Quote from: r0ach on May 25, 2014, 07:08:04 PM

Quote from: Anotheranonlol on May 25, 2014, 12:14:59 PM

So why invest into litecoin OVER bitcoin?

It's funny reading threads like this where people get outright angry at the existence of Litecoin. The people with 5 stars by their name won't tell you the reason they're angry about it, but the reason is, they're scared a network won't function solely with transaction fees unless it has a monopoly on the entire market, and even then, it's still sketchy. What I see happening in the long run is, eventually this model might prove to be faulty, but nobody will be able to gain consensus to change it due to being called Keynesians. Some lower coin with a minimum block reward that never goes below X units will probably have to lead the way until the top coins are forced to change.

I don't want to be called Keynesian as much as anyone else, but I foresee the amount of coins lost per year if cryptocurrency ever becomes mainstream to be a huge number. People will lose passwords or die all the time with encrypted wallets and those coins will be lost forever. The number lost per year is going to be at least 1% in my opinion, so having a coin supply that always emits new coins by a minimum of 1-2% wouldn't be a big deal.

Satoshi had to create a fixed-supply currency to break the "deflation is bad" myth that is accepted as fact by the status quo. The 21 million coin limit forces a debate on this subject and a re-thinking around the "wisdom of central bankers." But a hard limit is not strictly necessary: a currency with a money supply that increase or decreases, for example, by less than 1% per year is little different than one with a fixed supply. What is necessary is for the new currency units to be created by an objective and transparent algorithm on the basis of work performed.

The mechanism employed to ensure the security of the network in the distant future when the block reward subsidy drops below the transaction fees is unknown. But one thing is clear: if bitcoin is successful there will be a large vested interest in ensuring continued network robustness. There are many many possibilities for how bitcoin could deal with the reduced block reward twenty years from now:

  1. Continued advances in the size and cost of flash and RAM memory, coupled with investment in internet infrastructure, could enable bitcoin to scale enormously and beyond even credit-card-level transactions per second. The fees earned from transactions could be more than sufficient to secure the network.

  2. Bitcoin could become more like SWIFT or FedWire, and side-chains or third-party solutions could be used for day-to-day spending. Transaction fees could increase as required to ensure the security of the network.

  3. Wealthy bitcoin holders might subsidize their own mining operations. Advanced detection systems could be deployed to ramp up network hashrate to defend against attacks.

  4. International organizations like the IMF might create "bitcoin defence strategies" similar to #3. Network attacks might be criminalized and offenders hunted down.

  5. Some combination of the above might happen, or something else I haven't thought of.

Furthermore, there is little to no direct economic benefit for an attacker to engage in a perpetual 51% attack, and any short-term attack for economic gain can be mitigated by requiring a greater number of confirmations. Therefore, the only attacks that truly threaten bitcoin are the non-economically-motivated ones (IMO).

But if you worry about non-economically-motivated attacks in general, then you would live a very fearful life. People might destroy bridges, explode damns, randomly kick people in the balls, etc. Think of all the bad stuff that could very easily happen but doesn't. It is actually amazing: if I spend a day in a big city like New York I might walk past 10,000 people. If I do that 365 days in a row, perhaps I've walked past 1,000,000 unique people. All it would take is for 1 of those people (0.0001%) on one of those days to decide to kill me, and they could very easily do so. I would be a sitting duck! But the fact is that the vast majority of people can live their entire lives in a big city without ever being murdered despite how easily it would be for anyone to murder them.

People will argue that it is different for bitcoin because control of money creates power. But control of communication creates power in the same way and the internet has never really been attacked to the point where it was at risk of becoming unviable. Bitcoin will be the same way. The Powers That Be are less organized than we give them credit for.