[baddox]

> It also has no scarcity since it can face competition by an infinite number of similar conceivable algorithms / block-chains / virtual currencies that offer much the same features, regardless of how hard its own mining gets.

I don't get this argument. Competing cryptocurrencies won't be spendable on the Bitcoin block chain and vice versa, so Bitcoin's scarcity isn't compromised. It's true that Bitcoin could face competition from other cryptocurrencies, but that's not exactly an inherent deal breaker. People need to use a cryptocurrency for it to be of much use.

[bduerst]

They're referring to any unique characteristics that give Bitcoin value in competing with other cryptocurrencies, which is mostly true.

There are already a number of newer cryptocurrencies that are better than bitcoin (e.g. no block size issue, computational waste, etc.) but with bitcoin it will take more than that to dethrone Bitcoin's brand as "Internet Drug Money".

[petertodd]

All existing cryptocurrencies have a block size issue because blockchains have terrible scalability; removing a safety limit doesn't make the underlying problem go away.

[bduerst]

I'm referring to the famed blocksize debate [1] that's happened with Bitcoin, in which several miners have gained control of the blockchain through economies of scale and are preventing forks for block size increase [2]. This size increase would allow for more than 7 tx/s but it would also increase costs for miners, so the miners are ignoring it, effectively making it tragedy of the commons.

Note: This isn't a blockchain issue, it's a Bitcoin issue. Other blockchains have implemented different measures to deal with transaction saturation and block size caps.

[1] https://en.bitcoin.it/wiki/Block_size_limit_controversy

[1] https://blog.plan99.net/the-resolution-of-the-bitcoin-experi...

[stale2002]

Look, I am a pro big blocker myself (I think that the network would be perfectly fine with a 4-8x capacity increase). But Peter Todd has a point. (I would hope so. He is literally one of the experts)

Imagine if blocks were x Gigabytes. Thats X GigaBytes that have to be sent to every single miner in the world every 10 minutes!

There is a fundamental N squared problem in blockchains that you can't get around without using some very clever tricks that haven't been implemented yet.

[pmorici]

The creator of Bitcoin very much disagreed with Peter Todd's view. In 1999 people thought sending video let alone HD video over the Internet was totally nuts and impossible. Then YouTube happened and now we have HD video streaming to the extent that cable companies are worried it is going to put them out of business.

[bduerst]

Litecoin has the same blocksize as Bitcoin, but resolves blocks every 2.5 minutes instead of 10, giving it more 4x capacity. ZCash just forces block size increases as hard forks.

Like I said, different blockchains solves the blocksize differently, and Bitcoin has demonstrated that it's not capable of addressing it's blocksize issue and can't scale.

You can scoff and say, "That's a non-issue.", but even at the start of an NPR Planet Money podcast episode about Bitcoins, where they do a Bitcoin transfer, it hits the cap and gets lost.

[stale2002]

Litecoin's capacity is still nothing compared to VISA or Mastercard.

The question is not whether a crytocurrency can do 4X. The question is whether it can do 1,000X or more.

[runeks]

> They're referring to any unique characteristics that give Bitcoin value in competing with other cryptocurrencies, which is mostly true.

The unique characteristic that makes Bitcoin more valuable than all other cryptocurrencies is liquidity. The order book depth for the USD/EUR Bitcoin market is more than an order of magnitude greater than all other cryptocurrencies combined.

The more liquid a monetary unit is, the less friction is involved in using it for exchange, since you pay the spread (which increases with order size) every time you enter and leave the Bitcoin market.

This is the only reason gold is still so valuable: it has immense liquidity/market depth, meaning you can quickly offload it on the market when needed. This is very useful, and the defining property of money.

[baddox]

There are undoubtedly improvements that can be made to Bitcoin or adopted by its competitors. But you still have to have people using a currency. Anyway, my point is that this doesn't compromise the scarcity of Bitcoin. Scarcity of a currency does not refer to a lack of competing currencies.

[gre]

Which cryptocurrencies in particular are worth watching and why?

[bduerst]

I don't keep tabs on them all, but in terms of technical aspects I think Monero stands the most likely to be a good substitute for the Bitcoin users.

