Quote from: Kleptoid on November 29, 2013, 07:31:38 PM

Quote from: Bitcopia on November 29, 2013, 06:45:24 PM

Quote from: Kleptoid on November 29, 2013, 06:23:50 PM

Yes, competition is good.
No, alts are inflationary.

Please explain...

I'll have to be brief, I'm in the middle of painting my bedroom, apologies. If you require further explanation I'll post more later or tomorrow....

Most people agree that cryptocurrencies are a new asset class, and bitcoin is the first to become established. While bitcoin is technically inflationary until the last coin is mined, this is offset by the increase in it's adoption/capitalisation. Once the last coin is mined there will be a fixed amount of bitcoins, and bitcoin inflation will stop, no more bitcoins can be created. The growth of altcoins increases the money supply within the crypto asset class, and therefore leads to crypto-inflation. The more the crypto-coins of any kind that are created, the less each individual coin of any kind is worth, it represents a smaller fraction of the total wealth in it's asset class. For me, and for many believers in sound money, the fixed supply of bitcoins is one of the (many) key advantages bitcoin has over the farce that fiat has become. Alt-coins are a threat to this.

You see?

I find this idea that alts are inflationary a flawed concept. You people do realize that BTC and LTC are digitally more different than the digital version of the USD and the EUR (which makes up most of their supply and is thus the largest factor influencing their exchange rate), right? The only way computers can differentiate between USD and EUR is that each of their digital coins has DIFFERENT LETTERS to identify them. That's about the only difference between the digital version of the USD and the EUR. Yet, most would agree that it's ludicrous to say that the EUR inflates the supply of the USD, even though we can say that these currencies fall in the same asset class (government issued currency).

Fact of the matter is that even slight differences such as a name can make coins lose fungibility. And it's this aspect that determines if a coin can inflate the supply. New coins must be 100% FUNGIBLE with the old coins in order for the new coins to inflate the old supply. If these coins are seen as different, they will be essentially seen as alternates and will achieve their own exchange rate with their own unique behaviour. Perception is everything.

Remember that price inflation results from how we PERCEIVE the scarcity of the money supply and based on that perception do we decide if the coin is valuable or not. People tend to forget that money is all in the mind. It's entirely a psychological concept. SOME people believe that altcoins inflate the supply. If a lot of people believed this, altcoins would indeed be inflationary, because belief is what ultimately decides how we value scarcity. But the average person would disregard any digital currency that's not called Bitcoin.

Average person: "Litecoin? What the hell is that? No, I don't know that coin. I don't want it. I rather stay with that thingy that's been all over the news."

Different perceptions lead to essentially the coins being seen as two seperate currencies (thus losing fungibility) and these coins achieving vastly different exchange rates and having diverging supply and demand. If there exists only 10 BTC in existence (with no monetary inflation) and someone comes along with 10 000 LTC that has yearly inflation of 2%. The average person would still see BTC as being scarce, because they BELIEVE the coins to be different. Try asking the average person what LTC is. If they don't even know what it is, how can they ever perceive LTC increasing BTC's supply thus creating the PERCEPTION of reduced scarcity of BTC? It's a ridiculous idea.