Should we be suppressing "unworthy" digital currencies?

Is there an "anti-greed policy" that would not have killed Steemit, BitShares, and Peerplays in the womb?

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A few days ago @intelliguy published a thoughtful post entitled
One thing Satoshi Nakamoto underestimated was greed. We underestimate it too. Let's correct our mistake.
At Friday's BeyondBitcoin Hangout, I promised I would comment on it.
Since his original post has probably "expired" under Steemit's short attention span,
I decided to make a new post to go along with the excellent companion piece
A Call for Leadership - In Response to @inteliguy

This is not an attempt to comprehensively respond to the whole issue and all the great points that have already been made in these threads. I'll limit myself to just a few of my most profound thoughts.

@intelliguy summarized his key issue this way:

We're not going to gain mainstream adoption, if we keep complicating this space. The majority of new users are going to get so confused when they get here, we're going to lose them.
The present monetary system makes it easy for people.
Crypto creating tokens all over the place non-stop makes it difficult for people.
The most important part: Every day that passes, the sand is drifting through the hour glass.

I agree that this is an phenomenon we need to recognize, but I don't think it is necessary, desirable or even possible to discourage others from introducing new tokens over time. This is an industry driven by gamblers who are willing to risk "our time, our fortunes and our sacred honor" in the hope of "winning big". Without the possibility of a big win, there would be little time or funding available to build anything in the industry. (I'm personally certain BitShares and Steemit would have never attracted a development team.) That really would limit participation to the Big Guys who are able to self fund. They, of course, would field something far less innovative and easier to monopolize.

I think some of the ideas in the referenced threads will be helpful. But here is why I don't believe a proliferation of "altcoins" will ultimately matter much and how I expect it to sort itself out in a year or two.

Point 1. - First, do no harm.

I think it's too early to standardize - innovations are still happening at an accelerating pace. (The half-life of Cryptonomex's technology has notoriously been about six months over the past three years.) Let a thousand mutations bloom and natural selection will do it's job. The good stuff will bubble to the top. Any attempt to discourage the introduction of new blockchains would be harmful to the ecosystem and the whole ethos of Cryptodom. The possibility of hitting it big is what motivates developers/speculators to do the hard work of creating/sifting the wheat from the chaff. When they create/find a nugget, they call it to everybody's attention by what happens on coinmarketcap.com. This directs badly needed funding to the most promising newcomers. Also-rans fade quickly.

De-facto standardization will happen when enough people are using a component, system, or interface that it becomes in the best interest of entrepreneurs who make the conscious decision to adopt it because that's what it takes to be successful. That will decided long before any erstwhile standards committee could agree on anything.

Point 2. - Consumers will never see the complexity we see.

The fact that coinmarketcap.com has 600+ confusing entries simply means that consumers should not be looking at coinmarketcap.com. This is just a list of raw materials -- a handy reference scorecard for day traders and speculators. Popular wallets, payment services, shopping carts, debit cards and streamlined exchanges like BlockPay, BlockTrades and ShapeShift are already beginning to add layers of abstraction that hide most of the also-ran coins from the consumer. Consumers will learn about digital currencies from sources outside the digital currency industry who have the deep pockets needed to promote them. We should not be relying on discussion forums, coinmarketcap and the exchanges to reach ordinary consumers and these are the only places where information about our "confusing abundance" is aggregated.

Ordinary consumers won't frequent these sites any more than they they read medical journals to select an antibiotic. They will be introduced to the best currencies at the retail level.

Point 3. - Big Boys will muscle in on general purpose currencies.

The battle ground for general purpose currencies will be dominated by the Big Boys. They will soon show up with the resources to muscle in on the industry leveraging their brands, distribution networks, regulatory influence and marketing budgets. Think about what Google and Microsoft did to the browser industry pioneered by Mosaic, Netscape, et. al. The innovators always get crowded out by the Big Boys, whether we like it or not. This is what will happen in the general purpose digital currency arena. A few years from now, not one of today's dominant coins will be in mainstream use. Consumers don't even know why using Big Boy Coins is a bad idea and not a single one of the current leaders has a the marketing budget needed to educate them.

