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NXT – Proof of Stake and the New Alternative Altcoin

When the crypto community thinks of altcoin, cryptocurrencies like Litecoin, Dogecoin, and Peercoin are usually first on their mind. We have seen a growing number of altcoin since Bitcoin’s introduction in 2009, simply because of the rapid adoption of cryptocurrencies all over the world. But is it possible to have an alternative altcoin? The new and innovative altcoin NXT and its developers have made it possible.

Less than a month ago, NXT launched their brand new digital currency, and soon after signed BTER as an exchange partner. With no mining on the network, NXT is the most energy efficient cryptocurrency, because the “forging” process requires little processing power. Forging NXT can even be done from a mobile device.

The new Alt-Altcoin?

The way NXT works is completely different from that of Bitcoin as it uses completely different algorithms for mining. In fact, the developers created NXT completely from scratch, in order to create the new alt-altcoin. The different algorithms used allow NXT users to mine with exponentially less computing power. NXT uses Proof of Stake (PoS), a concept initially pioneered by Peercoin, rather than Proof of Work, used by Bitcoin and other coins.

NXT and Proof of Stake

As the first 100% Proof of Stake digital currency written from the ground-up, NXT is creating a new path on which altcoins can be built from. Unlike Proof of Work currencies like Bitcoin, the currency is secured by owners of already existing coins that receive a portion of transaction fees for forging a NXT block. A user is chosen to solve a block depending on their stake in the market, which allows everyone on the network to have the same reward potential.

The idea behind NXT and Proof of Stake is to generate coins without using vast amounts of energy as the Bitcoin network does. This is done through the network, by calculating the amount of coins each user has and randomly selecting who will forge the next block. Everyone knows who will be mining the next block in the blockchain, making it impossible for a user to convince the network that a transaction didn’t occur.

Additionally, the network can detect which accounts do not participate in PoS and also recognize users forging a fraudulent block. A process called Transparent Forging enables the network to decrease the attacker’s mining power to zero and keep the NXT network secure.

Reducing Double Spending and 51% Attacks

NXT eliminates the possibility of double spending and 51% attacks, because each user knows who is responsible for forging the next block of transactions. A fork in the blockchain simply does not exist with the newest alt-altcoin. What Transparent Forging and PoS provides to NXT is something new for cryptocurrencies. Transactions continue to remain anonymous and secure, but unlike Bitcoin, each transaction requires less user confirmation, making digital transactions even more efficient.

NXT is the first cryptocurrency that has been completely rewritten and is 100% Proof of Stake. Other altcoins like Peercoin, only uses PoS for a portion of its coins and uses Proof of Work for the rest. Digital currencies, most namely Bitcoin, along with other altcoins like Peercoin use mining to create new coins, working together to solve each block. This is the main point of difference with NXT – instead of mining new coins, NXT has already produced them. This enables the NXT network to focus on solving blocks and increase transaction efficiency, while decreasing power consumption for users.

What’s Next for NXT?

As with any alternative coin, NXT is very new to the cryptocurrency community. The entire market consists of 1 billion coins, all created by the NXT developers, and are currently worth just under $74,000,000USD. NXT also provides an alias system, arbitrary messaging at Block 40,000, asset exchange and a decentralized domain name system. There is no question that NXT warrants its own category, as the world’s first alt-altcoin entirely based on Proof of Stake. With the growing popularity of cryptocurrency, the future looks very bright for NXT.

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  • Jeff Perkowitz

    Great article, I’ll be investing in Nxt. Thanks.

    • Chris

      Don’t. It’s basically a scam. 100% premined (which they act as if it’s a feature) and I believe it’s still closed source.

      1 billion NXT were initially distributed between just 70 people, that wasn’t even a month ago. These 70 people ALL TOGETHER paid 21 btc for it. If you look at the market price now, these 1 billion NXT would be valued at more than 70000 BTC. Does that make any sense? You’re right, it doesn’t.

      Forget about this scam coin. It’s nice if someone creates a new and bitcoin-independant code base, but getting the initial distribution of the currency so fundamentally wrong is just unacceptable. There is a REASON satoshi didn’t just split 21 million bitcoin between himself and four or five friends of his….

      • Tom

        So much ignorance…

        1. There is no such thing as premine in pure PoS. In fact, there is no mining at all.

        2. It’s open source.

        3. Satoshi owns ~10% of all Bitcoins there will ever be (he is currently worth $1.5bil). I don’t see you complaining about that? Also, NXT distribution is currently better than Bitcoin’s despite the initial distribution and Bitcoin’s 5 year lead.

        4. From your writing, it’s clear that you are letting your jealousy and envy talking. “If you look at the market price now, these 1 billion NXT would be valued at more than 70000 BTC. Does that make any sense?”

