First Generation Cryptocurrencies versus Second Generation Cryptocurrencies

[Alias]

Hello everyone,

I would like to start a healthy discussion of what distinguishes a First Generation Cryptocurrency from a Second Generation Cryptocurrency.

Sample list of 1st Gen:

• Bitcoin
• Litecoin
• Peercoin
• Namecoin

Sample list of 2nd Gen:

• Nxt
• eMunie
• Bitshares
• Mastercoin

I think the distinction should include some of the following:

Does the 2nd Gen currency resolve problems with 1st Gen currencies?
Does the 2nd Gen currency come with additional functionality "built-in"? (Especially functionality which was previously tacked on to 1st Gen currencies as an afterthought?)
Does the 2nd Gen currency have greater potential to survive long-term than the 1st Gen currencies?
Does the 2nd Gen currency have inherent flexibility and extensibility such that it can compete with future growth of the cryptocurrency space (e.g. that it won't be trivially passed out by a hypothetical 3rd Gen currency)?

Another question. Are we agreed that Nxt is a 2nd Gen currency. I think it is.

Discuss.

[fruitbat]

I think the distinction, within the example set you give, could also be:

1st gen: Bitcoin or derived by forking Bitcoin with a new blockchain and modifications
2nd gen: Bootstraps from existing Bitcoin blockchain, or uses brand-new codebase

One of the major changes of this generation is the introduction of philosophies about money beyond the "gold-like" model that drove Bitcoin. In particular I see two unique features:

1. Enabling financial derivatives to live on-protocol
2. Omitting proof of work in favor of new methods of currency release

I find part 1 to be less worthy of interest. Derivatives markets have a place in creating liquidity, but aren't fundamental to finance, and I'm wary of some of these implementations that try to hew too closely to a model like forex or options - complex trading models ultimately favor financial specialists. Nxt has the colored coin option planned, of course, which may prove to be good enough for individuals who want to make simple investments.

Part 2 interests me profoundly. At heart I hold the opinion that an equitable redistribution of wealth is desirable; not to the point of rendering currency meaningless, but as a long-term force to dampen inequality and keep the global economy from stagnating. As such, I expect a gradual trend towards equitable-redistribution strategies in new cryptocurrencies, because a currency that demonstrably produces more stable economic outcomes is winning on the most important intrinsic of any "medium of exchange." I don't think any of the 1st gen coins are anywhere close to this, since the mining process is unequal-redistributive, and thus destabilizing. Nxt remains deflationary in basis, but is also a strong step towards stability, since wealth in the system remains in proportion over time until actors choose to transact - with a very slight bias towards appreciation due to lost coins. Nxt relies on the social expectation that its early adopters will be rational enough to spread around proportionate wealth in order to gain real wealth. eMunie is also taking a step towards stability guarantees, since it designed in a feedback loop for a self-correcting level of inflation.

[MadeTran]

Honestly....This brain wallet thing or whatever it's called I think is gonna get a lot of negative PR.....people don't have the ability to create a passcode on top of that with a different algorithm encrypting it......that would bolster confidence I do believe.

As far as the topic, I think the best feature about NXT (Which is the first 2.0 crypto currency IMO, all the others were just variations of bitcoins source code)....is it's 100% proof of stake. That is NEW and attractive. People are tired of new coins getting released and they can't get in on any action because they don't have 5k or more worth of specialized hardware to have a chance.

[Alias]

Some important aspects of NxT's mining algoithm are referenced in the following thread - "Transparent mining, or What makes Nxt a 2nd generation currency":

https://bitcointalk.org/index.php?topic=364218.0

So, what does make Nxt a really next-gen currency? Not those nice features like decentralized exchange, or decentralized DNS, or decentralized app store. The transparent mining algo does, and this is only the 1st part of BCNext's plan...