Can someone please rebut this, or at least parts of it? It keeps getting mentioned in IRC and trollboxes, apparently smart people are believing it and I can't find any counterproof to point to.
https://en.bitcoin.it/wiki/Altcoin#Application_Built_on_top_Of_CryptocurrencyBitcoin is a lot like HTTP. It is an application layer protocol and tools can be built on it (like websites can be built on HTTP). There is a class of cryptocurrencies that promise features like casino websites and exchanges and anonymity protocols to be built on top of them.
When creating a new website, one doesn't make a new protocol unless it is necessary. For example, HTTPS is an encrypted version of HTTP, therefore it is useful and necessary. When creating an app such as "DarkSend", one doesn't need to make a new protocol such as "Darkcoin". This is synonymous to making an HTTPS alternative (eg. HTTPSX) for your new website for encrypted chat and not adding any new security or functionality to HTTPSX.
Because Darkcoin is by far the most popular cryptocurrency of this class, the Darkcoin example will be covered in this section.
The Darkcoin devs created a tool called DarkSend. DarkSend is an implementation of coinjoin (an anonymity feature originally implemented in Bitcoin[4]) which utilizes the Darkcoin network to organize the coinjoins. If DarkSend becomes open source and is useful, it will be ported to Bitcoin with a few small modifications. Currently DarkSend masternodes are paid 10% of the block reward after they hold 1000DRK in order to become a masternode.[5] This is flawed because while purchasing 1000DRK is trustlessly verifiable, a user running a DarkSend masternode isn't trustlessly verifiable. It is also costs bandwidth to run a masternode, therefore there is an incentive to buy 1000DRK and get a chance at the 10% block reward masternodes are being paid, but not actually act as a masternode. For this reason, DarkSend would work better if the masternodes were paid by those they were helping coinjoin, or if there wasn't a masternode at all and everyone collaborated in a decentralized fashion. The better implementation not vulnerable to the attack described is compatible with Bitcoin, therefore, the Darksend protocol serves no purpose.
We agree that DarkSend is useful and necessary because bitcoin, in its current implementation does not provide adequate privacy. It is however not easy to "port" DarkSend to bitcoin with a few small modifications as it requires a significant re-engineering of how the protocol works.
One must question whether existing bitcoin miners are willing to make that leap and also question whether the bitcoin development team are prepared to work on such a project under the eye of the government. Recent history would suggest not.
To be paid the 10% block reward, one has to act as a masternode. There is no in-between stage. If everyone acted in a collaborated decentralised fashion it would be too easy for government to infiltrate the protocol and setup monitoring masternodes.
Darkcoin's decentralised privacy implementation is a technically superior implementation of bitcoin. Darkcoin is https. And http will never be https.
There are more people everyday switching to https.