Topic: The Main Problem With Bitcoin (Read 2113 times)

You talk of bitcoin as if it were an investment commodity (and many others in this forum talk about it and use it that way).  In that case, yes, there's no problem.  Trade whatever you want and see what happens.  It's a trading experiment.

But bitcoin is marketed as a currency and a currency needs to have some universality to be successful.
How would transactions for tangible goods and services happen with mutliple digital currencies?  Would merchants accept a number of them, like they do now with credit cards, or would there be some automatic way to exchange a digital currency for another on the fly?

I also think of the bitcoin community as a social network.  There are a few social networks, but the ones at the top have established themselves and it's difficult to dethrone them because of the network effect.  On the other hand, there are things like telephone operators, which have found a way to interoperate seamlessly by using common protocols.  So I can use the telco of my choice and you can use the telco of your choice, and I can still call you and talk with you on the phone.

Not as long as people continue to mine and use bitcoins the most. Every other coin is just following in the footsteps of bitcoin but will not see near the success for many many reasons.

I think you are under estimating the significant network effect that is required to propel a currency. Apple beat out Microsoft because a consumer of an Apple product didn't need an entire network of Apple users to make their product useful.

Competition is a good thing.

May the best cryptocurrency win.

Sorry my mistake, IBM introduced the PC not MSFT. but the analogy still works I think. My point was that the first one to market won't always be the biggest, most valuable and popular in the long term. And in this case, there could be an infinite number of alternative crypto currencies pop up to steal away the monetary value of the bitcoin.

Btw ftr Bitcoin isn't a currency

You answered your own question with this example.

How companies entered the market to challenge Microsoft? Many. How many succeed? A couple. Why did they succeed? Innovation

Sorry but if you'd know what it takes to mine a block you'd be of a different opinion.

No, because I agree with your OP that competition from other crypto-currencies will keep the value of BTC in check long term. I just don't see this as a problem.

Why would anyone buy a consumer electronics gadget (TV, computer, camera, etc) today when they know that it'll cost less and have more features tomorrow? Plus it will almost certainly depreciate in value faster than the currency used to buy it.

But isn't the problem that it is a deflationary currency. I mean, if you know that the value of your coins in USD terms will be worth more tomorrow than today, why would you exchange them for anything?

Doesn't it always just lead to hoarding?

Nonesense. Everything that makes bitcoin useful has nothing to do with the price of bitcoin. Ease of transactions, fixed supply, relative anonymity, the ability to store value out of the reach of governments, ect. It isn't an investment vehicle designed to make people rich.

As for the OP, competition isn't a problem for bitcoin. Because again, what difference does it make if the price is $5 or $5,000 a coin? The only thing that changes is the number of coin's used to make a particular transaction.

Just as you don't want a monopoly of a good or service, you don't want a monopoly of a currency.

If you're curious, just look at how much good the dollar is doing in the world. 

The fact that there is already a LOT of money invested into this one. People are already skeptical about cryptocurrencies. This one busting will prolly kill the concept for good at least for ones who put in their time/money.

But if I release a new currency and market it, people will surely jump on board because they'll see the value is close to zero and they can be an "early adopter", no?

dilution is relative -- just because you release doesn't mean anyone will care.

IBM introduced the IBM PC. Other PCs (Personal Computers) existed on the market for years before the IBM PC was even designed. Microsoft just made a big business deal with IBM and rode along its success. Microsoft didn't even write the OS (MS-DOS) that they licensed to IBM. They didn't make the first graphical windowing system either--Xerox, Apple, MIT, and others came before them. Microsoft has been late to the party with most of its so-called "innovations", so your analogy is flawed.

I'll give you an analogy:

Microsoft were the biggest tech company for a while because they were the first to introduce the PC.

Bitcoin is the first cryptocurrency so everyone jumps on board.

But then Apple came along and innovated its way to a higher market cap than Microsoft.

Some alt currency will come along, and people will want to jump in early to catch the rise up and you'd just end up with heaps of different alt cryptocurrencies popping up everyday all driven by the desire of their creators to essentially make money out of thin air.

As far as I know the only way digital money could guarantee no competition is if that was mandated by government (or basically, any group with bigger and better guns than you have).

What's to stop lots of people from trying to get on to the next big speculative cryptocurrency to pop up?

Another digital coin at a near zero price sounds like free money.

People will just sell out their bitcoins to be "early-adopters" of the new currencies, and eventually, you'd have a new competing currency popping up everyday and people leaping off to go chase the new one, which would ultimately dilute the value of all the currencies.

Can someone point out the flaws in my argument here?

It's not called dilution, it's called competition, and it's a healthy part of a market that's not regulated by the state.

It's only dilution if one clings to one specific currency with religious fervour and refuse to diversify, and it happens to lose market share to a different currency. Then one's personal portfolio will be 'diluted.'

Currently, most all of the alt-coins are half-assed copy+pastes of the Satoshi client but with some interesting changes. Such as Litecoin with Scrypt, and PPC with scrypt and proof of stake. Namecoin with its nameserver concept. But there's none that really "takes the cake" in terms of having a completely different client, a real protocol specification to start with, etc. So we won't see any real "dilution" too soon - the biggest we have is Litecoin which has been hovering at around $3-5 per coin for a while - other popular alts are $.25-$2/coin.

I give you mad propz yo - by the thread title, I assumed this thread was going to be another tard with the original concept of "I know exactly what other people do with their coins and have looked at the Bitpay and tx stats - so I know that nobody actually spends bitocoins, everyone is an evil hoarder/speculator and that is the problem with bitcoin." Which of course is categorically false, not to mention an occupy-wall-st-esque stereotype, so thanks for not making that be your "problem with bitcoin" ;-D ;-D ;-D