Litecoin the Price and the effect.
As I write this There is much dread and fear at the moment because the Litecoin price seems to be in “free fall”
this is taking place on the Bitcointalk forum – https://bitcointalk.org/index.php?board=67.0 and in other places.
lets look at the price of LTC and why the panic then lets humorously examine why this is important for Quark and all other real crypto currencies.
first a background on the the fear:
LTC is at $7.51 at this moment USD
normally the trend has always been that when Bitcoin rallied Litecoin followed along, but unfortunately this is the first real large decouple of the price movement and its causing many much fear and doubt.
So free markets…. they are real and do matter after all?
Yes indeed if an entity is predominantly free to flow in the “free market” they do.
In the past i’ve written a little bit about decentralized economics and a little bit about what “Mining control” is, but lets come back to this…
Mining monopoly and “Mining Control” also “One-CPU-One-Vote”
Crypto currencies are Generated or were supposed to be generated under the “one Cpu one vote” Principal that was generally defined by “Satoshi.”
Bitcoin: A Peer-to-Peer Electronic Cash System
So without the hyperbole this means that the closer the system can get to this principal of “one cpu one vote” the better the “random proof of work” will cause a general distribution of units into the free market.
upon which they are then governed by very strong free market forces, as Crypto-currency has no fixed exchange and can be transferred person the person, with very low cost.
so you might say Crypto-currency is a free market dream come true.
Advanced to Crypto currency can skip to *1
So to be clear, if Joe had 5 CPU and Greg had 10 CPU the crypto reward units “Quark or Bitcoin or Litecoin” would be distributed to Joe and Greg in that order ratio for the distribution period generally over an amount of time.
but if Joe has 5 CPU and Greg has a piece of technology that grants him the power of 1 million CPU’s what does that do to the distribution system?
obviously a child could tell you that Greg gets all the units.
if Greg gets all (or the majority %) of the units Greg has effective control of the price mechanism and can influence the free market, good for Greg lets move on…
One PCP One Vote.
So you can see the economic distribution impacts of moving away from the “one CPU one vote”.
Now the definition here is important Satoshi was (and its provable in his writing) referring to one “Central Processing Unit” – CPU one vote, a CPU is best defined in a personal computer.
so we can perhaps better define the economic term as:
“One – Personal Computer Product – One vote.”
“One – PCP- One vote”
how can this be enforced generally ? impossible?
Well its not actually and I will talk more about this later but lets examine Litecoin’s best attempt.
because for those that are not specifically educated on the matter, that’s why Litecoin was invented, to primarily try to stick to the One PCP One vote, principal, and have a “better distribution model”
a GPU is a PCP.
Litecoin started its life being only able to be generated on a CPU just like Bitcoin did.
But the Litcoin Algorithm was designed differently it has what is called a “Memory hard function” this was designed specifically to try to prevent specialized machines such as ASICs (Application Specific Integrated Circuits.)
all an ASIC does is allow Greg in our example to have the power of 1 million Cpu’s, but the problem for economic distribution is they are hard to buy and easily outdated quickly, this causes very large crypto distribution problems.
so in trying to stick to One PCP one Vote – the idea was that this algorithm used “computer memory” in a way that made and ASIC very difficult to design (or even non cost effective)
this meant that people that wanted to mine Litecoin when they knew about it, could use a Personal computer product with a pretty good guarantee that Specialized machinery was out of the picture for a while.
And this system was successful, for a long time and it means that generally the market had a “pretty good distribution” for crypto currency, and certainly a better distribution than Bitcoin.
what is a GPU?
after a time, the mining software to mine Litecoin and the algorithm was adapted to be able to work on a GPU, or a (Graphical Processing Unit) – these are commonly in video cards, but a video card is an accessible Personal computer product – basically anyone can buy a GPU card. so this was still in sticking to the distribution principal.
This harbored the GPU mining craze and many people purchased GPU’s because of their powerful Processing units to mine Litecoin, and so on up until recently when KNC ASIC maker announced the intention to build a Litecoin ASICs device.
in the lead up to this time ASICs did exist but because of the problem (of course) of human desire those that could design and make them obviously didn’t sell them and used them to mine for themselves (much more profitable) but it can be said that for an amount of time in the Litecoin distribution that was not the case.
Is Litecoin a “Victim” of its “better” distribution ?
in my analysis yes it indeed is, there are a number of key reasons for this lets list them:
Bitcoin maintained and maintains a very centralized mining control monopoly, (and thus very centralized price manipulation) there was a very short period of time relatively in Bitcoin’s overall distribution period that both :
A- a market was aware of it and
B- It stuck to the One PCP One vote principal.
Litecoin was different; here are two defining points:
- Because Bitcoin was in its small (in time period) GPU mining phase when Litecoin was released there was a much more diverse set of GPU miners, so when Litecoin (phased up) from CPU to GPU there was just simply more infrastructure, education and thus more participants.
- Carrying this general effect forward there is now also much more ASIC hardware and infrastructure, KnC is a real company and has really delivered products to market, so as LTC is now in its ASIC period there will be more ASICs spread out to a more diverse set of people.
Both of these points are very significant and directly play a part in the “better distribution” of Litecoin going forward in time.
Welcome to the free market.
In a real market or when real free markets effect monopolies this can be the direct result, the price can decouple and drop if the more diverse market feels there is no justification of the current price.
so to this degree Quark was designed with this in mind, and as the wider economic environment is not in free fall or “obvious crisis” (as we speak) I would expect that the Litecoin price could move significantly lower as/if its distribution base gets more diverse.
Bitcoin can not be considered a free market in its distribution base, as there is no diverse generation of the units, (and there really hasn’t been any in the past )
what does this mean for Bitcoin Litecoin and Quark ..
Bitcoin 21 million units – will probably have little price volatility but also will need to rely on new participants to put capital into the structure that is fundamentally not free market driven in its distribution, this however is not unusual; most human systems are not free market driven but it remains to be seen if a Crypto-currency can achieve long term the same results with a crypto structure.
Litecoin 84 Million units – will be “stuck in the middle” with ASIC monopoly coming but, the price increasingly only just justifying the ASIC existence and manufacture cost, this is because of the better market distribution that Litecoin had in its earlier life and the better infrastructure that exists today ( thus price can’t be manipulated upwards or stabilized such as Bitcoin. )
Quark 240~ million units – Quark was distributed by primarily CPU, so can not have a mining monopoly (one of the only crypto in existence of its type) , it is driven completely by the free market and will be both stabilized by the free market and trend with crypto currency free market, Quark (and others like it) are the perfect reserve crytpocurrency in this respect, and was designed that way.
my obviously bias advice is, that fearful Litecoin holders can and should gain exposure to a Crypto that is provably not controlled by any mining manipulation or price control.
if you don’t, you can expect to be continually “buying high” and selling low, unless you are actively in “crypto-currency development”
Why is Quark (and others similar) better than USD or fiat ?
because if you park capital from any other crypto into Quark you both hedge against fiat and other dropping crypto’s, simple.
Then as it trends upward with the free market you gain in % return also, this is basic crypto-currency economics and as Quark is low (in value presently) the market can only get more distributed every day .