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Intro Mastercoins. This is a game changer within Bitcoin protocol...


Mastercoins will enable you to sell stock to fundraise and idea or company, sell or buy gold, trade stocks, make bets, produce financial instruments, etc. All used as a second layer within the Bitcoin network and protocol. This is gonna turn Wall Street on it's head.

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Game changers galore

By market cap, the next five alts behind bitcoin right now are Ripples, Litecoin, Peercoin, Mastercoin, and Nxt. (http://coinmarketcap.com/)

Look at how fast the technology is changing! There are hundreds of alts, because it's so easy to create one. Litecoin is based on bitcoin, and these days most new clone-ish alt coins are based on litecoin.

But of the top six, only bitcoin and litecoin are only ones based on bitcoin's proof-of-work idea. Someone commented (on a bitcointalk forum I think) that proof-of-work cryptocurrencies will soon be viewed as quaintly anachronistic, and maybe they're right.

Ripples (XRP) only recently became open source. It's market cap is nearly 3 billion, compared to bitcoin over 9 billion. At about three cents per XRP it doesn't have the "seems overpriced" effect that bitcoin prices have. But it's a centralized digital currency. It's about as un-bitcoin as you can get.

Next is Litecoin, with a market cap of $600 million. A bitcoin clone with faster transactions and an anti-ASIC proof-of-work.

Next Peercoin, with a market cap of $110 million. It's innovation is a hybrid proof-of-work/proof-of-stake algorithm. See this for why that has advantages over bitcoin/litecoin: http://www.peercoin.net/

Next Mastercoin, with a market cap of $100 million. No need to rehash its innovations on this thread.

Then Nxt, with a market cap of $60 million. Launched by crowd funding. Not open source (yet, they say it will be). Not a clone anything, a ground-up design. Proof-of-stake only, no proof-of-work.

Conclusions: The technology for crypto currencies is changing amazingly fast. Of the top five behind bitcoin, only Litecoin can be said to follow the bitcoin design. Proof-of-work in general seems to be phasing out in favor of proof-of-stake and other approaches. And although there are hundreds of alt coins out there, the biggest market caps are all alt coins that that were significantly innovative in some way. If you like the idea of digital currencies in general these are very, very exciting things to see.

First impressions of mastercoin

I've only spent I don't know maybe five or six hours reading about mastercoin so I'm sure I'm still misunderstanding things here. Here are some random thoughts about mastercoin.

(1) I wonder if bitcoin proponents aren't misunderstanding this. MSC is (mostly) neither helping nor hurting the price of bitcoin. It's an alt coin that uses bitcoin transactions of negligible amounts in order to store MSC data on the blockchain. Some things are "built on top of bitcoin" in a way that means their popularity would also drive demand for bitcoin. This isn't one of those.

(2) The crowdfunding kick-off was brilliant. There are a number of copycats already, but MSC launched with something like $600,000 (USD) worth of bitcoin, all of which is available to fund development. A mastercoin clone that doesn't offer any distinction in terms of features is unlikely to be able to attract that kind of crowdfunding, so the cloning problem is somewhat reduced. (NXT is another one that did the crowdfunding kickoff -- am I seeing this right that it's #6 in market cap, and not even open source? Visacoin is currently doing it, and others.)

(3) It's 100% mined. Actually there's no mining involved they just created all the coins that will ever exist (more on that later) at the launch. Speculators sent bitcoins to the inventor's address, and then mastercoins were distributed proportionately based on the amount sent.

(4) The claim that mastercoin will be able to have a user-defined currency pegged to the price of gold, with no physical gold involved in any way, sounds absurd on the face of it, and when you look at the details of how they propose to do it, it really just makes no sense at all. I explained some reasons why in another comment below.

(5) A lot of the special features rely on their "data stream" idea, but a data stream relies on having a trusted source for the data, and a trusted owner of the data stream. That's pretty far outside the general philosophy of bitcoin/litecoin, but wIthout that most of the potential they're promising doesn't work.

