Lesson learned from Auroracoin's death

lukep

lukep

He Hath Arisen
Sep 18, 2010
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On the blockchain
An awesome lesson on the topic of money just happened last night, or really over the last few days.

Auroracoin, the Icelandic-national altcoin started it's "airdrop" on March 25th, attempting to give 31.8 auroracoins to every single Icelandic citizen by letting them log into their site and claiming them with their national ID card number.

Even the Icelandic Gov held a special parlimentary session just to plan for dealing with it.

Just yesterday, Coindesk pointed out that 8 or 10 other attempts have started up at nationalized cryptocurrency: CoinDesk Guide to the World's National Altcoins (Of course some could be not-so-legit.)

Speculators took the price of a single Auroracoin up to 0.1698 Btc, or about $111 on March 3rd, before the airdrop.

It's fallen considerably since, as over 1% of the popualtion of Iceland claimed their coins on the 25th, and immediately sold them off. The price took a 50% plunge on that day... Herp derp.

985k0L1.png


There were no merchant establishments to spend Auroracoins at yet... How could it happen any other way? Isn't this the only possible outcome if you don't spend as much time on the merchant/marketplace side as you do the coin giveaway side?

But... It got much worse yesterday... The coin is right now in fact completely Dead... Split into at least 3 forked chains!

It was very easily 51% attacked, again and again yesterday.


The problem here is that:

  1. In order to give out coins to a citizen, you have to pre-mine quite a lot of that coin so it exists first to give away.
  2. In the process of mining it first, you have to take away the incentive for miners to mine the coin, because they can't earn very much anymore.
  3. In the process of killing off these miners, you destroy the coins security.

So not only did they have a problem with citizens finding the altcoin useful and holding onto it, they had equally bad problems with securing the Auroracoin blockchain because there was no longer a strong incentive for miners to mine it. (Which has totally disappeared as the price fell through the floor the other day.)

To parrot one user on the bitcointalk thread: "they should have airdropped some video cards."

So it's a demonstrated fact now; Altcoins will not work as a national currency. Maybe if you could convince everyone in the nation to start mining them first.

You simply need to build all three pillars at the same time, as all 3 are necessary:

  1. More users holding coin
  2. More Miners securing coin
  3. More Merchants accepting coin

Otherwise you see the exact collapse that you just saw with Auroracoin.

To a lessor degree, this proves that only Bitcoin can survive and all the other altcoins will die out in time. The other coins just aren't being accepted at merchants like bitcoin is. They're essentially in a slo-mo death spiral and they don't even know it yet.

Simple economics bros. Double down on your bitcoins while you have the chance... They're hovering at $500 right now because of some stupid chinese rumors, so I don't think they'll be there for long.
 


lukep said:
The problem here is that:

  1. In order to give out coins to a citizen, you have to pre-mine quite a lot of that coin so it exists first to give away.
  2. In the process of mining it first, you have to take away the incentive for miners to mine the coin, because they can't earn very much anymore.
  3. In the process of killing off these miners, you destroy the coins security.
Click to expand...

All of this has an easy solution. Require citizens to mine their coins easily instead of giving them away (something about teaching a man to fish...). Make the "mining" process a simple mobile app or browser toolbar. Set the first few blocks for an individual to be easily mined ... after that, mining is from the general pool, therefore less lucrative. But as IMers, we know that doesn't matter. Once the software is installed, most won't uninstall and you've got a core group of miners from the starting gun. Blah, blah, mining power, blah blah, gigahashes, blah, blah.

Man I really wish some alt coins launches had some thinkers backing them.
 
lukep said:
But... It got much worse yesterday... The coin is right now in fact completely Dead... Split into at least 3 forked chains!
Click to expand...

But that's the free market, and for that matter, electronic democracy* in action, ain't it?

