[aboodman]

That's right. Selling a piece of spectrum is a very good analogy.

Another easy analogy would be IP addresses. Early on in the internet huge chunks were just given out for free. Now they're valuable because they're scarce and the demand for them has skyrocketed as the internet grew.

You need spectrum to participate in the radio business (and other kinds of businesses). You need IP addresses to participate in the internet. Similarly you need HNS (as an example) to participate in the Handshake network.

And as with spectrum and IP addresses, there's only a fixed amount of HNS (or at least that is the expectation, the details vary in each cryptocurrency).

[iamspoilt]

But there is another factor for cryptocurrencies. Anyone can create a new network and do an ICO and as long as the protocol is sound and audited, the new network can still enable money transfers the same way as a Bitcoin network. The collection of networks can potentially never become as scarce as, for instance, IPV4 range or the radio spectrum for telephony in the earlier analogy that I mentioned.

[aboodman]

Anybody could create a new protocol that competes with IP (many did). So that part of your argument doesn't hold.

The reason that IP addresses are scarce is not because it's not possible to invent a new protocol, but because everyone else uses IP so only IP addresses are useful.

Spectrum might initially appear to be fundamentally scarce, but even then, people can invent other ways to communicate (and they did! copper wires! IP!).

These are all examples of networks - their value is proportional to their popularity. So yes, anybody can create a new cryptocurrency, but currencies are mainly valuable because of who you can use them with. Dollars are valuable because so many people accept them!

So if one cryptocurrency really gains traction, it will be hard for any other cryptocurrency to compete unless it offers something fundamentally new and different.

[pashamur]

Even domain names follow the same pattern - in the last decade there has been a huge number of new domain extensions that have been approved for use; if you go to namecheap these days you have hundreds of options for your personal site.

Yet the vast majority will still use .com, .net and .org, and those still remain the most valuable. :)