Categories: Bitcoin Entertainment

The Nakamoto Institute’s First Podcast Rebuts Buterin’s Defense of Competing Cryptocurrencies

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The Nakamoto Institute's First Podcast Rebuts Buterin's Defense of Competing Cryptocurrencies

Bitcoin enthusiasts debate about a number of details—from block size to the best consensus protocol. One timely (and by now ancient) debate centers around appcoins.

Poor cryptocurrency devotees would love to know, are they good investments? Or not? Many believe that a few good soldiers—or maybe many—could endure the storm of investments. But the Satoshi Nakamoto Institute is notorious for offering an unequivocal “appcoins are snakeoil.”

But if 2014 is any indication, many developers disagree. A long line of alternative coins have cropped up, many raising a lot of money through sales of their coins. The new features tagged onto each coin, from anonymity to file sharing, often generate a frenzy of excitement.

Vitalik Buterin, founder of Ethereum, published a lengthy defense of competing cryptocurrencies, addressing “Bitcoin maximalism,” which is the opinion that Bitcoin should hold monopoly status and competing cryptocurrencies should be discouraged. Ethereum itself raised $15 million earlier this year and has been praised for its revolutionary potential.

And now, Daniel Krawisz and Michael Goldstein address Buterin's post, in the Institute's brand new podcast called “The Crypto-Mises Podcast.” The two argue that Buterin failed to address many of the points made by Krawisz in earlier articles where he describes why he believes competing appcoins will fail.

“No more appcoins, please”

They kick off the podcast by reiterating their position: one cryptocurrency will rule them all.

Krawisz starts by explaining why investments have value. Stocks pay dividends and bonds pay interest. There's an “opportunity cost” to investing, because investors could always buy something else, so for people to invest, they must have a reason to hold it over time. But Bitcoin is more like money, they argue, which obtains value from knowing that it can be used broadly to take advantage of future opportunities. Therefore, a single broadly-used currency makes the most sense. If you had one among many currencies, “You'll only be able to seize opportunities that accept that cash,” Goldstein said.

Krawisz summed up their position: “There's always a tendency moving us towards one universal cash.”

Krawisz gives an extreme example: a distributed system that gives you a “cornucopia” of  stuff—or anything you want. “Cornucopiacoin?” Goldstein offers, coining a term that will be used for the remainder of the podcast.

“The appcoin that makes it work is still going to be worthless, regardless, unless this Cornucopiacoin is so valuable that people just switch and only use Cornucopiacoin,” Krawisz said. He claims:

“The only possible way of explaining an appcoin is as cash. It's not cash. It doesn't give dividends. There's no logical reason why its price should be related to the value of the network, or the services on the network.”

“No more appcoins, please,” Krawisz said looking into the camera.

Rebutting Buterin's Post

Goldstein and Krawisz addressed many points in Buterin's post, but in a nutshell they believe he failed to address the economic arguments they brought to the table. Krawisz noted that Buterin failed to link to Krawisz’s aforementioned arguments against appcoins.

In his blog post, Buterin drew up an ordering of types of network effects that a system can have. Network effects are the characteristics of a technology that boost the value as more people participate in the network. As a multifaceted technology, Bitcoin offers several kinds of network effects: blockchain-specific, platform-specific, currency-specific, and general network effects.

Krawisz contends that he does not mince these distinctions. In his posts he specifically addresses the currency-specific network effects.

They also argue that Buterin fails to look beyond the short term. Sure, crowdsales have been successful so far, Krawisz concedes, but with the blistering pace of cryptocurrency development, people will soon drop them:

“Once people figure out that crowdfunds are bad investments, than you can't crowdfund with them anymore. The only reason it works is because people are duped.”

Of course, the duo explores many other finer details in the podcast. And so the debate continues.

“Vitalik, you're welcome to come back in the cool kids club once you get out of Ethereum,” Krawisz ends the podcast. Watch the whole video here:

Did you enjoy this article? You may also be interested in reading these ones:

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Poor cryptocurrency devotees would love to know, are they good investments? Or not? Many believe that a few good soldiers—or maybe many—could endure the storm of investments. But the Satoshi Nakamoto Institute is notorious for offering an unequivocal […]

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