*Except not really because with all these cryptos, btc included, when there's a fork or a bug the developers declare what they think the truth should be and the sheep on bitcointalk and reddit bleat their assent, do what their github masters tell them, hop on freenode and thank their github masters for their incompetence when they fuck up, and most amusingly, blame mining pools instead of asking "why's this code suck and why am I participating in this?" But in certain circles, the 1% is always to blame, even when it's pretend internet money. So essentially your decentralized virtual currency does have it's own self-appointed fed of starry-eyed idealistic neckbeards, generally with socialist leanings, occasionally with undisclosed loyalties, who govern the blockchain with no accountability in whatever way makes sense to their little circlejerk of internet guys who can sort of maintain a base of crappy c++ that's poorly tested, buggy, and is maintained with a very cavalier and dangerous attitude regarding its dependency tree. But that's cool, it's not like it's designed to support a janky protocol and is faced with a hostile network filled with malicious peers designed to compromise transactions. Nope, nobody out there trying to steal btc and other cryptos, every hour of every day in every possible way. But not to worry, the idiot-kings of the internet are all over this shit. Like, for example, dogecoin, where the head idiot in charge declared they lied and there won't be a cap on total doge, but it's mostly because they suck at C++ and just retconned this "we want 100 billion in circulation so lol we infinitecoin now" into their sucking at C++ so bad they can't backspace over a number and replace it with another, then decided random rewards are bad, once again, BECAUSE POOLS, so no more random rewards. It's great, I love investing my money into stuff where complete fucknuts can just change the rules and make up new rules as they go along. Sign me up. Maybe the rest of the world should get more like the guys who run the cryptos. Maybe the NYSE can just open whenever they feel like it, and they should reverse trades they don't think are fair. They should also charge whatever transaction fees the guy who runs their source control system thinks are fair on any given day. Of course that guy should discuss it on IRC. He should probably tell his friends he'll discuss the transaction fee issue on IRC, but not tell anyone else, to keep the trolls out. And he should usually end up doing something different from what he told people he would do on IRC. That'll give everybody a warm fuzzy feeling, and everybody can feel as good and positive about the NYSE as they do about bitcoin.

I really wanted this crypto stuff to work, and gave it more than a fair shake, but I've washed my hands of btc and everything built on its base because the code sucks, the implementation doesn't scale, and developers are trusted way too much.
 
erect said:
All of this has an easy solution. Require citizens to mine their coins easily instead of giving them away (something about teaching a man to fish...). Make the "mining" process a simple mobile app or browser toolbar. Set the first few blocks for an individual to be easily mined
Click to expand...
They won't though... Why not just 'require' them to all learn cryptography & Austrian economics while you're at it?

No national population would. Therefore, national coins are dead.
 
JCash said:
But that's the free market, and for that matter, electronic democracy* in action, ain't it?
Click to expand...
Hey JCash! Glad you're back, bro.

And no, I cannot even agree with this quote, the free market =/= electronic democracy. This IS free market you're seeing happen because no one is holding a gun to anyone's head in this process, saying they are allowed to do anything or not. Democracies hold guns to heads.

Perhaps that's just potato pohtahto though. ;)


JCash said:
*Except not really because with all these cryptos, btc included, when there's a fork or a bug the developers declare what they think the truth should be and the sheep on bitcointalk and reddit bleat their assent, do what their github masters tell them, hop on freenode and thank their github masters for their incompetence when they fuck up, and most amusingly, blame mining pools instead of asking "why's this code suck and why am I participating in this?" But in certain circles, the 1% is always to blame, even when it's pretend internet money. So essentially your decentralized virtual currency does have it's own self-appointed fed of starry-eyed idealistic neckbeards,
Click to expand...
Wow, don't hold back bro!

They change, they grow, they shrink, they have different leadership all the time, and there's nothing from stopping you beside coding skills and drive from joining them at either level.

But more importantly, there is nothing forcing the miners to accept code they don't like, so you can count on the fact that they wont do so.



JCash said:
generally with socialist leanings,
Click to expand...
That's news to me... If they were socialists, what the hell are they doing helping bitcoin?

Surely if they've written any code for bitcoin they'd know that socialist-leaning features are instantly rejected by the pure free-market system of miners downloading their proposed software?


JCash said:
Nope, nobody out there trying to steal btc and other cryptos, every hour of every day in every possible way. But not to worry, the idiot-kings of the internet are all over this shit.
Click to expand...
Don't leave out the free market, venture capitalized, huge pool of coding talent! Whatever Bitcoin problem you imagine is out there, I can likely find 3 different teams of well-capitalized groups working on fixing it.


