I agree largely with the article, though I still feel altcoins
could play a valuable role in the future.
However, once the dumb masses are in the main coin, it will become much more difficult to compete with that coin. Because the dumb masses don't care about decentralization, anonymity, and the benefit of mining on PCs can be offset with palm-scanning ATM machines for Bitcoin (the dumb masses will blissfully scan their palm). We are not yet there, but the window of opportunity is rapidly closing.
I think this underlines the true magnitude of the network effect (as discussed in the article). While most of the original bit-pilgrims were drawn by the decentralised nature of bitcoin, the anonymity it promised (including those with less-than-legal purposes), and idealistic/geeky aspects of its cryptography and its economics, many of the next wave were simply speculators marveling at rapidly rising graphs and sensing an opportunity. Since then, the "third wave" of bitcoin users have given it a try because they've seen it advertised, found it a convenient way of storing wealth and making online payments. Even if a new alt-coin emerged that was
vastly superior to bitcoin in EVERY SINGLE ONE of its original goals, joe-public, investors and many service providers would probably feel no massive urge to switch.
Consider supercoin which has some radically better features than Bitcoin. Because Bitcoin has over $1bn riding on its success there is a significant investment by all the people who use it, own it, mine it, and otherwise profit from the ecosystem. So there would be huge incentive for Bitcoin dev to clone the software changes which make supercoin so super, even if it means a hard fork. Such a hard fork would be tolerated as all bitcoiners want to protect their own interests. As soon as these features are released in a new bitcoin version, then supercoin becomes irrelevant.
In this case, supercoin was
not irrelevant, because it galvanised an otherwise reluctant bitcoin to innovate. Anyone who believes altcoins (in their current form) could rival or even supercede bitcoin is deluded. But (semi) thriving altcoin economies provide real-world stress testing for new ideas (more so than testnet) that could be used to improve bitcoin. I think if altcoins are to succeed (not necessarily match bitcoin, but run alongside as a significant alternative economy trading with bitcoin) then it will take one of four forms:
1. One or more of the current altcoins (or even brand new ones), instead of being minor twists on bitcoin, need to correlate several good ideas (and good developers) into ONE coin and aim to constantly innovate in ways that bitcoin (or at least the Foundation) are scared to, in order to attract enough "purists" over to make it viable.
2. A payment system (not necessarily a single currency) that allows decentralised, anonymous, CHEAP sending of fiat (or fiat-linked) "currency". Something like Ripple (which from my reading appears to be a lot more decentralised than they make out to be, perhaps to attract venture capitalists' investments) - it would be possible now the code is open source to build clients designed not to link addresses, tumblers would be possible etc, and it if the network grew big enough there would be no need to trust the company's own "validators" - I haven't however used the system so can't say much in detail about it. Something else that could take off is Open Transactions.
3. Something built as an "extension" to Bitcoin. #2 above could be achieved with something like "Coloured Coins" or "MasterCoin" built ON-TOP of the bitcoin architecture. MasterCoin, as well as NXT, plan on using an "exodus block" for coins moved over from BTC instead of a genesis block, utilising the ubiquity of bitcoin rather than competing against it, allowing people to trade out of bitcoin when they require special features, then trading back in again.
4. Something COMPLETELY different.