Quote from: toknormal on February 07, 2015, 03:02:14 AM

It is not the job of "base money" to be stable against other currencies. Base monet doesn't give a f*ck what it's value is or even whether it has any - its job is to function as a monetary medium of high integrity which means resistance to counterfeit, fungibility and tranrsmittability.

In a physical market, many things fulfill that role. In an electronic platform only cryptocurrencies can fulfill that role - in other words they can be transmitted on an electronic platform without the need for a counterparty (bank).

There is a fundamental drawback of open source cryptocurrencies: anyone can copy the code and make a new one. So, Bitcoin is finite, but cryptocurrency is infinite. So why do bitcoins trade in the $200s but all the copies, the alts, trade for much less, usually in the cents?

The reason is Bitcoin's first mover status which has allowed it to get a head-start, the network effect which has kept a head of steam behind it for 6 years. People use Bitcoin because other people use it, and the mining power builds up as the ecosystem grows. It is a positive feedback loop. People do not need lots of cryptocurrencies. They only need one. Just as multiple different fiat currencies are a pain for an international traveller.

So, what can go wrong?

If Bitcoin were to hit some limit, I dunno what, just maybe there is a limit in the code which people might start writing threads about on bct, but anyway, if Bitcoin hit some limit and couldn't scale anymore, then the network effect is arrested. Bitcoin, just being software that can be copied does not have the privilege of gold which is a rare physical element. Some other version of Bitcoin, an existing alt perhaps, which can scale will build up its own network effect from all the users who can't use Bitcoin. If Bitcoin found some crazy limit where only 1% of 1% of the world's population could use it, then it would become obsolete. It would be a footnote in the history books written about the alt which eventually succeeded as the new electronic gold standard.