JCash said:
Like, for example, dogecoin
Click to expand...
Oh please don't. I thought my OP made it clear that I don't feel they'll survive. Frankly, anyone trying to base such a serious thing as a currency on a flavor-of-the-day silly 4chan meme is just asking for disappointment, no matter how many people find it funny this month.


JCash said:
It's great, I love investing my money into stuff where complete fucknuts can just change the rules and make up new rules as they go along. Sign me up. Maybe the rest of the world should get more like the guys who run the cryptos. Maybe the NYSE can just open whenever they feel like it, and they should reverse trades they don't think are fair. They should also charge whatever transaction fees the guy who runs their source control system thinks are fair on any given day. Of course that guy should discuss it on IRC. He should probably tell his friends he'll discuss the transaction fee issue on IRC, but not tell anyone else, to keep the trolls out. And he should usually end up doing something different from what he told people he would do on IRC. That'll give everybody a warm fuzzy feeling, and everybody can feel as good and positive about the NYSE as they do about bitcoin.

I really wanted this crypto stuff to work, and gave it more than a fair shake, but I've washed my hands of btc and everything built on its base because the code sucks, the implementation doesn't scale, and developers are trusted way too much.
Click to expand...
It really sounds like your problems are with the whimsical, fly-by-night altcoins. I'd call you smart for washing your hands of those.

Including bitcoin in that bunch isn't fair, and if you just watch all the money and talent moving into it (Seriously, check out last week's Coinsummit videos on youtube!) you'll see that it's only going to get more and more secure, hardended, and professional.
 
lukep said:
They won't though... Why not just 'require' them to all learn cryptography & Austrian economics while you're at it?

No national population would. Therefore, national coins are dead.
Click to expand...

Download an app or installing a toolbar is in their comfort zone ...crypto speak, not so much. Something as simple as a newspaper ad reading ....

Attention Kazakhstanians: Download this app to get your $100 in free kazcoins

... or whatever would go viral in a country in a matter of days. People want free stuff, and really don't mind the tech as long as they don't have to understand the nerd speak and mining process. That's exactly where bit/alt coins loses Joe Plumber.

You need miners.
General public isn't mining friendly.
Repackage mining into something more user friendly .. like an app for your cell.
#winning
 
erect said:
Download an app or installing a toolbar is in their comfort zone...
Click to expand...
Fair enough, if that gets them mining... However there is the third pillar (Merchant acceptance) that you're leaving out.

If no Kazaks are accepting Kazcoin at any local retail bizes, (which generally requires understanding and even POS hardware) then the coins only exist in Kazakhstanian long enough to be sold to an exchange.

You have to address all 3 pillars at once.
 
erect said:
All of this has an easy solution. Require citizens to mine their coins easily instead of giving them away (something about teaching a man to fish...). Make the "mining" process a simple mobile app or browser toolbar. Set the first few blocks for an individual to be easily mined ... after that, mining is from the general pool, therefore less lucrative. But as IMers, we know that doesn't matter. Once the software is installed, most won't uninstall and you've got a core group of miners from the starting gun. Blah, blah, mining power, blah blah, gigahashes, blah, blah.

Man I really wish some alt coins launches had some thinkers backing them.
Click to expand...

Lolz why not just give everyone a printing press to make dollars?
 
lukep said:
Fair enough, if that gets them mining... However there is the third pillar (Merchant acceptance) that you're leaving out.

If no Kazaks are accepting Kazcoin at any local retail bizes, (which generally requires understanding and even POS hardware) then the coins only exist in Kazakhstanian long enough to be sold to an exchange.

You have to address all 3 pillars at once.
Click to expand...


Isn't that the most important one?
 
lukep said:
You have to address all 3 pillars at once.
Click to expand...

Make the same fucking app have peer to peer transactional capabilities. Boom, suddenly_borat is pimping out his sister (and grandma in times of demand>supply) for 0.000001213 KazCoins per hot mouth blowjob.

If any of the altcoins are going to survive, let alone prosper, they need to be dumbed down to consumer level. Mobile apps is the quickest route to massive infiltration. You know, out in the real world where end user consumers actually live, not completely online like us fucks.