ZCash seems popular, but it's privately-run with a U.S. based company and can pull some strings to assist in de-anonymizing users. They basically claim no liability for it's users which means it may be too comfortable with authorities for Bitcoin users.

Other than that I think Ethereum has the best chance in terms of market traction to take off as a true international currency.

[abecedarius]

How can the Zcash company deanonymize users? I haven't studied their system, but that sounds completely against the design goals. (Not to mention to mention the personality of those Zcash core developers I've worked with in the past at leastauthority.com. But security engineering is about not having to rely on their probity.) I don't understand what you're saying about liability and authorities either.

In online discussions of cryptocurrencies it's clear that many people's financial positions bias their conversational positions. I'm long on all four of these currencies.

[bduerst]

From the whitepaper:

>A powerful attacker could potentially fabricate an additional block solely for a targeted user. Spending any coins with respect to the updated Merkle tree in this “poison-pill” block will uniquely identify the targeted user.

If ZCash works with that person or organization, then they're able to deanonymize the inputs on the transaction. As a privately owned U.S. company they can be compelled to do this with authorities.

For most people this doesn't matter, but for the type of user that bitcoin attracts, I think they would care, which is why I think Monero is probably better for them.

[abecedarius]

Thanks. You're talking about section VI.c of http://zerocash-project.org/media/pdf/zerocash-oakland2014.p...

It's saying if an attacker extends the blockchain just for you, and makes only you know about its forked blockchain, they would then know that if someone creates a transaction against the unique part of that chain, it must've been you. That attack appears to have nothing to do with the Zcash company as an insider -- the software is open source and hosted from Debian, etc. Am I misunderstanding? How does Monero stop an analogous attack?

(The paper continues "To mitigate such attacks, users should check with trusted peers their view of the block chain and, for sensitive transactions, only spend coins relative to blocks further back in the ledger (since creating the illusion for multiple blocks is far harder)." I don't know whether current software does this for you -- that paper's from 2014.)

[pmorici]

This site is good for getting an idea about what coins are actually being used. Bitcoin is extremely dominate.

https://coinmarketcap.com/

[edblarney]

"Competing cryptocurrencies won't be spendable on the Bitcoin block chain and vice versa, so Bitcoin's scarcity isn't compromised."

Because bitcoin is not backed by any assets, anyone could come along an invent something like bitcoin, claim it has value, and disrupt it.

So it's maybe the wrong wording for the argument, but the underlying premise - the actual underlying weakness of bitcoin as an asset, is the argument.

USD's are backed by TBills, Euros are backed by pretty good quality assets. I understand it's not like you can go and exchange your Euros for landholdings or gold, but there is integrity in that system.

Bitcoin is just an idea, worth whatever a group of random people decide it's worth, which makes it highly volatile and risky.

The USD will not go do 0 tommorow - its's needed for many things. Bitcoin could go to 0 tommorow.

[baddox]

Bitcoin isn't backed by any assets. Bitcoins ARE assets. They don't have value because someone just came along and claimed they do (try to start your own Bitcoin clone and see how much people will buy them for). They have value because people are willing to trade for them, and there are many potential reasons for that (some less reassuring than others).

[edblarney]

Bitcoin is really not an asset by any stretch.

"They don't have value because someone just came along and claimed they do" - that's exactly why they have value - because a bunch of people arbitrarily believe they have value.

There are zero currencies which survive on this basis.

All major currencies exist because they are the medium of exchange in some economy - and/or they are backed by something tangible: in the US it's government debt, in Europe by other assets.

In China it's a little more fantastic, but the currency has about as much trust as one can have in their government - meaning, it's sketchy, but it's not going to 0 overnight.

Bitcoin could be worth 0 tommorow if people lose interest, vendors stop caring - which could happen - after all, what is the underlying impetus to keep pricing momentum? Is there demand on Bitcoin for people to pay taxes? Nope. To buy other products and services? Nope. As a 'store of value'. Nope.

Really - the only value might be to 'hide from paying taxes' or to 'hide from authorities' - which admittedly has value to some people, but I'm not sure if it's enough to keep it afloat.