what people are doing with fiat currencies too. I don't oppose people who are spending their coins for gold and silver, but those aren't that widely accepted, be it b&m store or an online shop.
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So if people are doing the same thing with fiat currency why would you create the digital representation of the same ill begotten problem that is now the scourge of humanity?

Purge your mind of this madness. I don't agree with your methods and am suspicious of your motivations.

What is your main concern now? The early adopters holding so much BTC?

Agree, Gresham's law will take effect.

There will always be inflation or deflation with bitcoins too. And the inflation being slightly predictable helps a lot.


That's what people are doing with fiat currencies too. I don't oppose people who are spending their coins for gold and silver, but those aren't that widely accepted, be it b&m store or an online shop.

I certainly like the idea of managing the rate of inflation with a faster pace the first few years to aid distribution.... I'll be keeping an eye on this post as this system certainly seems fair.... also like the 11/11/11 launch date  

If the pre-launch is handled properly we'll not be in this situation where the stability of the economy could be threatened by a few possessing the majority of coins.

the problem I have with this is that the current bitcoin inflation rate is too high...  otherwise it would be trading at 35 USD rather than 11 per BTC ...

And i'm with most on this thread... focus on helping and building bitcoins not forking it... 

There is no point in a constant and 100% predictable inflation. Every hour (or even second) the price of goods and services will have to be changed accordingly! Is that what you want? A madhouse?

Complete nonsense. This will encourage people to spend their coins for real money like gold and silver. Because real money doesn't inflate!

It's only a proposal. You might draw some design ideas from here too. It's not my goal to create a new cryptocurrency whatever it is. If you (or probably, we as a community) can pull off a good enough implementation, there's really no reason for me to create my own. I'm just trying to initiate the discussion and development here, not to do all of it myself.

And to add something concerning the launch date, it needs to be set far away enough so that the project can gain as much publicity as it can. Although it would be more profitable for us miners when we could get a headstart, in order to the currency to succeed, we must get as much early adopters as possible. Bitcoin helps a lot in that, because there have been lots of people that have become familiar with the cryptocurrency concept and if we get a new blockchain rolling now, there will be much larger userbase ("wanna-be-rich-early-adopters") than there was when Bitcoin was launched. We definitely don't want majority of the coints to be held by minority of the users.