        It make sense.

        Hint: It has that market cap because NXT is a good idea.

      • bithic

        Chris, I encourage you to do more research and join the community. Would bitcoinmagazine have published this article if Nxt is a scam? Think about it, they have their reputation to uphold. There’s a VERY active Nxt development thread on bitcointalk, as well as two independent forums dedicated to Nxt. If you read a few hundred of its pages you’ll get a sense of the community, and it’s very exciting.

        Regarding the distribution: The initial ipo was publicly announced on bitcointalk, and open for anyone to contribute to for 6 weeks. I wish I had invested then, but like you I missed it. That was probably a once in a lifetime opportunity, but it still has great potential for growth because of its ground-breaking innovations, so I’ve invested and gotten involved in helping the community where I can. This is cryptocurrency history in the making — read up on Transparent Forging! Where Nxt is right now is like Bitcoin when it was worth only a few dollars per bitcoin. High risk, but very high ROI potential. The distribution has improved significantly in the past two months since its release, and it will continue to do so. Before you criticize it too harshly, recognize that Bitcoin distribution is no better. Take a look at distribution by address at bitcoinrichlist. 1.53% of all bitcoin addresses with more than 0.01BTC hold 68.66% of all bitcoins. This is not counting the 96.66% of addresses with less than 0.01 BTC.

      • Eli Maier

        Wake up, mate. If you can’t mine the coin it doesn’t meen it’s premined. You just missed a moment when POS coins appeared. Also Nxt is so much more than just a coin like Btc, Ltc or whatever. It offers lots of new features that never existed. One day Nxt will be number 1.

        • Damelon

          Coin is a misnomer, yes. The “coin” part is only a small part of the ecosystem.

      • salsacz

        You can see Nxt distribution in this infographic:

        • Shin

          Reading this infographic is recommended to those who would like to gain
          information about NXT distribution in comparison to BTC. Get educated,
          don’t be confused. 😉
          Please, read more about NXT if you like the idea! And then decide for yourself.

      • Coenraad Loubser

        Did you check out the source code? If not, we’re not interested in your opinion.

      • Will

        The amount of early stakeholders is irrelevant at this point. The amount of general interest and “regular people” who have invested in this coin far outnumbers the early stakeholders. The term scam has been thrown around at every single coin to come around and it is getting old quite frankly. I currently hold only 800 NXT and am in no way shape or form a whale, but as far as the NXT community is concerned I have an opinion that matters. We are all able to discuss and give input in this community in an open forum. Early adopters as well as the creator of the coin are STILL working hard to make this coin successful and are open to the opinions of ALL holders. This is not some “mining community” scheming on the best time to dump our coins. We are an active community taking part in economic discussions about our coin. Id love for you to have a look before using the S word.

      • mijnnaam achternaam

        It is so Obvious you know nothing about NXT, You dont know what PoS is and you are probably a minor.

      • zorke

        The easiest way is to say it’s a scam and it has been premined. Go ahead and do some research first and you will see how wrong you are. The IPO was open 6 weeks and anybody could have joined.

        It is still not late to join in. This NXT train is still in the station but not for long.

      • olivier

        It may looks surprising indeed that 70 people own the first 1 billion NXT, and I was also surprised at the beginning… but what is more important is what they do with it : as the distribution infographic above shows, those NXT are more and more distributed now, to speed up NXT use, welcoming newcomers, and financing NXT related projects.

        To sum up my own story, as a new user with 0 nxt, some unknown users sent NXT just to say hello, and as soon as I have installed a node I was granted with thousands of NXT. It makes me trust it and invest my time in the project, starting a mobile app which won a opened poll, and far far more NXT.

        So now, I can certify that stakeholders use their money to invest in the project : most of them do know there is no use to keep them in a wallet, to sell them and leave. There is a nxt spirit and a long term goal : it is human centered. I didn’t have to buy big and expensive mining devices to accumulate virtual coins in closed wallets, I’ve just given my time, and shared it to own nxt and become a new investor.

        NXT has been thought to be shared, by its strong community’s values, and even by its forging algorithm (fees are distributed between nxt owners).

        All cryptos are virtual… so I think the more important is the spirit shared by their users : it makes the long term value of it ! And nxt has strong values :)

      • Ivan

        Some people used to say this more than 3 months ago. It’s time to wake up buddy :) It’s not even late to catch the train. Nxt proved it is not a scam long time ago :)

      • Mistafreeze

        “that wasn’t even a month ago. ”

        It was well over a month ago and everybody had a chance to be one of the original shareholders as it was it was publicly announced.

