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Comment by dllthomas | Hacker News Reader

Not much more than different currencies or different goods devalue others as stores of value in general.

I think you're wrong, but am willing to be told otherwise. Here's why: one currency is not (generally) legal tender outside its country of origin, so there's an exchange rate determined roughly by the trade balance between countries etc. If all currencies were legal tender everywhere (a much more analogous) situation, the exchange rate would not be determined by the same factors, since the currency would in no way be pegged to the nation.

Then the question becomes: what does in fact determine the exchange rates? I.e., would one currency be "infinitely valuable" compared to all others? Which one? The first? Or would all of the stabilize at the point where 1 of A is always worth 1 of B, because that's easiest to work with?

The value of an altcoin, the true market value, is in my mind determined by two things. First, how many different ways can I spend it reliably? For example, I can spend BTC on goods on Overstock.com. I can spend Dogecoin on a tip for a comment on Reddit. BTC is already more valuable to me than Dogecoin.

Second, is the size and composition of the specific altcoin network. For example, lots of new altcoins use central checksumming during the early stages to prevent early market manipulation. This is bad, since the coin is then for a period of time controlled by a central entity. BTC and LTC are mature enough to not have this problem anymore.

In other words, sure bring on more altcoins/blockchains. I don't care. Let's let the market decide that. In the end the total market cap of all these coins will converge and the more coins are created every day the more we approach the point of people starting to be able to tell the difference.

That determines your subjective value for the coin. Market value depends on it only to the degree that the subjective value others place on the coin mirrors yours.

Of course. Naturally, everyone places different value on these things. However, I have several reasons to believe that my criteria has some merit. Specifically, look at the reverse of each of the two criteria: imagine a coin with a very small network and a very young blockchain. This means that a player with lots of computing power can at least mine a huge amount of the coin, or even carry out a "51% attack" and double-spend.

Also, imagine a coin which you cannot spend on anything. You can mine it and send and receive it in a vacuum, but you cannot derive any other value out of it. Is such a coin in any way more valuable than a coin which lets you buy a cup of coffee, a car, or a house?

I certainly think that those both deserve to be important considerations, and probably most others assessing will think so as well, so they will certainly affect things. But there will be lots of other factors, individual (diversification, speculation) and collectively (amount of currency available), so I feel that "determined by" is too strong. I also didn't really like the "true market value" wording, but I'd have let it slide if that was my only concern.

I'm not sure legal tender matters much. It's all about what people generally expect other people generally to give them for the currency when they decide they want to convert it into something else. See, for instance, the Somalian Shilling retaining its value despite a period that basically lacked a government (http://www.economist.com/node/21551492) or the fact that the dollar is happily accepted in very many countries. What does screw with things is currency controls, but that's not really substantively different than any other market manipulation.

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