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Do Altcoins Bastardise Blockchain?

Do Altcoins Bastardise Blockchain?
Written by Jon Gulson @jongulson
Posted 13 February 2018
Beneath the headlines around cryptocurrency lay ferocious debates driving decentralised system development. Many sides contain fierce intellect; asserting and trenchantly defending their corner.

This can sometimes be confusing and off putting to new comers and existing adherents alike: in the last six months, the term blockchain has become increasingly common to the extent actual meaning is in danger of being lost behind dollar signs – giving rise to charges of cryptocurrency bubbles, fraud and scams.

Before we look at clarifying the arguments, here is a brief definition of blockchain.

Blockchain Explained

Blockchain is the technology behind bitcoin which evolved as a peer to peer digital ledger without central authority: a chain of blocks where each new block is built as a function of the last, so all contained transactions (on the chain) become fraud resistant and trustless (without the risk of third party failure).

Bitcoin was therefore the first cryptocurrency and new kind of money free from banks, incentivising participants of the network.

Blockchain Explained

Since bitcoin’s inception, thousands of alt coins (alternative coins, or coins that aren’t bitcoin) and ICO’s (Initial Coin Offerings, each with their own token) have come into life. Most contain some sort of value proposition, others have been created to either be deliberately pointless or possibly with more nefarious motives (due to the unregulated nature of cryptocurrency).

The Case for Altcoins and ICO Tokens

•  The best altcoins contain a benefit derived from perceived shortcomings of bitcoin – selling themselves on quicker transaction times, cheaper transaction fees, improved privacy, less mining centralisation and the ability to run smart contracts or other functionality.

•  Bitcoin has proved itself a store of value, but altcoins strive to be the first accepted as cash (bitcoin’s original aim).

•  Decision making and getting things done amongst currencies with known development teams can expedite progress in comparison to currencies without leadership premium.

•  Altcoins and ICO tokens introduce greater liquidity into the cryptocurrency markets and can offer the kind of short to medium term multiple (and life changing) gains which are difficult to find anywhere else.

•  As a consequence, as more dollars pore into cryptocurrency the more blockchain technology and associated coins are considered to have ‘intrinsic value’ (through a translation of money prices).

•  Altcoins and ICO tokens allow investors to participate and build asset bases without the fees involved in traditional markets; avoiding the need to deal with expensive stockbrokers, advisors or Venture Capitalists.

•  Some altcoins and ICO’s are deliberately less energy intensive than bitcoin – which is seen by some as either wasteful or environmentally harmful. These coins or tokens are usually proof of stake, pre-mined or adopt a differing approach (to bitcoin’s proof of work) at maintaining their ledger or technology.

The Case Against Altcoins and ICO Tokens (aka Bitcoin Maximum)

•  The cost to attack bitcoin is the point of its proof of work algorithm which guarantees its security – the energy required being the proof of work.

•  Proof of Stake blockchains are self-defeating because they lower the cost of attack by admitting decentralisation is unimportant.

•  Mining centralisation does not compromise bitcoin as decentralisation is only essential to bitcoin in relation to timestamping: the energy required to perform a network attack is still prohibitively enormous irrespective of mining demographic.

•  The best developers are attracted to bitcoin because they believe in the original vision and careful step by step development in achieving this; the isolation of features and risks layer by layer and in the absence of creators to maintain its trustlessness.

•  As a result, bitcoin may have its own ICO type boom as it comes to fruition in the form of layers on top of bitcoin, which may or may not resolve to blockchains; allowing users to build things for example in the form of smart contracts or other innovations.

•  Many altcoins are bitcoin forks because they don’t have the skill, funding or development talent necessary to build these features themselves.

•  Whilst altcoins and tokens introduce liquidity into cryptocurrency, this can disappear as easily as it came. In comparison, bitcoin has built a strong network of participants who run the protocol.

Concluding; this is a general summary of arguments you may find around bitcoin, altcoins and other crypto tokens. Of course there are still many sceptics of blockchain full stop - or of the idea that blockchain isn’t about the money, it is about the technology.

This will continue until bitcoin or another blockchain based currency becomes intuitive: meaning easy to understand as useful or possessing instantly translatable value to an overwhelming number of minds, pockets and wallets.
Written by Jon Gulson @jongulson
Posted 13 February 2018
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