Meanwhile, our dog Duke knows how to leverage everything the Big Boys do with multiwallets, sidechains and smartcoins, ...but he ain't talkin'.

Point 4. - There are better places to innovate.

General purpose private currencies are just the tip of the iceberg. Let the Big Boys have them. The past existence of national fiat currencies has not prevented every business out there from issuing business-specific tickets, coupons, vouchers, stock certificates, bonds, and a thousand unique specialty tokens. This will continue. We will use Big Boy Coins to buy these specialty tokens much the way Bitcoins are used on most exchanges today as the Most Liquid Path between any other two tokens including national fiat currencies. This is a much better situation than we have today since they will do the first round of training for us and provide much easier to use on ramps for everything else. (For example, consider the value of soon being able to purchase specialty coins with Big Boy Coins while avoiding current credit card claw back risks. On and off ramping will become infinitely easier.)

All that will be as familiar to consumers as using their current credit cards to buy tickets to entertainment events or shares in companies. Every business can have its own specialty tokens without confusing consumers because consumers don't ever have to look at them all at once. Only when a business has a token that you want to hold for some other reason (e.g. access to a unique product or service) will you ever buy such a token. You are introduced to the token in pursuit of the product or service, not as a collector of tokens.

That is where the smartcoins of the BitShares exchange, the Steemit forum and the PeerPlays gaming platforms come into play. People own those tokens because of what they can do with them - i.e. the useful service they can provide. This is where whole new industries can gain traction right under the noses of the Big Boys.

Steemit, BitShares, and Peerplays are designed
to attract customers from outside the crypto industry.

And yes, counter-party free public currencies will continue to exist, but for now, only as a niche item because consumers don't realize they need them...yet. That opportunity is my fifth point!

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Point 5. - The Flight to Safety Wild Card

People who are currently awake (e.g. readers of Chris Martinson, Dollar Vigilante, et. al.) know that the one place where the Big Boys can't compete is in supporting people who want to be "off grid" from the current corrupt financial system. Their achilles heel is their pathological need for each of them to own their own private chain and the counter-party risk that goes with it. Their insistence on running private chains will keep them from competing in the autonomous public chain arena ...until it is too late.

As a result, most private Big Boy Coins will be subject to the same collapse mechanism that capital will soon be fleeing from. Traditionally, that wealth flees to physical gold and silver, but that will quickly become impossible to find at any price. That's when some will discover digital currencies and flee there as the only remaining avenue of escape. They will probably flee to Bitcoin first, since that's what Google and most industry pundits know the most about.

But, once they have taken that leap, the performance of Graphene based real-time blockchains like those used by Steemit, BitShares, PeerPlays, et. al will beckon. So the money that manages to escape into Bitcoin will begin to diffuse out into the more modern tokens that perform better. Consumers won't care about esoteric technical arguments, they will only care about what somebody has done to make things easier to use than Bitcoin.

To attract fleeing capital away from Bitcoin, other tokens must offer that capital more convenience, a secure rate of return or a unique product or service that justifies the Big Advertising Budget they will need for consumers to discover them where they live. Most of the smallest altcoins will not be able to compete in this arena.

Let the clones proliferate on coinmarketcap all they want. Getting listed there or on an exchange is just first base in this industry. That's not where consumers will be learning about digital currencies in the coming economic meltdown.

Bottom Line

The key lesson I've learned is that "If you build it they will not come". You need the resources and distribution channels to sell it. Mainstream adoption will go to those who can raise sufficient marketing funds to grow and prevail in their own swim lane. We don't need to stop clones from just splashing around the pool in a novel swim suit.

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In the mean time, we will always need incentives to attract entrepreneurs and talent to the industry. The potential for such risk takers to strike gold is essential to the future health of the industry.

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About the Author -- Stan Larimer

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