Quote from: TPTB_need_war on May 19, 2015, 10:26:12 AM

Did I start the discussion of BTC -> altcoin avalance effect? Did I start the discussion on Monero here?

No, I did. And will continue to address the monumental defence erected by Z.B.:

Original theses:

Quote from: rpietila on May 18, 2015, 10:26:03 AM

- The exit requires as little as 10% selling their coins in the previous majority ledger, which effects a huge decrease in the value of the remaining coins there due to the negative wealth effect, while increasing the value of their new ledger by approximately the equivalent amount of positive wealth effect. Thus the small minority of the "rogues" can enrich themselves in the expense of the majority by so doing, creating a new majority ledger in terms of marketcap.

Quote from: Zangelbert Bingledack on May 18, 2015, 01:12:55 PM

If your main point is how few "rogues" (~10%) it takes to switch to a new majority ledger, I think you may be neglecting the arbitrage opportunities that would create. Arbitrage seems to undo the cascade effect of the small exchange float, with arbitrageurs profiting from that market inefficiency.

The arbitrage works if enough of the existing holders of the new chain truly believe in the old chain, and are in the new chain only to make money. I don't chastise anyone for thinking this way as there is hardly anyone in the myriads of other alts who believes in their alt more than in BTC, so it's convenient to assume that this is the case universally.

However, the premise outlines the case that there is a split in the opinion how the main chain should continue, and both sides perceive that the other side's opinion spells doom for the experiment. Thus there is no thinking or incentive to come back - the same way how Bitcoin has managed to gain and preserve a formidable marketcap. It has taken a lot of brunt, but I for instance, don't - and cannot - go back to fiat, because I perceive that as a destructive move regarding my capital. Everyone reading this has the same thinking, so now I urge you to consider the situation where you honestly believe that your solution preserves Bitcoin, and the other camp's one turns it into fiat.

If the new chain starts out empty, there is no one to sell. Everyone who exits the old chain, obtains some value in the new chain, and the wealth effect as calculated from the actual net new capital flows, is 4x-10x. So the new chain does generate a lot of wealth effect (note that the wealth effect multiplier is calculated from the existing data, which have totally allowed the portfolio balancing back to the original chain, eg. BTC/USD rate increase in Mt.Gox in 2010 did allow conversion back to USD, yet the wealth effect was 10x - this is based on many factors that are outside the scope of this post but I have researched them).

If we go closer to the situation in the "protocol split scenario", we can take Crypto Kingdom and CKG as an example. It is not a "push" asset, it is a "pull" asset ("push" is a refuge out from the unwanted chain (example: gold), "pull" is a wanted chain (cars), and both Bitcoin and Monero are a mixture of escapist and going-forward tendencies). CK has only absorbed about $50k of value from the outside world, and its market cap is persistently in the order of $500k. This value has come from somewhere, either it is newly generated digital wealth because a new interesting thing has become available (new digital wealth is generated at a very high rate worldwide!) or some other chains have suffered a loss of interest, and of valuation. Until now the effect is of course not noticeable from the volatility in the other chains, as we only have 100 characters and a very meager marketcap.

But for the sake of getting the point, you just have to envision a scenario where the new chain is either perceived as significantly more desirable than the old, or the old chain as doomed, by a minority of the people originally holding the wealth in the old chain but not going back due to the reasons, and the effect is just as described - negative wealth effect in the old chain and positive in the new.

Don't let the current paradigm of altcoins deceive your thinking concerning a perceived "life-or-death" situation.

ADD: The coming (or why not any of the existing ones in history) bond market collapse (or cash hyperinflation, or altcoin-biting-the-dust) comes to mind. We all know that bonds are unrepayable. Yet they represent a large share of "wealth" of for example pension funds. When the collapse is triggered, the first ones exit, causing a large negative wealth effect to the rest. There is no wish for arbitrage after the tipping point. The supermajority is left holding a bag worth nothing in the end.

I have theoretized that the actual event horizon for BTC's demise is when any competitor gains as little as 20% market cap share without gimmicks. In the BTC-dominant environment that is a gargantuan accomplishment, and if it is realized against all odds, I am sure you all see the writing on the wall, (and if not, someone else does - as the majority's opinion is not relevant, everyone stands for himself). The power of minority has never been as prominent.

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Insofar as the 90% are mostly strong hands,* not price chasers, they will react by bringing their portfolios back in line. That means they will do the opposite to what the 10% are doing, but with 9x the force: sell their allocations in the minority ledger, now for a giant premium, and buy more BTC at these cheap prices. I believe this negates the "small float" issues of having only a tiny amount of each coin available on exchange at any one time (not to mention that when prices move drastically a lot of coins [and fiat] come out of hiding).

Now you are talking about the spinoff, my whole agenda is to bring to your attention the higher-than-perceived chance of a new chain abruptly taking ground in the scenario outlined. The reason why you have not perceived the chance as high as it is, is the lack of understanding concerning the wealth effect, and the resultant need of no supermajority but only a small minority deciding to convincingly move, to achieve unwanted consequences to the majority.

In short, as is the case with CK, the ones not migrating there do not have holdings there, and do not have voice, vote or exit available in there, and we can therefore happily hold our CKG "coins" which are now 8x more valuable than 6 months ago, perhaps the best performance in cryptoland.

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And any overshoot is yet a further opportunity for arbitrage to further entrench the majority ledger investors who have the strongest hands.

After taking 2 days to think whether this is correct, and if not, how I would refute it, I have reached the conclusion that I don't believe you are correct, and have given anecdotal evidence supporting my viewpoint. Yet I don't hold a great confidence that many would only because of them, change their thinking on the subject. It is a deep matter and my extensive (if anything in cryptosphere can be classified as such Wink

) research has pointed me to think the way I do, and being familiar with the concepts and data is almost a prerequisite for understanding it.