(6) I'm not completely opposed to derivatives and leverage as some are, but the extent to which their theories of how all this will work are based on those things would bother me. (http://wiki.mastercoin.org/index.php/Contracts_for_Difference)

(7) They say that no more MSC will ever be created, but I can't find anything that describes a technical obstacle for doing so. To increase the maximum number of bitcoins would require a hard fork, which is not impossible but you can make a reasonable argument that this very unlikely. Could the foundation, which controls the "exodus block" for mastercoin, just create new mastercoins at will, so that the only thing keeping that from happening is their promise that they won't do it?


The crowdfunding kickoff was brilliant, and will no doubt be copied by many; most alts currently are not much more than clones, but crowdfunding will tend to reward innovation. Piggybacking on the bitcoin blockchain was also brilliant, as a way of launching with the support of a huge network already in place.

But the special features that sound interesting at first glance don't look so good under the hood. The explanation for how a user coin pegged to the price of gold is supposed to work, without any physical gold being involved, would make even fans of GLD (the gold ETF) cringe. And without those features, MSC as an alt coin isn't really very interesting. The way they launched it is interesting, but once it's up and running it offers little advantage over other alt coins.

On the other hand they launched with a lot of money in the bank, and they've got a venture capital firm (bitangels) backing them, and enough buzz that they're number 5 in market cap among all the alts. But I don't get the popularity. What am I missing? Or are they just riding the buzz and the funding, and (unless they evolve quickly -- and they are changing their design so frequently it's like a pre-beta, so they might) and it won't actually amount to much in the long run? Some advocate who understands the technology please explain it to me if I've gotten anything wrong!


...to keep up with its development.


careful about Mastercoin.

Mastercoin is NOT an independent currency. It's pretty stupid actually IMO.

Mastercoin is like a tumor riding on a dog's back. The dog can survive without the tumor, but the tumor can't survive without the dog.

Mastercoin is NOT a part of Bitcoin. Be very clear about that.

To explain this, you must understand that fundamentally Bitcoin itself is an experiment. The world has never seen/tried it before. We can guess what is likely to happen, but nobody knows for sure. This isn't necessarily a reason to be afraid of Bitcoin, as the same could be said about the Internet when it first arrived.

However, Mastercoin is built as a scheme on top of Bitcoin. It's like if I went to the racetrack and bought some tickets on what horse I thought would win. Those tickets themselves may have value because they might pay off. Now imagine somebody gets the idea to sell shares of my tickets. They leave the racetrack and sell ticket shares on the street. They sell so many shares that a few stores offer to accept these ticket shares in payment for goods.

Does that sound like a fundamentally stable system? It doesn't to me. The ticket shares themselves are entirely dependent on the underlying actual tickets. Those tickets might be accidentally burned, or thrown away for instance. What happens then? The reason Bitcoin themselves have value is because there is a growing global network of people building support to accept them (or similar coins like Litecoins). If there is a flaw in Bitcoins algorithm (SHA-256) for example, people can switch to Litecoin which uses a different one. People might lose money as everyone rushed to convert bitcoins to litecoins, but overall the cryptocurrency community could continue. If that actually happened, Mastercoin and all the so-called innovative exchanges etc. built on top of it would disappear, just like that tumor that needed the dog it rode on top of.

Be careful people, as cryptocurrency gains notoriety so will shoddy investments and outright scams. I'm not saying Mastercoin definitely won't work, but it would really surprise me if it did.

I don't think so

Does that sound like a fundamentally stable system? It doesn't to me. The ticket shares themselves are entirely dependent on the underlying actual tickets.

The MSC price isn't coupled to the BTC price, it's an independent alt coin. All of the mastercoins that the foundation intends to ever create have already been created, and were sold for BTC, so that established an initial exchange rate. But after that there's nothing connecting the price of MSC to the price of BTC. It's a new alt coin that piggybacks on the bitcoin protocol but only to use the blockchain metadata to record MSC transactions, not to use bitcoins.

(Storing a mastercoin transaction in bitcoin blockchain metadata requires making a bitcoin transaction with a tiny fraction of a bitcoin, and the miners charge a transaction fee for including tiny transactions in the block chain. Mastercoin is essentially paying those small transaction fees, in bitcoin, to use the bitcoin blockchain as a kind of cloud storage for the mastercoin ledger.)

