Would Altcoins Have Value If They Were Called Bitcoin Testnets?
Paul Sztorc is the man behind Bitcoin Hivemind (based on his Truthcoin concept), which is a blockchain-based prediction market that is intended to be rolled out as a sidechain to Bitcoin. Sztorc is also part of the team over at Bloq, which was co-founded by Bitcoin Core contributor Jeff Garzik and Tally Capital Founding Partner Matthew Roszak.
Sztorc has often written about his perceived issues with altcoins and crowdsales, which is at least part of the reason why he has thrown his support behind Bitcoin Hivemind (as opposed to Augur). Since the current, test version of Bitcoin Hivemind is not connected to the Bitcoin network, the coins on that blockchain could be called altcoins. Sztorc has avoided this issue by simply referring to the coins as testnet coins.
When looking deeper into Sztorc’s philosophy, it becomes difficult to see where Bitcoin testnets end and altcoins begin.
What is the Bitcoin Testnet?
The Bitcoin testnet is mainly used by developers who want to test their applications on a blockchain without having to throw away real bitcoin every time a bug is found. During a recent conversation with Sztorc, he explained:
“Currently, we have something called the Bitcoin ‘testnet’. The testnet is more or less the same as the real Bitcoin. The chief difference is that no one takes it seriously — it is occasionally reset (without protest), and no one accepts testnet coins for payment.”
The Bitcoin testnet is rolled back every now and then to make sure that people understand this is not intended to be a blockchain where real value is stored. Having said that, these coins have some sort of value due to their usefulness for testing. Sztorc added, “Since no one takes it seriously, it is ideal for experimentation.”
Altcoins are Testnet Scams
Paul Sztorc has sometimes referred to altcoins as “testnet scams.” The Truthcoin creator explained:
“When I refer to ‘altcoins’ as ‘testnets’ (or usually ‘testnet scams’), I aim to highlight the fact that there is nothing in principle different from ‘an altcoin’ and ‘another Bitcoin testnet.’ While there is nothing different in principle, there is a difference in that the altcoins contain an expectation of seriousness. It is this expectation which I try to poke fun at, by labeling altcoins as testnet scams.”
Altcoins often contain speculative features that may or may not provide actual value to potential users. For example, Litecoin uses a different hashing algorithm (Scrypt) and features faster confirmation times. Ethereum is a blockchain-based platform with a focus on smart contracts and “Bitcoin 2.0” applications.
It is interesting to think about what these platforms would look like if their creators simply called them Bitcoin testnets from the start. The group of developers behind Bitcoin Core are currently working on various mechanisms, such as sidechains and Version Bits (already used), for adding new features to Bitcoin more easily, and many in the Bitcoin community think that anything useful in the altcoin space will eventually make its way to Bitcoin.
For example, Ethereum is one platform that some believe could be extremely useful. Rootstock is a similar project that intends to bring more flexible smart contracts to Bitcoin via a sidechain.
How Do Sidechains Play a Role?
Sidechains allow users to take advantage of the bitcoin token on another, alternative blockchain. During my recent conversation with Paul Sztorc, he noted two new options for altcoins made possible by sidechains functionality:
“Sidechains will, of course, allow altcoins to upgrade from ‘alt-chain’ testnet status to mainchain status. Or, they can be sidechains of the Bitcoin testnet, in which case they will actually be on the Bitcoin testnet but no longer a scam.”
It’s not entirely clear how all of this will play out. Bitcoin maximalists claim all of the useful features of altcoins (or testnets) will eventually make their way into Bitcoin, while altcoin creators believe there is room for other digital assets such as ether or litecoin. Having said that, it does seem clear that the most popular altcoins contain features that are also planned for Bitcoin.
Kyle Torpey is a freelance writer and researcher who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, NASDAQ, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.