Capital inclusion as an alternative to community buy in and developer remuneration.

haasboerhaasboer Member Posts: 8
I've mentioned this before but I want to keep beating this drum a bit.

I honestly believe that network effects will cause a dominant currency to have a vastly higher market cap than any other. Ethereum looks like the most believable challenger to Bitcoin so far. If Ethereum works as advertised it will rapidly erode Bitcoin's network as it has uses well beyond Bitcoin's.
This create a problem. Most of the community will have their funds devalued basically completely as this happens. From a loyalty perspective this is important because that community build the crypto-currency economy. From a self interest perspective it is important because devaluing (even if done completely unintentionally) bitcoin will reduce the available investment and entrepreneurial interest in furthering Ethereum based business.
Another problem is the premine. No-one likes it but the core devs seem to think they can pull it off. I fully support their remuneration for building something like Ethereum, but from even a self interest perspective the pre-mine is a bad idea. Ethereum can easily be forked into a clean blockchain and once it becomes clear that it will deliver there will be believable threats to do this.

So I propose the following:
*Ethereum launches with prefunded accounts corresponding to all Bitcoin accounts. Ideally including prefunds (with weight adjusted balances) for Namecoin because it is the only really useful altcoin and Litecoin because of its mining community.
*Ether is premined for the developers. This will still be somewhat unpopular, but if the proportions are kept reasonable relative to the total money supply, the community will accept it.

The major benefits of this:
*Bitcoiners, Namecoiners and Litecoiners now have skin in the game. They want to see Ethereum succeed.
*Bitcoiners are not left with the unpleasant option of selling to an uniformed noob that which is sinking, or going down with the ship.
*The crypto community has capital after Bitcoin dies (assuming Ethereum overtakes it)
*Because they have capital and skin in the game, their incentives to see Ethereum succeed can be matched be funded by their ether balances.

Comments

  • mode80mode80 Member Posts: 64 ✭✭
    Anyone holding bitcoin will like this idea. But leaving that aside for a moment, I think this makes a lot of sense.

    Has this been seriously considered?
  • JasperJasper Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
    Also at http://www.reddit.com/r/ethereum/comments/20smpr/refloating_the_capital_inclusion_idea/

    Can read there how i dont think it solves the problem of coins eventually dying at all.
  • haasboerhaasboer Member Posts: 8
    The idea is not to prevent the death of Bitcoin. The idea is to involve the existing community at very little risk to either the Ethereum developers or the Bitcoin community.
  • davidpbrowndavidpbrown London, UKMember Posts: 15
    edited March 2014
    If you distribute like that and 80% of holders then do nothing, then how would that not be a liability? If 20% are engaged users and 40% of the remainder sell, then can that work?

    Perhaps you might look to do two step distribution and callback; so, include a time limit and if a holder doesn't acknowledge their new coin in some way within ~?three months, then collapse the currency to only those who have expressed interest. That idea though is rather hostage to your communicating to everyone, otherwise you'd have people sore because they lost out having not heard about it.

    I think then this sounds like an interesting way of distributing water; that is, coins that are not meant to hold value but that supports the action that is valuable. So, Ripple perhaps would have done better going this route but I don't see it working well for any coin that is to be valuable. Even without value, I can't see how you compensate for the risk of those who are gifted and not interested just dumping their coins in an unhelpful way.


    No; I still think it's better that those who are interested and who are able, buy in. That action of putting skin in the game, is not the same as being gifted something for nothing. We value what we have worked for not what is for free. I've suggested before you could gift to those already engaged and contributing to Ethereum.. members of forum and NEM like sign up on BCTalk etc.. those enaged users will value what they are given.

    Those who will use Ethereum and be valuable to Ethereum in the long term, may not be the same as those who hold BTC now or those who are 'just' miners of LTC... we all know LongTrollCoin holders are looking for a slow way to make profit and so desperate they will grab at any straw ..but this isn't it. ;)
  • JasperJasper Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
    @reignbeau: yes, but you could do something like make 'snapshotted bitcoins' worth 1/10 the amount of initially bought ethers. I dont particularly think it is a good idea.

    Another problem with this idea is web wallets/exchanges; people do not necessarily have their private keys, and web wallets may not all implement ethereum. If they're particularly unreasonable, they may even consider the ethers to be their own. I dont know exactly how exchanges operate, but i think they may not even have a wallet for each person.

    Burn-over is better imo. If there is something that stakes a bold claim on 'Bitcoin 2.0', that is! Dont really think it is wise at this point though.
  • maidenlakemaidenlake Member Posts: 44 ✭✭
    I agree with Jasper. If BTC value is threatened, then with proof-of-burn at least the reduction in the number of BTC would help it hold its value. Also, this would distribute coins to miners who are definitely involved in the community.
  • JasperJasper Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
    @maidenlake yes, if you can turn 1BTC to N ethers, the value of 1BTC ≥ the value of N ethers. But imo the idea is most useful to save the value of bitcoin holders, not to save bitcoin itself, which presumably has a good reason for devaluating, and the newer cryptocurrency is a better target.