Also, there's nothing tying mastercoin to bitcoin in the long run. It was just a clever way to boot the project so that it has an extensive network supporting it from day one, at virtually no cost. Plus it made it easy to do the initial fundraising, in bitcoin, to get it off to a running start. Very, very clever. But if for any reason using the bitcoin blockchain ever seems like it's no longer a good fit they could switch over to the litecoin blockchain or their own dedicated blockchain and it would make no difference to mastercoin.

So I think your scenarios aren't really fatal flaws for mastercoin, although it does have some other things about it that I think are grounds for major skepticism.

Mastercoin advocates please correct me if I'm misunderstanding any of this.

Be CAREFUL: there are 2 different mastercoins

I don't know that much about mastercoin but, there appears to be 2 different coins out there both claiming that same name, MST/MSC. See: What is the difference between MST and MSC? @ http://wiki.mastercoin.org/index.php/FAQ#What_is_the_differe...

MST listed on Cryptsy https://www.cryptsy.com/markets/view/62

MSC for sale @ http://www.buymastercoin.com/

Also see http://coinmarketcap.com/ for MSC price.

I don't know enough about either one to recommend, it's just info I came across.


When you think about it, that is all FRNs are, a digital currency. It's just who would you trust more running the program, the public, or the bankers.

I guess the other way to say it, who would you trust any less then those in the Federal Reserve system.

Mastercoin has a lot of promise..

The reason Mastercoin is not traded on the major exchanges, is because Mastercoin is about to replace ALL the major exchanges. Currently the development team is working on the world's FIRST decentralized distributed exchange. Check out the progress (http://mastercoin-explorer.com/). This is only one application that the Mastercoin protocol offers. They are also working on an application where anyone can issue their own digital currency (tokens) with their own rules, which incorporates dividend payments proxy voting and more. By leveraging Bitcoin's infrastructure Mastercoin allows the programmability that Bitcoin's introduction initially promised. Here is a talk while not specifically on Mastercoin, tals about the possibilities


They say everything has promise

Until all currencies are decentralized I say watch it like a hawk.


Truly eye opening, mind blowing video. One of the best talks I've heard all year (and it's New Years Eve! thats saying alot)

Great presentation. He really cleared some things up for me.

Now I finally understand why some people are convinced this may be the "way out" from under the thumb of corporate globalist banksters.

Thats a great way to start the new year man. Cheers!

for everything else ... there's mastercoin

It's hard to see how mastercoin is going to replace exchanges. Exchanges are still useful for exchanging other currencies such as dollars or yuan for digital currencies. Converting between BTC and MSC is built into mastercoin but an exchange is still useful if you wanted to convert to or from LTC or any others.

The kind of digital currency you can create with mastercoin is very different from the first wave of digital currencies like litecoin and all the rest:
The example they use to explain it is intriguing -- a digital currency pegged to the price of gold. A new currency, goldcoin, would be created within the mastercoin protocol. A "data source" is also defined, derived from a trusted source, and controlled by the creator of the new digital currency. So for gold, you'd have a data stream that provides the price of gold and periodically stores the current price in the blockchain. Then the mastercoin protocol creates or destroys goldcoins whenever the exchange rate differs by more than some threshold from the target rate defined by the trusted data source. By controlling the supply this way, backed up by an escrow account funded with mastercoins, they claim they'll be able to peg the price of goldcoin to the spot price of gold without having any physical gold involved.

That would be amazingly good if it were possible. A digital currency pegged to the price of gold would be good for gold, good for the digital currency pegged to gold, and bad for fiat currencies all over the world. But I'm skeptical that this scheme would actually work. The creator of the new currency controls the data source, and can change it at any time. Manipulating the supply should move the price over the long run but it's not instantaneous so the price could get badly out of synch. The whole idea of a currency pegged to the price of gold, without any physical gold involved, seems very questionable.

