Bitcoin and Cryptocurrency Technologies

Switching costs are certainly not zero for cryptocurrencies. For example, users might buy hardware
wallets which can’t be upgraded. But by and large it's easy to switch cryptocurrencies or to use more
than one at the same time.
Second, as we said earlier, many altcoins have unique features which provide a distinct reason for
existing. These altcoins shouldn’t be seen as mere substitutes for Bitcoin; they may be orthogonal, or
perhaps even complementary. Viewed this way, complementary altcoins actually increase the
usefulness of Bitcoin rather than compete with it. If Namecoin succeeds, for example, Bitcoin users
have one more useful thing they can do with their bitcoins.
But this picture of happy cooperation is also an oversimplification. Some altcoins, like Litecoin, simply
try to achieve the same functionality as Bitcoin but in a different, perhaps more efficient manner.
Even when new functionality is being offered, often those use‐cases can in fact be achieved within
Bitcoin itself, albeit in a less elegant way (we’ll have more to say about this in Chapter 11). Supporters
of the do‐it‐on‐top‐of‐Bitcoin model argue that having numerous altcoins divides the hash power
available and makes each currency less secure.
Supporters of altcoins argue, by contrast, that altcoins allow market forces to determine which
features are worth having, which systems are technically superior, and so on. They further argue that
having numerous altcoins limits the damage of a potential catastrophic failure of any one system.
They also point out that Bitcoin developers are highly risk averse and that adding new features to
Bitcoin via a soft or a hard fork is slow and difficult. On the other hand, it is easy to try out a new idea
via an altcoin; altcoins can be seen as a research‐and‐development test bed for potential Bitcoin
features.
The practical upshot is that there is some tension between supporters of Bitcoin and those of altcoins,
but also a sense of collaboration.
10.4 Merge Mining
In this section and the next, we’ll set aside issues of culture, politics, and economics. Instead we'll
focus on the technical interactions between Bitcoin and altcoins.
Altcoin infanticide.​As of 2015, Bitcoin’s hash power dwarfs that of any other altcoin. Indeed, there
are powerful miners and mining pools that control more mining power than entire altcoins. Such a
miner or entity could easily carry out an attack against a small altcoin (if it uses the same SHA‐256
mining puzzle as Bitcoin), causing forks and general havoc which are often enough to kill the altcoin.
We call this phenomenon ​altcoin infanticide​.
Why would anyone do this, given that they must use their valuable mining power to do so and won’t
gain a significant monetary reward? Take the case of the 2012 attack on a small altcoin called
CoiledCoin: the operator of the Bitcoin mining pool Eligius decided that CoiledCoin was a scam and an
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