Cryptocurrencies as Distributed Community Experiments: how Bitcoin, Ethereum, Monero and other Cryptocurrency is based on experimental economics of distributed experimentation.
This chapter is part of the Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data edited by David LEE Kuo Chuen.
This paper outlines the major criticism cryptocurrencies faced since Bitcoin’s introduction in 2009 that resulted in the iterative development of various Altcoins.
Altcoins as distributed community experiments
Alternative cryptocurrencies developed as distributed community experiments. These Altcoins introduce new algorithms and tackle social and other evolving problems that emerged throughout the various phases of adaptation and collective learning processes.
Altcoins are often introduced through self-published whitepapers or online announcements. These alternative coins (Altcoins) represent hypotheses by the respective creators until they can show a significant user-base and ultimately are accepted in online cryptocurrency exchanges.
We examine the important experiments and alternative approaches to specific issues of the Bitcoin design and described differences in coins that have been launched. We not only discuss successful experiments, but also show attempts that failed in the relatively short but eventful past years of cryptocurrency.
Cryptocurrencies as Distributed Community Experiments demonstrates how the initial design of Bitcoin is extended and improved by next generation cryptocurrencies. The two main aspects – the blockchain ledger and strong cryptography – remain key elements to all of these new systems. We conclude that two technologies (Ethereum and Monero) are relevant for future development of the cryptosphere, as they tackle different use-cases.
Finally we outlined possible future problems and developments around the blockchain, which not only is the invention that started cryptocurrencies, but remains the most experimental and challenging part with no long-term strategy yet.