    You can make that N any function of time. For instance, over time N(t)=N(0)⋅exp(-t/T). If bitcoin cannot hold up its value above that conversion, everyone would switch, otherwise the value of their coins will devaluate by that well known function of time.

    Mind that full nodes at least need to be aware both the coin itself and bitcoin, so it makes them cost more harddisk/memory/cpu. There may be ways to diminish that.. Like an intermediate cryptocurrency that looks at itself and bitcoin, only taking notes of burned bitcoins, and the end-cryptocurrency only looks at itself and the intermediate one.(which it accepts only when it is burried deeply enough) Not sure about that though.
  • maidenlakemaidenlake Member Posts: 44 ✭✭
    Over my head but interesting, Jasper.
  • haasboerhaasboer Member Posts: 8
    @Jasper can you clear up if the coins will be burned or held? As I have it they will be held in a multisig?
  • JasperJasper Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
    Note that i was talking hypothetically in this thread.

    Also note none of 'capital inclusion', burn-over, or IPO are entirely mutually exclusive! Although they do affect the economics of each other. Of course

    For the ethereum IPO the bitcoins are used to pay for ethereum development and related things. It doesnt seem sure yet how it will be held, but on ethereums side it will likely be some kind of DAO.

    I reckon for initial creation of a coin, it does not make sense to burn at all, it just drains money from the community that is trying to make the coin. It makes sense for further along once the coin is launched an is already gaining some popularity, and there is another coin that is showing weaknesses/problems, or it would simply be better to consolidate cryptocurrencies into fewer ones.
  • maidenlakemaidenlake Member Posts: 44 ✭✭
    @Jasper Sorry if you have covered this in another thread, but how would you propose to consolidate cryptocurrencies, say bitcoin and ethereum? I realize that you would most likely be speaking hypothetically again.
  • JasperJasper Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
    It seems that peoples heads arent toward getting different approaches to merge at this point. Probably that is fine.

    One way to try 'take over' bitcoin with a new protocol is to copying all the bitcoin balances of a fork is very difficult. If there is a lot of division, i think the value might be very negatively affected, and otherwise one of the two is probably simply not worth much. One can slowly increase in price, but the money on bitcoin will move, and it wont serve to really protect people from transition between the protocols much. Also, it kindah forces the issue for everyone, to try get a massive switch.

    Burn-over is better in this regard, everyone can choose to change, and the supplies of the two coins change correspondingly too, so it shouldnt affect prices too much. As i said above, you can have different exchange rates for burn programmed in to change over time with some function. So if you want NewCoins for Bitcoins you can either buy them or burn the bitcoins. Whichever gives you the most NewCoins is preferred, so the exchange rate via burn sets an upper limit in terms of price in bitcoin. Early adoption could be promoted by a bitcoin simply yielding more NewCoins early on.

    Could also consider more complicated schemes, like the conversion rate being dependent on the amount of burned coins. If fewer are burned, the amount of NewCoins you get for them could go up to try maintain some particular rate. The price still has that upper limit, so you would basically have to be confident that people will continue to adopt if you want to change.. (This is just an arbitrary example..)

    Another thing is that for burn-over a full node basically needs a copy of the older coins' blockchain, after all, it creates the new coins by watching proof of destruction of the old ones. I suppose with bitcoin that right now isnt that bad. But Bitcoin does need all the blocks. Basically in Bitcoin you have bits of data with amounts on them and you put a riddle on there that allows use. When you send them Bob, you put a riddle based off Bobs public key, which Bob can use to send the bitcoins further on. Bob will have to use that data in the block to use those bitcoins.

    In Ethereum, instead you write a little message 'i send this much to Bob' and put it in the blockchain, and the state of Ethereum just updates, changing how much Bob has. Bob can put similar messages in at any time, without referring to particular block. Other than for convincing new people that the current state indeed comes from the genesis, blocks can essentially eventually be thrown away.

    If the size of the old blockchain is somehow problematic,(which doesnt seem like it is going to happen in the near future) it might be possible to make an intermediary coin that serves only to act as the second type of blockchain mechanism, without the references to older blocks. The intermediate then burns over to the final one.
  • maidenlakemaidenlake Member Posts: 44 ✭✭
    @Jasper Thank you for this extensive answer. Sorry I accidentally did not thank you for it at the time.
  • vaXvaX Austin, TXMember Posts: 78 ✭✭✭
    @jasper absolutely love your cognitive capacities!
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