I've been thinking about Devcoin and the difference between Devcoin and Bitcoin. With Bitcoin, we got people obtaining Bitcoin by buying (for various reasons) and by mining (keeping the network secure). Devcoin is different: mining is less prominent for Devcoin due to merge mining. Anyone who wants Devcoins buys them. Mining Devcoins to obtain Devcoins is a waste of time.
It seems as if the dynamics of mining play a role in increasing the user base of a crypto currency. I am not sure whether there is a relationship and if so, what the relationship is all about. Is was said that Devcoin basically is a pot of money (market cap) that is steadily converted into Bitcoins by Devcoin earners. For a certain part, the same goes for Bitcoin (miners cashing out to USD). What we seem to miss is the speculation part. No speculation, no price increase and no exponentially expanding user base.
Thinking further, what is Devcoin all about that Bitcoin cannot do. Essentially, the holder of Devcoin sponsors open source activity. That's great, but can this holder not achieve the same by holding Bitcoin and donating some Bitcoins to charity supporting open source (by donations or giving tips)? From this perspective, Devcoin is nothing more than a system of forced charity. Hardly enticing for the average user of money.
I have not thought this through enough to reach a conclusion, but it seems as if the main function of Devcoin must be emphasised more: ledger for (electronic) transactions. Yes, the same as Bitcoin, but that is the core of any crypto currency. I would love to see the commerce surrounding a software event (e.g., a conference) fully handled through Devcoin. Mobile wallets, payment machines, you name it, creating a cult around Devcoin just like Doge managed to do on the basis of a simple theme. It should become cool to pay and be paid in Devcoin, because it supports something good.
Some of us are already leading this way by building a mobile client and Windows client. It's getting there, but is it enough?
It seems as if the dynamics of mining play a role in increasing the user base of a crypto currency. I am not sure whether there is a relationship and if so, what the relationship is all about. Is was said that Devcoin basically is a pot of money (market cap) that is steadily converted into Bitcoins by Devcoin earners. For a certain part, the same goes for Bitcoin (miners cashing out to USD). What we seem to miss is the speculation part. No speculation, no price increase and no exponentially expanding user base.
Thinking further, what is Devcoin all about that Bitcoin cannot do. Essentially, the holder of Devcoin sponsors open source activity. That's great, but can this holder not achieve the same by holding Bitcoin and donating some Bitcoins to charity supporting open source (by donations or giving tips)? From this perspective, Devcoin is nothing more than a system of forced charity. Hardly enticing for the average user of money.
I have not thought this through enough to reach a conclusion, but it seems as if the main function of Devcoin must be emphasised more: ledger for (electronic) transactions. Yes, the same as Bitcoin, but that is the core of any crypto currency. I would love to see the commerce surrounding a software event (e.g., a conference) fully handled through Devcoin. Mobile wallets, payment machines, you name it, creating a cult around Devcoin just like Doge managed to do on the basis of a simple theme. It should become cool to pay and be paid in Devcoin, because it supports something good.
Some of us are already leading this way by building a mobile client and Windows client. It's getting there, but is it enough?
Wekkel this is not all directed to you specifically, but just my general thoughts on this topic as its an important one.
The receiver file metaphor
The metaphor is that human work is to devcoins, what mining is to bitcoins. Merge mining ensures network security for a 10% generation tradeoff, but 90% of the generated coins are distributed based on real human effort - open source programming, writing, and eventually also visual and aural art. People themselves are the miners. This is the revolutionary idea behind the receiver files, which are a centrally managed way of ensuring fair reward for fair work. If human effort could be judged algorithmically, without human intervention, then we wouldn't need the whole admin system that we have, or the centralization of the receiver files. This may very well change in the future but for now, it is what it is.
The receiver files are what this all runs on. People do some sanctioned work (1 share per 1k words on devtome, various open bounty share rewards that are critically awarded, etc), are allocated some shares, then at the end of the round get a line with their dvc address for every share that they've earned. This is the receiver file. The file is retrieved from its central urls (utb's github and file custodians) by the client, and uses it to allocate generation shares. The generation algorithm goes through this list, and picks a line when a block is found, giving that dvc address a generation reward (minus 10% for miners).
