The Kill Cost
The number one metric that one should use to evaluate the utility of one capital-stock, power money cryptocurrency, such as Bitcoin or Litecoin is the cost that would take to kill the currency’s core blockchain integrity, and thus the value position of that coin’s market cap.
To recap, there is a calculation that figures the cost of killing Bitcoin, we can probably adapt similar models to the cost of killing LTC, DOGE, and others, such as AUR for example, which seems to be under threat.
Meanwhile, crypto 2.0 functions like zero-credit-risk trading and smart property will be potetially portable to different underlying blockchains if the security and liquidity merited it. That is a big if, the difference between MySpace and Facebook.
Ultimately, the dream is a Proof-of-Work algorithm that allows lots of people to make small investments in mining with operationally profitable results, and that these contributions cannot be significantly clumped into centralized cartels. The idea of Scrypt is that you get a lower boost in $/GHs by investing your capital in an ASIC versus a GPU, which more people have. The idea of Primecoin or Momentum (early Protoshares PoW used as a more extreme RAM hog, before they decided to go Proof-of-Stake) or Dagger (Etherium’s Proof-of-Work) is to make generalized computation capacity potentially viable, though the economics for Primecoin didn’t get there, and the network became dominated by marginal bot-nets stealing electricity for an unearned profit,
The other factor to consider is the inflation rate of a token. Inflation is always falling proportional to the entire money supply as a fixed block-reward adds to a great monetary base. With BTC it periodically drops by half, with DOGE the ongoing inflation provides different math.
With XPM the difficulty’s smoother adjustment and the 999/difficulty^2 formula for block-reward adjustment create a similar diminishing inflation rate, such that that coin as a commodity could still be interesting if it were profitable to mine and its network got more serious adoption, and then crypto 2.0 features used its blockchain - the exponential decline in the block reward could drop inflation faster than BTC and sooner than DOGE, while leaving a market-flexible difficulty and reward adjustment so that future inflation rates are semi-predictable but dynamic - the dream o a prime-number’s crypto has to do with the infinitude of primes and the computational difficulty in doing math with increasingly astronomical numbers.
Then you’ve got the Proof-of-Stake coins and the hybrids, with the cost-to-kill has to do with the market cap and more importantly, distribution of the stake tokens such as the game theory of buying it out leads to an uncontrollable blow out in price. Combine that cost with a PoW that is hard to throw money at through out-performing specialized hardware, and you could potentially make the kill-cost of a coin push $1 Trillion dollars, which is impressive because it’s both a big round number and precludes political attack for most parties, making other strategies (regulatory attrition, punitive tax policy) more likely than a hard fork.
The converse argument is that BTC’s high capex bar to become a profitable miner is an advantage, because the ASIC gains allow such a much more powerful network for only 8 to 9 figures in investments, greating a kill-cost of between 8 and 10x higher. The challenge is for the BTC price to rise enough to drive a continued doubling in hashing power, that BTC must trade like gold on crack such proportional growth in market cap, is irrelevant if BTC is used to collateralize fiat-pegged transactions.
It’s all one big experiment, and far from the capital-stock token question being resolutely answered by BTC’s eternal dominance, the alt-coin markets for LTC, DOGE, XPM, (using MSC or XCP as the 2.0 layer) and NXT, ETH, and BTS will be answering the question of if these experiments offer a better value-proposition in terms of cost-effectively aggregating network resiliency.
The features of crypto 2.0 will drive volumes and are adaptable to different mining algorithms, mined tokens, and blockchains. To some extent these alt-coin markets become like commodities as businesses take-advantage of hyper-fungibility and customers are increasingly removed from the crypto-guts of the new financial system. As these things begin to support 100bb USD+ sized economies, the supremacy of power money token over the other will come to how fast and cheaply they can continue to boost their effective kill-cost.
