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NEW YORK (InsideBitcoins) — At the recent Future of Money and Technology Summit in San Francisco, a panel featuring Andrew Barisser of Assembly, Greg Maxwell of Blockstream, and Nicholas Thorne of BlockSign was asked whether there should be one blockchain or many blockchains in the cryptocurrency ecosystem.
The viability of altcoins and appcoins has been a topic of some debate over the past year, and the plans by Maxwell’s Blockstream to enable sidechains as a way to bring an endless number of new features to bitcoin has taken the polarization of this debate to another level. Maxwell is also a core developer on the bitcoin protocol, and he shared some of his thoughts on why altchains, but not altcoins, could be the future of digital currency.
“Having a zillion altcoins doesn’t make a lot of sense, right?”
Bitcoin and network effects
After Assembly’s Andrew Barisser made his case for one blockchain as opposed to thousands of chains, Maxwell was able to get into the technical and economic reasons as to why he agrees with Barisser’s premise. When it comes to the economic reasons for one blockchain, Maxwell had this to say:
“The reasons that [one] blockchain makes sense are because of a couple of things. One, the network effects and the economic effects. Having a zillion altcoins doesn’t make a lot of sense, right? Because they’re fighting against each other rather than against the traditional, inefficient things that they should be fighting against. And then, the users of these systems face uncertainty for more liquidity risks, for exchange rate risks, [and] for more diversity. Who wants to adopt into a system, store value in it, and then find out, ‘Oh no. It’s not the latest fad.’”
Another way to say this would be to point out that altcoins weaken the network effect of cryptocurrencies as a whole. It’s hard enough for bitcoin to continue to grow as a network with all of the fiat currencies out there as competition, and breaking up that network effect into multiple coins only makes it harder for one of them to eventually succeed.
Maxwell also pointed out the economic issue with altcoins from a user-experience perspective. The fact that altcoins have less liquidity and more exchange rate risk means that users are less likely to adopt those alternative systems.
Technical reasons for one blockchain
As one of the most well-respected members of the bitcoin development community, Maxwell was also able to discuss the technical reasoning behind a one blockchain stance.
“The security of blockchain crypto systems is very dependent on people using them, right? It’s a consensus system, so if the consensus system only has a few users, then a larger majority can come in and outnumber them. And so, there’s safety in numbers. And having systems which are completely independent doesn’t necessarily achieve good security for any of them.”
Altcoins vs altchains
During Maxwell’s response to the original question about whether one blockchain is better or worse than many blockchains, he also pointed out that alternative chains can be useful for scaling bitcoin over time; however, there’s an important difference between altcoins and altchains. As Barisser explained:
“There’s a really big distinction between sidechains, which Gregory [Maxwell] is working on, which I’m really bullish on, versus altcoins. And there’s a huge distinction because with altcoins a lot of them, they’re like parallel universes in of themselves where they have different rules than in bitcoin, which has its own set of rules, and people can innovate what those rules are and get new features. But the problem is, if I want to go to the mainstream standard, which is bitcoin, and have access to other kinds of features, other kinds of rules, like escrow, things that don’t exist in bitcoin, I have to go to a floating market with a floating exchange rate and experience volatility there and risk, right? By exchanging to another altcoin. And that disincentivizes me from accessing other features, which other people are coming up with. Sidechains, however, they’re pegged by definition, so if I move one bitcoin into the ‘Andrew blockchain’ [with] different laws and rules, I can still go back to bitcoin with one Andrewcoin. So, I mean, in a sense [unintelligible] I don’t have to experience the risk to access that functionality.”
Bootstrapping the community?
During the Q&A portion of the panel discussion, Swarm’s Joel Dietz asked Barisser and Maxwell about the idea that alternative token systems could bootstrap a community around specific applications or use cases for digital currency. He noted the enthusiasm around Ethereum, pointing out that he just came back from the Ethereum Dev Summit in Berlin where people flew in from all over the world to be there because they believe in that particular alt-chain and token system.
“I’m interested in Ethereum, but you’re often selling hope and castles in the sky a little bit. People are free to do what they want, but I think it’s slightly unethical to sell a dream.”
The basic gist of the responses from Barisser and Maxwell was that these sort of altcoins created for crowdfunding efforts are unethical. Barisser bluntly stated:
“Some of these other funding models like Ethereum, I think people should be free to make their own choices to buy ether for example. And I’m interested in Ethereum, but you’re often selling hope and castles in the sky a little bit. People are free to do what they want, but I think it’s slightly unethical to sell a dream.”
In Maxwell’s response to the question from Dietz, he noted the difficulties with properly assessing the value of various crypto systems and agreed with Barisser’s ethical concerns.
“Often, I look at these systems and say ‘I’m not competent to assess the value of this system or that system,’ because it’s so easy to have this fractal complexity. And you can’t tell if it’s secure or not. You can’t tell if it will last or not. I support people’s ability to self determine, but I share the ethical concerns with doing that. And I prefer that if there’s risk that it be consolidated in folks that are most equipped to handle it.”
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