This is fundamentally different to the main incentives behind bitcoins (and practically all alt-coins except a few). Bitcoins are a cryptographically protected decentralized store of value, with some deflationary characteristics. Devcoins are about funding human endeavour for the good of all, with the proof of work concept built into the receiver files rather than just the transaction ledger. People largely buy bitcoins as stores of value, perhaps speculating that the price will rise too, and maybe some so they can actually transact online business, but there is a fundamental flaw in this value store vs transactability, which people will realize on and off for themselves over time.
Transactions vs store of value
I've written about this flaw with bitcoins as a trade currency, in a bitcointalk post long ago: https://bitcointalk.org/index.php?topic=24867.20 and the main point still stands - that "bitcoins only value is in value storage due to scarcity". It's quite amusing watching bitcoiners get so excited that new businesses accept bitcoins, because they think it will increase adoption and increase the value...then worry when the price goes down because those that accepted them simply sold them because they work in fiat. The act of buying something for bitcoin, from a business currently living in the real world, is fungible to the act of selling the coin. They are one and the same. Businesses don't care about how they get paid; they want the absolute minimum volatility so will always convert earnings to the currency that gives them that. People care about how they pay; they want the least future valuable stuff off their hands first, then most valuable, ie give your cash before you give your car (or bitcoins). Bitcoins are always going to be a relatively poor transaction coin, because their only real value is in storing value, and so is subject to an expectation of increasing value over time as adoption increases. It doesn't really have anything to pin its value on, except maybe network security, so it's difficult for businesses to create a b2b bitcoin supply chain. Without this supply chain, coins will consistently be converted to fiat, messing with people's expectations and driving interest down.
A good transaction coin will be one that has little speculation value. Speculators increase volatility, which businesses don't like. Devcoins turn off speculators because they're not a great store of value compared to all the other coins, being one of the first fixed inflationary coins, administered by humans (potentially unpredictable, corruptable), etc. Although still non-zero, speculation has a reduced effect.
A good transaction coin is cheap to use and secure, with some incentive not to hoard them. Inflation is good for this. Cashflow is king, when it comes to business, and businesses need to find it easy to get the coins off you, because of investors, loans, and the business 2 business supply chain (if it exists). Devcoin earners are humans, that have human needs like food, clothes, shelter, sex toys, whatever. While earning devcoins, they can't simultaneously earn elsewhere at the same time, so there is a great likelihood that devcoin earners will be willing to part with their devcoins for real world goods and services to meet their needs. This can't be overstated enough. We know people will write and code for devcoins, seeing it as a form of income, and they will naturally want basic goods to sustain themselves. A stable price added to this, increases the fungibility between devcoins and cash (fungibility is like saying "I can replace a $10 with 2 $5 notes; devcoins and cash are the same thing"), so there's a good chance people will use devcoin earnings to buy staples, and converting some to btc as long term savings, whereas bitcoin earnings will probably leave their wallets at a lesser rate (which is bad for the 'economy'). Businesses should become attracted to devcoins, because devcoin earners would rather buy bread with devcoins, instead of doing a dvc->btc->usd conversion with all the slippage and fees involved. This is a totally under serviced market for basic everyday goods; something bitcoins are not as suitable for. If I had a choice to spend my devcoins on hand or my btc on hand when going grocery shopping, I would much rather spend my dvc. It has the convenience and security of btc, but also has a way I can easily earn more at a predictable rate. I even know in advance how much I'll be earning next month, so I can even budget. This is what makes for a good economic/transaction coin...incentive to spend it is built in.
A good transaction coin can be easily earned or purchased. You don't need to invest anything other than your labour to earn devcoins. No capital, no hardware, nothing but your brain for hire. At any point in time, a new devcoiner can join the community with no disadvantage to being a late adopter in a pyramid scheme, with earnings being linked to skill rather than how soon you joined. Totally different to bitcoins. With the huge number of devcoins already spread to many hands, devcoins will reach market stability faster than bitcoins will. If the price rises a lot, the share difficulty goes through the roof (more work gets done), until it's back to a stable ultra long term real-world relevant level. While it's a small thing, it is important - there is a base level of pay that writers seem to refuse to dump their coins under. US$10-13/share has been a consistent bottom for prices, even with the same 200M coins being distributed round after round. There has been dvc volume on exchanges, but the price has been stable, meaning people are holding on to them to get their target wages. Devtome writing is as strong as ever (468 shares in round 37, 67% of total), so writers and private investors have found a stable free-market equilibrium all by themselves. We can probably pin the value of a devcoin to this figure, because it's been lasting for months, and has been visited in the past too. As a free market user, I know that if I want some writing done, I can confidently offer US$10-13 per 1000 words for an average writer, and expect it to be fulfilled, and maybe double for a good writer. This is completely independant of the dvc/btc/usd prices, so we can estimate the dvc/btc price based on btc/usd price, and investors can get an idea of when they're supporting devcoins at bargain prices or inflated ones.
