Topic: Increasing the monetary supply with alts . Opinions? (Read 471 times)

People should be allowed to make mistakes and learn from them. What I propose is what I am doing right now, discussing the differences and consequences openly and honestly. Most of them will ignore this advice and still invest and maybe learn from these mistakes, but perhaps not. Others may likely repeat these choices over and over not understanding why the incentives are perverse and why these developers are driven to exit their risk. By discussing it earlier and repeating it than some may end up only repeating the same error the first time or not at all.

I know this is not an exciting or "cool" conversation and I may be coming off as a old protective grandpa , but it doesn't matter. Generally , I have even been telling people to not even invest in bitcoin and only buy it to use it. I can think of perhaps even one other currency that has some utility - monero on the dnm , but even than you may as well use btc securely. If people want to play around with DAPPs than cool , but right now they should be treating eth as highly experimental like bitcoin was before it was valued at anything and using some sort of testnet.

Young, credulous and greedy individuals who want to get rich quick you mean? They learn and pay for lessons of life like we all do, lessons of life come at a cost. They don't mine because a) it can't make them rich quick enough, b) they don't have the expertise and c) very importantly mining is a very competitive business which mostly explains why it can't make them rich quickly. So they invest in ICO, being greedy they jump into every new ICO that promises the moon, and usually get burned. While there are established coins that don't promise the moon but instead constantly deliver innovations but being credulous and greedy these individuals go after the biggest promises. What do you propose? Somehow not let them make bets, nanny them not letting them grow up? Failure is part of experience of growing up.

There will be infinite amounts of alts created and infinite amounts of young credulous individuals lining up in the future to invest in them. Sure the market will sort this out , but my criticism is part of the market. 


Energy burnt follows demand typically, but it is also possible for miners to increase the hash rate to prompt a price increase as well because speculators look for this to anticipate market movements and confidence.

My point was that When someone premines, instamines, or sells an ICO , the purpose of this to to fund raise either for a pump and dump scam or to legitimately pay for development. If its the later than regardless of the intentions the results are typically really negative and for good reason.

Cryptocurrency ICO involve young , credulous , idealistic individuals that don't properly vet investments so is more akin to gambling or buying penny stocks. VEnture capitalists are much more experienced and have very elaborate contracts that protect their investments. Sure , sometimes angel investors and VC funders scam themselves, but categorically the two are nothing alike. When You mint with PoW in the free market you are making a sacrifice for security of the network and being rewarded thusly which aligns your efforts with the success of the project. With premines, instamines, or ICOs the payment for uncompleted services is paid up front and than there is a strong incentive for the creators to exit and start a new project shortly after. This is the same reason that VC typically have metrics and payout funds in partial amounts if certain metrics are met with many provisions as well.

It wouldn't have time to get too bad. If it proves not useful, it will die in free market conditions in short order, if it's useful it will stay. Think about utility and efficiency, the rest will sort itself out. And no, the value is not given to Bitcoin by the energy consumed to mine it, it's a fallacy to believe so. The value comes from utility, from how well it helps people solve their problems.

This was already addressed in my OP. I'm fine with competition. The main thrust of my argument more has to do with perverse incentives which often lead to intentional or unintentional scams. These means that a PoW alt that doesn't want to burn btc or be a sidechain and isn't instamined wouldn't be that bad because it would be transferring energy to fungible value in a free market like bitcoin did.

A handful of them have much more innovation that Bitcoin can ever achieve. Does innovation matter or is Bitcoin good enough with all its limitations is the right question we should be asking ourselves.

The difference between quantitative easings and alts is the latter are free market tools, while the former are being enforced with measures as far from free market as could be. Slightest inefficiency in free market environment almost instantly self-adjusts or is killed off. You should only be afraid of alts if Bitcoin is not efficient to compete against them, and that would make you as bad as those who force quantitative easings of noncompetitive currency down the throat of the populace. Control and power hungry freaks don't like competition. Pro free market people love it. Are you one or the other?

Alts can be created by burning or sidechains however to "keep the original fiat money in crypto currency" thus the only reason not to do this is to fund development. Funding development is indeed important but their is a really nasty consequence that is created when one incentivizes developers to exit.


The problem is this--- Many of these altcoin developers have strong incentives to exit into fiat and btc regardless their original intentions. Thus My comments are more directed at appcoins, ICOs, and premined PoS coins where there isn't a direct transfer of energy for fungible token without any sharp distribution rate to allow instamines. The incentives become perverse. If a sidechain is developed instead than the developers can raise thier own portfolios value and all others and have no incentive to "lose interest in their alt" and start another one. There are a handful of devs that are serial altcoin developers and leave the bag hanging on credulous speculators. This is the concern I have.

The "sound money doctrine" is a naive doctrine, that only makes sense if the two following hypotheses are satisfied:

1) the monetary asset has 100% of the "store of value/currency" market (that is, it is the ONLY currency in use)
2) the monetary asset exists since a very, very long time, and the unfairness of its seigniorage and early adopters is long forgotten and diluted.

Only on the basis of these starting points, the sound money doctrine makes sense.

If the monetary asset is one amongst many, eating a small, variable part of the market of "store of value" and if the asset has to be created and the seigniorage problem addressed, then almost the whole theory falls on its face, because "inflation" will be related to the totally variable market share in the "store of value" market it will take, and in any case, if there is a mechanism to undo the unfairness of seigniorage, then monetary creation is not a problem, and if seigniorage is a problem, then it will be a problem for a long time in the usage of the coin.

In fact, "sound money doctrine" only makes sense if all monetary assets, including fiat, derive 1-1 from gold and nothing else.  Gold has then, directly or indirectly, the whole market of store of value ; and gold is a monetary asset since so very long, that "early adopters" and "early miners" are long since forgotten.

I think due to game theory that altcoins are definitely a positive for the crypto community. They help keep the original fiat money in crypto currency form as well as provide a competing network should the powers that be corrupt the original vision. Plus they allow for an organic testbed of new technology .

TLDR. Altcoins are a positive.

One important aspect of bitcoin is that it is founded in principle against continuous inflation, bailouts , stimulus programs , quantitative easing or any other method states use to inflate the monetary supply. Most these alts offer little innovation and many are outright scams, but even those that have some technical curiosity betray the principles bitcoin was set out to combat by printing more currency. This doesn't need to be done as one can burn btc to create another chain or create a sidechain to experiment with thus the whole point of alts and ICOs amount to a method developers can use to offload their risk onto credulous speculators. Some of these developers may be sincere in their attempts to create a community of value but the end result is the same - Increasing the monetary supply and creating a tremendous incentive for the developer to exit and cash out when they lose interest regardless their original intentions.

To clarify, I am not suggesting that there should be any restrictions and limitations with creating or investing in alt. People should always be free to transfer value as they see fit. I am talking about some of the consequences and concerns however and am interested in the general sentiment of those that invest in these tokens.

I will readily admit being a bitcoin minimalist but am not making this post merely as an attack but am sincerely curious how others feel about the concerns raised above. Look forward to your replies.