They're trying something ambitious, and there are lots of innovative ideas in there which is a lot more interesting than most alt coins. The idea of piggybacking on bitcoins blockchain alone is a game changer and I wouldn't be surprised to see a new wave of alt coins popping up that do the same thing -- for the price of the transaction fees you've got an instant network. They've got a fair amount of funding so they're going to be able to pay developers. Lots of reasons to keep an eye on them.

mastercoin sounds good but

i would be careful. from what i understand mastercoins are pre-mined and not readily available on any major exchanges.

it's a great concept but i like the dev team at protoshares much better. they seem way more liberty mined and have some of the best anti asic mining (future centralization) algorithms out there. mastercoins seem more wall street than main street.

i will watch this later though, thanks for posting.
Protoshares: The Anarcho-capitalist cryptocurrency

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
My ฿itcoin: 17khsA7MvBJAGAPkhrFJdQZPYKgxAeXkBY

they say it's not pre-mined

But it sure sounds a lot like pre-mining to me. 100% pre-mining in fact. All the MSC that will ever be created have already been created. See the discussion here: http://bitcoinmagazine.com/7961/ under "Concerns and flaws".

The idea of piggybacking on the bitcoin blockchain is kind of brilliant. Mastercoin transactions are encoded as metadata on bitcoin transactions of negligible amounts, essentially using the bitcoin network as cloud storage for the mastercoin ledger.

Protoshares certainly looks more professional.

i love the idea of mastercoins but

some of the dev team worries me. i have listened to hours of them talking on the "lets talk bitcoin" show and something about them was off. they have good ideas but so do others. in the interview it seemed to me all the msc devs were not on the same page and i just got an overall tense vibe from a few of them. no matter their current motives with future centralization will come regulation and i think they will fold. there's money to be made with msc but plan to be regulated by the gov sometime in the future and pay the piper. that goes against satoshi's original intent and against core libertarian principals.

being a layer on top of the btc bc has as many disadvantages as advantages. the main problem i see with msc is the centralization of the btc mining network which the msc team doesn't seem to have a problem with as they seem more focused on making money verse staying true to decentralization.

the libertarian protoshares devs are determined to stay decentralized and not sellout to big miners (future centralized controllers). pts devs are also focused on platform wide privacy through encryption of email as well as all internet communications through keyhotee which launches at midnight tonight.

to oversimplify things i see mastercoins as wishy washy European libertarian leaning republicans and protoshares as philosophically committed American ancap libertarians. both protocols take time to understand but it's clear to me that protoshares has a clear philosophical based vision of what they are doing and the vc funding to make it happen.

thanks for the link, i will check it out tonight.

Daniel Larimer on Project Keyhotee

Introduction to Keyhotee

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
My ฿itcoin: 17khsA7MvBJAGAPkhrFJdQZPYKgxAeXkBY

there are certainly majority owners right now

of course the inventors and early programmers are going to own the majority of available shares (Mastercoins). In order to fund their continuation in the project, they will continue selling shares on the open market, and offer bounties to programmers to build the protocol.

And this is happening now.

The Red Coats are coming!

100% mined

Tell me if this is just saying the same thing, but the FAQ says:

How many mastercoins exist? The total number has been calculated to be 619478.59338440 MSC. The calculation is based on purchases during the month of August 2013. There will never be more MasterCoins created.

So all the MSC that will ever exist have already been created, although as far as I can tell the only guarantee of that is that the foundation that is running mastercoin says so. The initial investors (who bought MSC with BTC during August 2013) own 90%, and 10% are owned by the Mastercoin Foundation, a nonprofit organization. That 10% will be used to fund development.

It's definitely different, and fascinating.

Here's a scathing article from a mastercoin skeptic:
But the mastercoin inventor responds in the comments, so it's a quicker way to get up to speed on the controversy than wading into the bitcointalk and reddit threads, which is what I spent several hours last night doing. Whatever happens with this one, I'm glad to see alt coins popping up that aren't just bitcoin/litecoin clones.

mastercoin is a bit different from other crypto currencies

because the protocol is layered on top of Bitcoin. It's not separate such as litecoin or protoshares.

The Red Coats are coming!

Not really. The more currency is decentralized will do that

The more decentralized currencies hit the market the more it will expand. The less central control, the better the results.

That is what will turn Wall Street on its head.