This is all completely different for someone buying devcoins to perform a transaction with. The only people, at the moment, that you can buy anything from are writers and some developers willing to accept them. Businesses don't really have a big reason to set up shop only accepting dvc. It doesn't really make sense to do that. When we extend our umbrella to aural and visual creative commons, we'll have more people, but that is essentially the scope of our economy. These are all pretty cool people to have on board, and there's a good chance that once we have people of these different disciplines earning shares through os/cc work, there will be businesses crop up that service them, possibly attracting more of the general public. I, for one, would think us pretty successful if we were the go-to coin for developers, writers, artists and musicians (and variations of) within the next 2-3 years. Except for maybe developers, these communities are not typically interested in cryptocurrencies, so we would be the introduction for them, which is a big deal. There *could* be a larger economy that grows out of that, but that is largely unknown.
Devcoins in particular
I personally feel I have to make a choice whenever I look at an alt-coin between investing all I have in that, or all I have in bitcoins (not really a choice), whereas devcoins are so completely different in every way to bitcoins, that it's like comparing apples to oranges. Bitcoiners doggedly seeking business transactions to get wider adoption don't seem to understand that they are the ones who will be paying for transactions through reduced coin value, because all of its value is based on a house of cards. The transaction value of a bitcoin is far, far, far lower than what it is right now, and if everyone actually used it to transact with as they intend, there will be blood in the streets.
If you're a devcoin speculator, then this will all probably sound like bad news for you. It's unfortunately impossible for an item to be both a store of value, and a good currency for an active economy. Devcoin, whether it likes it or not, is a better currency than it is a store of value, for all the reasons listed above. We could try to play it to its strengths, or we could fight an uphill battle raising the dvc/btc price for the sake of raising it. There are a ton of currencies that are better at that than this one. It took me a little time to realize that myself, but it does make sense to me now. The proposals I will release soon on where we should go next will take a lot of what I've mentioned here into account.
Focusing on the dvc/btc price as a metric of performance is completely missing the point of devcoins. There are ways to improve the conversion rate, and one is a side-effect of fixing the balance of productivity between different devcoin disciplines. I'll get to that at another time, but for now: If we go after straight dvc/btc price increases for the sake of getting more attention, we're going to lose without drastically changing the way shares are earned (especially devtome). All it will do is increase devtome output until any benefits have been eroded. Devtome needs a stern talking to and some brakes put on it, but that's part of my proposal under draft. If we focus on our actual mission - proliferating open source development and all creative commons - the entire project gains credibility and extrinsic value. This is where we will win, and get devcoin onto more lips, including the people who are actually going to put the usd/btc in to support all these people doing this open source/cc work. The best metric for our success is how many shares a round we are producing, which is directly related to our reputation for proliferating our mission. We will only be able to increase our share rate, if we can convince the greater public that by giving us money (buying devcoins), they're directly contributing to the most cost efficient open-source and creative commons proliferation project in the world. Devcoins are not a greater-fool speculative coin, but a human value concentrating coin. We're something people like Warren Buffet might consider changing his mind about crypto currencies for. He's a value investor, and devcoin needs value investors, which it can only attract by efficiently producing valuable work.
Devcoin investors, only have bright things to expect from this coin. I'm confident that I have a workable solution for the next phase of devcoin's development, to give it a more stable foundation, fairer pay for all disciplines, and better long term prospects for wider adoption. We do need to create an organizational structure that can handle all this, but it will give us more flexibility for the good of the community, and all will be open for discussion soon.
TL;DR: Devcoins are complementary to bitcoins. They make the best case for a transaction coin out of every single bitoin-family coin, because they are the least attractive to speculators, among other things.
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