A few replies to some comments from earlier:
@eric: +1 to the general concept of consensus system where your vote is not tied to directly a useless-number-crunch POW scheme.
POW is far from “useless” – it’s what allows Bitcoin to work. POW enables decentralized issuance of the bitcoin currency, and prevents the “nothing at stake” attacks, “long-range” attacks, and “grinding” attacks that POS is vulnerable to.
@eric: Silicon-melting POWs are both carbon/entropy-sad, but IMO more worryingly it seems we’ve now demonstrated that existing capital can be brought to bear to buy power in POW schemes, which is not the decentralizing utopia most of us were dreaming of.
A couple of points to consider here:
- Miners actually do not have that much power. Economic full nodes have at least as much if not more power than miners. Economic nodes accept bitcoin in exchange for “real world” value in goods and services. Without them, miners wouldn’t be able to pay the bills. Miners therefore follow the economic majority when deciding what full node software to run.
- The alternative to “one dollar = one vote” (POS) or “one hash = one vote” (POW) is “one person = one vote” (democracy). It turns out that democracies eventually devolve into oligarchies (at least that’s how things have turned out in the U.S. http://www.bbc.com/news/blogs-echochambers-27074746). It’s quite possible that as long as money exists, people/groups with lots of money will always find a way to rig the system in their favor – they’ll buy candidates, buy votes, lobby for preferential legislation that favors their interests, etc. One person = one vote also requires a robust identity system to be built into the consensus mechanism, which is antithetical to Bitcoin’s decentralized nature. Who would be in charge of verifying identities and letting people into the system or kicking them out? That would require a central authority of some type. So not only would a democratic cryptocurrency not work in practice, it would go against the whole idea of cryptocurrency in the first place.
@eric: I mean, they’re an answer, but it’s debatable whether they’re a good one that results in any better incentives than any other answer.
Bitcoin has the best incentives of any cryptocurrency thus far, by far. Miner incentives are aligned to support the long term health of the network to protect, at the very least, their investment in ASIC mining hardware, and, at most, the value of their hardware plus all of the bitcoins they’ve saved from mining. Since ASICs are specialized hardware and are useless for any application that isn’t SHA-256 hashing (unlike GPUs or CPUs which can be used for many applications), miners wouldn’t be able sell the ASICs if Bitcoin goes bust. So they have an incentive to protect the value of that hardware for as long as possible, which means protecting the value of Bitcoin. As described earlier, POW isn’t vulnerable to many of the attacks that POS is vulnerable to, so it is a very robust form of consensus that is likely to continue working for as long as the block reward is valuable enough to support all of the SHA-256 hashpower that’s out there. All other consensus algorithms either aren’t secure by design or aren’t decentralized by design.
@olivier: There are 700 crypto-currencies: http://coinmarketcap.com/all/views/all/ The real question is: why ?
pumpers proponents that I’ve spoken to give two main reasons, you decide which is more valid:
- “Experimentation” (because apparently Testnets aren’t good enough?)
- Pump n Dump. https://twitter.com/hrdng/status/737018222411665409
There’s also a third reason that is less and less valid every day, but is probably actually the most legitimate reason for now:
3. Filling gaps in Bitcoin’s functionality i.e. the altcoin implements some feature that Bitcoin does not support that people want to use today. This reason is becoming less valid due to the ways that Bitcoin as a system can evolve using e.g. metalayers (http://counterparty.io/news/evmparty-progress-update/) and sidechains (https://www.blockstream.com/sidechains.pdf)
In the end, I believe there will be many blockchains but only one cryptocurrency of any significance (https://lightco.in/2016/02/15/many-blockchains/).