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Comment by nawitus | Hacker News Reader

Copying my other comment here:

There's already zerocoin, a proposed extension of bitcoin, which guarantees completely anonymous bitcoins.

http://blog.cryptographyengineering.com/2013/04/zerocoin-mak...

Yes, there's already the Zerocoin proposal... which will require big buy-in from existing stakeholders to get grafted into the protocol.

What if big Bitcoin operators get a message from the tax-and-law authorities that they welcome Bitcoin just the way it is, thank you very much, but will start to use the levers at their disposal if large remixers or Zerocoin-like extensions are added?

Or what if the authorities just say, Bitcoins that have never been Zerocoined are great, but those that have been through the Zerocoin-blinding are contraband, and can only be cleaned by declaration and payment of a significant punitive excise tax? The nature of Bitcoin and the Zerocoin proposal leaves completely transparent which coins are 'tainted' by participation in a previous verboten transaction.

bitcoin is designed so that miners have an incentive to work on it and not alternatives. The result being much the same as that predicted by Austrian theory: a single money winning in the market, and the rest being demonetized. (A caveat however, when it is easy to convert between the moneys, this need not occur to the same degree.)

One would therefore predict low-to-zero chance of monetizing zerocoin/litecoin/namecoin if they compete for the same resources that bitcoin would compete for, namely miner processing power.

(edit: zerocoin is not subject to this criticism, I stand corrected; thanks nawitus)

Zerocoin works with bitcoins, though, it's not a different currency. 1 BTC = 1 "zerocoin", that you can convert back and forth.

Some alterna-coins may not rely on the same sort of processing power as Bitcoin. For example, Bitcoin mining has migrated to specialized GPUs and ASICs. Litecoin specifically chose 'scrypt' memory-hard hashing, for which the same GPUs/ASICs provide no benefit. Other 'proof-of-stake' proposals for maintaining the ledger emphasize staying actively connected to the network – pulling your own weight in verification and distribution – rather than raw hashing power.

Bitcoin's proof-of-work-during-verification trick is neat, but may not be the only way, and thus viable alternatives may emerge that don't face the barrier of an early miner decision to redeploy computational power elsewhere.

true, agreed.

though processing power would seem to be the best proof of stake, as say compared to network connectivity.

In the proof-of-stake proposals, actually holding old balances, and actively helping to certify transactions when challenged to do so, is what earns you the right to 'mint' new ledger-extensions. (And if you don't, your future transaction fees go up.)

Not sure all the kinks are worked out, but competing based on who best enables the fastest, most consistent, most-fraud-resistant global log seems to more directly benefit the community, than proving who's burned the most resources on electricity and specialized hardware.

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