Based on Computing Power
It would be difficult to create a new crypto-currency that is as fair as bitcoin because if it did start getting big, the people that were in early will get rewarded more than that got in later on. The big miners would own a lot of the new coins and people with money could buy them. There would be no little guys. I don’t think any of the alt-coins out right now are going to surpass Bitcoin. There are some interesting alt-coins where the processing is used to solve useful mathematical equations. A currency like Primecoin might get larger since the hashing algorithm also looks for prime numbers and those prime numbers are useful for scientist and engineers.
A new system could not be based on pure randomness for each wallet because whoever has the most wallets would get the most coins. It will end up being a race for whoever has the most computing power because the person with the most computing power could create the most wallets. Bitcoin has a good lead on any new crypto-currency since it has had so much time to mature. Currently, the newcomers with the most hashing power will earn the biggest rewards. If a similar system came out now, then the few major miners would take a majority of the mining reward. It would be a monopoly on the system. It is good that there were some little guys that got in at the beginning of Bitcoin. It is still the beginning of Bitcoin, so there is plenty of room for late stage newcomers.
Proof of Work
Proof of Work is the hashing that a miner does to show that a large investment was made to verify the transactions. It is a difficult math problem that needs to be solved by an ASIC. The rest of the nodes then validate the miners work. This is necessary because if there was no proof of work, then there would be bad nodes that would try to manipulate the system. This ensures that there will be no bad actors because it would be expensive to attempt and difficult to achieve. It is easy to verify that a miner did the correct work.
Here is an alternative proof of work that might be effective: a node gains power through validating & processing transactions. The more correct transactions that the node has verified, the more power it has on the network. As soon as a powerful node is caught making an incorrect transaction, then they would lose power. The network would also correct the inaccurate transaction that the bad node might have attempted to change. The transactions would have to have a maximum of a single unit. This system is feasible and it is not so expensive to operate. If a system like this could verify transactions as Bitcoin does, then Bitcoin could be in trouble since it will take far less computing power. As there are more transactions on Bitcoin, an adaption to the protocol could be made to allow for miners to spend more computing power on validating and processing transactions instead of just hashing to prove they are doing work.
Bitcoin would be an ancestor system to any new ones. I think it will always be around. If a new methodology arises then Bitcoin could be adapted to follow it.
A lot of people argue that it is unfair that the ownership of all the bitcoins is skewed towards such a small number of people. The miners that provided just a small amount of computing power at the beginning and held onto their bitcoins will have made an extremely large amount of money from a network that other miners are supporting. With the growing computing power that is needed, a newcomer has to provide thousands and thousands of times more hashing than the very first miners back in 2009-2012. With the maturity of bitcoin compared to any other crypto-currency, it would be hard to make another more fair currency. Whoever gets in on the next currency first will have more coins. If the algorithm was designed to not reward so many coins at the beginning, then that would make it more fair for people that come in later. With the price lowering as of early 2015, this should force some of the early adopters to sell some of their bitcoins to others that are interested in joining the market. However, the earliest adopters built the system. It wouldn’t be here if it wasn’t for them. Maybe they deserve the rewards.
In the long run, there will be some early adopters that might join the status of billionaire (USD). Currently, there are 1,645 billionaires in the world. There were 268 newcomers in 2014. There is plenty of room for a few more of them. The creator of Bitcoin, Satoshi Nakamoto, has over 1 million bitcoins. When the price of bitcoin surged to over $1,100, Satoshi’s worth was valued over $1 Billion. However, if he tried to sell them all for $1,1000 each or any price, the demand would fall and the price of the bitcoin would fall with it probably right down to $20. I don’t think bitcoin is going to shift the wealth of the world very much. Those early adopters would be better off slowly selling bitcoins over the years. If they sell too many, the price will plummet. If they hold onto them, the price should rise, but it will be lowered once they start to sell them. They will need to sell some of them to live a billionaire lifestyle. – not everybody accepts bitcoin as a payment. Even if they do accept bitcoin as a payment, then the bitcoin will be distributed more. Wealthy people will get their hands on their share of the bitcoin. They have the power to manipulate the bitcoin markets and get it from the early adopters for cheaper than what it will be worth in the future. In the long run, I think the bitcoin will end up mostly in the pockets of the existing rich people. And, it will create a lot of new wealthy people.
Advancement of Processing
Bitcoin is speeding up the rate at which computation advances. This has huge impacts on the timelines of predicted processing power. There are 3 important milestones:
- All the computers on the planet are equivalent to one human brain
- One computer is equivalent to one human brain
- One computer is equivalent to all the human brains on the planet
This is comparing apples to oranges some would argue, but brains and computer processors are more similar than most people think. We may see some or all of these milestones achieved in our lifetime. The implications of these could be a theme of many books, so I can’t get into it too deeply. Stephen Hawkings has already warned us of AI. If you are interested in learning more about this, I would suggest researching topics such as Robotics, Artificial Intelligence, Neural Networks, Data Mining and Natural Language Processing just to name a few.