Innovation comes from the community, each of us are just wheels in an incomprehensible machine.  domob mentioned here that he believes this idea has been around for some time: https://bt.irlbtc.com/view/563925.msg6151659#msg6151659  I independently "invented" this technique only after being inspired by the insights in Daniel's paper on the coming demise of alt coins.  So where do innovations truly come from?

The purpose of this thread is to discuss the strengths and weaknesses of this bootstrap distribution technique.  



I think perhaps you are mis-understanding the proposed technique.  If you believe 1-computer/1-vote and have a technical idea to implement this, then you could launch your alt coin with an initial pre-mine based on the bitcoin blockchain distribution and immediately have a large potential user base that already has keys to coins!  Since your coin will obviously trade at a sharp discount to bitcoin, you may have the ability to purchase 10,000 of your alt-coins for 1 bitcoin.  If you are correct and the community agrees that your alt-coin is superior, then the exchange rate of your coin will increase thereby rewarding you for your contribution.  

Bitcoin's distribution represents an empirical estimate of the most efficient distribution of coins in a cryptocurrency.  My premise is that by using this distribution to bootstrap an alt coin, this blockchain-based coin will be superior to most alternatives (IPOs, lottery, etc).  Only time will tell whether this premise is true or false.  

An interesting property of this technique is that the average bitcoin holder can simply do nothing, and they will automatically piggyback any innovations in cryptocurrency.  Yet innovators that make real contributions will be rewarded by natural market mechanisms.  

Remember, if the use of cryptocurrency continues to grow, everyone here today will be rewarded for the contributions they made and the risks they took by holding bitcoin.  There's a saying…something about a small piece of a large and growing pie being preferable…

What I understand from this is you get the past benifit of Bitcoin distribution and user base; You get the future benifit of giving the whole crypto coin community an opportunity to innovate with potential participation from the whole Bitcoin community; New comers get an opportunity to mine coins leveraging the upside innovation in alts. You need not reword Bitcoin holders disproportionately to early miners by setting a different cap.

This address the exponential growth in alt coins copy improve and repeat, while eliminating scam coins and encouraging innovation.

Take quarkcoin say I think it works better Bitcoin in every way, I invest in it believing the market will use the best coin. Then someone comes along and improves it. Now my quark collapse and market innovators are fragmented and only the early adopters of quark2 benifit. 

Now if the team of quarkcoin include quark2 user base and quarkcoin in quark3 the market will benifit by maximizing cooperation in innovation. Choosing the best risk is lower given the exponential innovation curve we are about to see in crypto coins. Net benefits go to adopters of crypto coins and the innovators not the scam coins.

Isn't the real purpose of most if not all alt-coins to bypass the distribution of Bitcoin?  Didn't on the bus in time, let's make another bus. While i can sort of see the value to Bitcoin of what is being suggested, I'm not sure why i'd want to bootstrap penigcoin in this way.

I have some low IQ questions: The new alt-coins are given away at first. You can claim as many of them as you want, up to the number of bitcoins you have. At the beginning, the alt-coin has almost zero value.

If the alt-coin gains users, you profit by trading the alt-coin for Bitcoin? And/or a different alt-coin?

What incentive would someone have to create an alt-coin, if they have no competitive advantage in getting them (Apart from their Bitcoin holdings)? Or in other words, why would someone go to all the work of creating an alt-coin rather than wait for someone else to do it and then claim the alt-coin?

Thanks for your comments Ragnarly.


You are automatically allotted the same % of the alt coin pre-mine as your % ownership of bitcoin, at the time of nucleus formation.  No one but the controller of the bitcoin private keys can claim the pre-mine.  Even if you do nothing, you still remain a "holder" by default.  



Let's say the alt-coin launches and is trading at 0.01% of the bitcoin market cap.  Most people will just do nothing.  If the alt ever takes off, these people sleep soundly knowing that they own the same % in this new alt as they do in bitcoin.  

Now some people might say: "wow, NxT is trading at 0.4% of the bitcoin market cap, and this new alt is better because it has a more efficient coin distribution and a broader potential user base.  I think I'll buy some more of this alt coin."

Others will say: "this is stupid.  I'll just dump all this "free money" and then gamble my 0.1 mBTC at just-dice.com"

If more people decide to buy, the price will rise.  If more people decide to sell, the price will fall.  



It will be difficult to profit from what are known as "scam coins" and "pump and dumps," however, if you have a genuine innovation that is actually useful you will be rewarded by natural market mechanisms.

When your coin launches, it may trade at 0.01% of the bitcoin market cap.  You can buy 10,000 of your alt coins for 1 BTC.  If you continue to develop your alt, and if people begin to agree that it is useful, your 10,000 alt coins will be worth more than 1 BTC (possibly a lot more).

This proposed distribution method allows bitcoin holders to piggyback innovations in cryptocurrency, while still rewarding alt-coin developers for genuine innovation.  

Wouldn't this be something similar to saying hey I want to launch a new app on the Apple App store.  Since Apple already has stock, I'm going to issue ownership of this new app to all of the people who own Apple stock (assume this is technically possible).

As a developer I have no incentive to launch this unless I own a lot of Apple stock.  Launching an alt-coin where you can claim more of the coins than the distribution of bitcoin is a huge advantage especially if you build something that is worth a lot and not a scam.

Agree.  That was the point I was trying to communicate.  



Agree.  "Allow" was a poor word choice.  



Disagree.

This has me more confident in bitcoin then ever.  It has convinced me that "inflation from alt-coin proliferation" is a red herring.  Any promising advance in cryptocurrency will absorbed by bitcoin in a non-inflationary way.  A clone launched from bitcoin's blockchain will win (because it represents the most efficient distribution) without causing any inflation.  (I personally also believe bitcoin is ideal exactly as it is.)

This will reduce the amount of alts to ones that have some genuine potential (in such a way that bitcoin holders are automatically stakeholders), and direct investment away from speculative alt coins and into productive advances to bitcoin.  
  

Thanks cyperdoc.  I borrowed this term from Daniel's essay on the coming demise of alt coins, but agree that it is unclear.  


Here is what I meant by "eaten":

Take NxT for instance.  It is trading at near 0.4% of bitcoin's market cap, has a perceived legitimacy problem due to the PoS pre-mine, and has been losing market share since launch.  But let's imagine that the experiment eventually shows promise: for some reason PoS proves to be useful and everyone agrees.  

Someone can now modify the source code for NxT in a trivial way using the technique I proposed in the OP and relaunch the coin.  Since the NxT clone coins are distributed according to the bitcoin blockchain, this clone automatically has a greater user base than the original.  Bitcoin holders will retain the same slice of the cryptocurrency pie, but automatically be piggybacked to the new network.  There is no inflation as everyone retains the same slice of the total pie.  The bitcoin blockchain has now "eaten" the alt-coin technology. 

I would go as far as to say that it is risky for alt-coin developers to not use the method proposed in the OP if they actually believe their coin holds long term prospects.  If they bootstrap, then they will be rewarded if their coin is successful; on the other hand, if they IPO/lottery/etc they will ironically lose wealth the more successful their innovation becomes (as any serious value would emerge in the bitcoin-blockchain-based clone chain).  

that's the whole point.  it takes a hammer to the scamcoins and allows only true innovative altcoins to prosper.

AFAICS first two points apply also to 2way peg sidechains.  


I suppose we have to wait for the "math" behind Back/Hill proposal to judge it properly.


it's a possibility  


also 5 and 6 seems to apply to Back/Hill's design


me too.