Consumer: "Fuck, I got a flat tire...better call AAA."

Towtruck driver: "Hey, you got DongCoins on your phone there, we can keep this off your insurance for say, <insert fractional number>."

Consumer: "OK".

Touch phones, NFC transaction occurs, both drive away happy.

Or flowers from a street market vendor. Or a back alley blowjob. Kajillions of of micro-transactions could take place from a mobile backed app.

Your third pillar needs critical mass for stability, you'd get there a lot quicker allowing peer to peer transactions than hoping for merchant acceptance/integration to propel it over that hump.
 
Grindstone said:
Make the same fucking app have peer to peer transactional capabilities. Boom, suddenly_borat is pimping out his sister (and grandma in times of demand>supply) for 0.000001213 KazCoins per hot mouth blowjob.
Click to expand...
Well, yes and no. The wallet capability was, I believe, assumed, so they already had that functionality in his original example... Ideally that should do the trick, but just because you give people the ability to easily trade their money, doesn't mean they'll all want to be entrepreneurs.

Existing retail business, bars, restaurants, jack shacks, need to start accepting their coin and word needs to get out that they do so, like how bitcoin is always in the news here.

Without that vital part, people knowing that they can spend it somewhere consistently, then it's hard to keep faith in that currency.


Grindstone said:
If any of the altcoins are going to survive, let alone prosper, they need to be dumbed down to consumer level. Mobile apps is the quickest route to massive infiltration. You know, out in the real world where end user consumers actually live, not completely online like us fucks.
Click to expand...
True dat. Same goes for bitcoin.


Grindstone said:
Your third pillar needs critical mass for stability, you'd get there a lot quicker allowing peer to peer transactions than hoping for merchant acceptance/integration to propel it over that hump.
Click to expand...
Bitcoin's got quite a lot of that P2P transactional capability though, (except on fucking iphones now that apple wants to do it's own wallet) and there's still more merchant acceptance to go before bitcoin can achieve that critical mass.

You're right overall, we've got to push for more P2P business and dumb down software more and more, but the 3rd pillar is definitely merchants showing the world that they've accepted it. There is just no faith that a coin will be worth something tomorrow without that.
 
More users holding coin
More Miners securing coin
More Merchants accepting coin
Click to expand...

This bit I'm uneasy with. I believe the more users spend coin in the bitcoin framework on real world goods and services the better. Each day when I read about new vendors online and high-street (mainly bars & cafes so far) accepting a decentralized crypto-currency the better. If vendors wish to accept Dogecoin - that's what they'll take (those mentalists have just managed to sponsor a Nascar ffs!), I have no complaints but don't just hold on to your bitcoin FFS! Spend it everywhere you can! Make use of it and encourage others to take it, use it and try to spend it everywhere you go.

edit: Ah - I've just realised what you meant by that. Not more users holding coin, but more users holding coin. Ok np.
Scratch the "uneasy with" bit. :)
 
lukep said:
Just yesterday, Coindesk pointed out that 8 or 10 other attempts have started up at nationalized cryptocurrency: CoinDesk Guide to the World's National Altcoins (Of course some could be not-so-legit.)
Click to expand...

Just like to point out that none of these "national coins" are genuine national coins.

The best quote I heard was from a Spaniard who pointed out that Spaincoin was like a Spaniard making InglaterraCoin and expecting Brits to adopt it.

All these coins are just new marketing memes thought up by pump 'n dumpers and it's actually amazing to me that investors thought a developer from Panama could impose a coin on Iceland and they'd adopt it!
 
microphone head said:
edit: Ah - I've just realised what you meant by that. Not more users holding coin, but more users holding coin. Ok np.
Click to expand...
It would probably be better to say more users "Believing in" a coin.

But spending alone doesn't do it... People holding/hoarding coin do a valuable service too... Without that coin being witheld from the exchanges, there would be a hell of a lot more selling than buying, and the price would be driven down to zero!

Any Austrian economist will tell you that saving or hoarding is required to keep a currency in good health. Spending is obviously important too for adoption. It takes both for a coin to be adopted, but once its' in everyone's hands, it'll only take saving to keep the price up and spending won't be as important.
 
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