      • Fush

        Quote:”Don’t. It’s basically a scam. 100% premined (which they act as if it’s a feature) and I believe it’s still closed source.” This would be right if it were a coin that you are able to mine…so please read the article above first before you discredit another coin…

      • irunic

        ouch! I don’t mean to be annoying but you are basing your accusations on the belief that premine=scam. This is false though, and probably very misleading.

  • bithic

    Thanks for the article! In the last paragraph, I think you forgot three ‘0’s on the current valuation. Second last sentence, you meant Proof of Stake, not Proof of Work. Great read!

    • bithic

      Looks good now. Thanks for correcting!

  • agnusnatum

    how many NXT did you get to write this article?

    • Damelon

      I hardly think the editors here would accept bribes, as you seem to imply. :-)
      Do you?

      • johncitizen

        I have and will continue to invest in NXT. I think its a bargain at $0.06USD !

    • John Manglaviti

      While I know this a popular comment to make on coin articles, it doesn’t help push any of our communities forward. If you don’t appreciate Nxt, that’s fine. Accusing this well known publication that’s done more for the crypto community than most of ‘getting paid off’ is simply off base.

    • zorke

      I don’t believe that a reputable magazine of this sort would be taking bribes as you have suggested.

    • CoinManiac

      There is no wrong even if the publication received a NXT as a donation because this way more and more people get involved, the more and more the coin gets distributed. Because NXT is for everyone.
      Grab some before it’s too late

      • NineCoins

        it is difficult to handle bribes and donations in same issue …
        If someone is getting a salary from a job he’s doing, then I guess, there is no room for donation.

  • Damelon

    Happy Nxt investor here. While it’s true that some things may look strange if you are used to PoW, I advise people to do some *independent* research. The platform is sound, has a very dedicated community and many talented developers. Sure, distribution could have been different, but I prefer to look at what it actually does now instead of looking at the past. Try reading the resources available for the current situation :-)

  • anon136

    Wow thanks for picking us up and helping to let the world know of our existance guys! Nxt future is bright indeed.

  • DrearyUrbanite

    Thank you for the article. For those who think they missed it – there is still time to get in on the ground floor of this exciting opportunity!

  • salsacz

    Nxt has got the best and most unique community! There is no leader, no boss from any agency. Richer Nxters are supporting helpers by donations. You don’t even have to begg for donations. You just do something for the community and you are getting Nxt and even don’t know who supported you 😀

    There are almost 1.400 pages on Bitcointalk forum, everyone is welcome in this wonderful world. Decentralized leadership is the best!

    And ofcourse, you can mine Nxt on solar energy supplied Raspberri Pi 😀

    • Coenraad Loubser

      So lets test that theory right here before your very eyes: I have just unlocked an NXT client with a passphrase to yield a wallet ID:

      2262975240066051554

      Now, presumably, someone who likes this illustration will transfer some NXT coins to that address. I can then use those coins anywhere where I feel safe to key in my passphrase… that particular one, as of yet, contains no coins.

      Let’s see how long before someone deposits coins into it… :-) If it works, I will publicly confess that I believe in the toothfairy.

  • John Manglaviti

    It’s nice to see another very well thought our article on Nxt. If anyone has any questions, we have a few forums that would be more than happy to assist.

  • Matt

    Thank you Adam for a very well written article!! I hope you enjoyed digging into the Nxt community and seeing everything that is going on. We have a lot in store so stay tuned! :)

  • Stew

    Good article. Bitcoin has no long term sustainability because mining requires tremendous effort for an increasingly smaller reward. Mining, being costly, is also HIGHLY centralized. NXT will unavoidably replace bitcoin in the near future.

    • bithic

      We will see. I’m a fan of Nxt too, but it’s still very high risk atm. I don’t see Bitcoin being replaced any time soon, but Nxt will definitely force Bitcoin to innovate! And maybe in the long-term Nxt will overtake Bitcoin, but it’s far too early to say it’s unavoidable now.

  • Uniqueorn

    Great article!
    I wish you’d emphasize the completely decentralized nature of the asset exchange and the very important difference between NXT and Bitcoin in terms of being sustainable from a cost-energy efficient perspective too.
    Bitcoin is just not sustainable in the long run and is detrimental to the environment. NXT solves these issues too :)

    • Taybrien79

      Agree, besides all the points posted above, the fact of it being eco-friendly is a major plus in my books. The amount of energy consumption we are using in this country to mine some of these coins is very wasteful. Its nice to see an alternative like NXT!

  • Coenraad Loubser

    Ever since I first heard about Bitcoin, I instinctively saw where it was headed and wondered how long it was going to be before someone creates something like NXT. On the one hand I’m glad it’s here… on the other hand, I think it would’ve been cool if I had more time and could play a part in creating it… Oh well, least I can do is study up the source code and if I see no major scope for improvement, spread the word…

  • Conurtrol

    Early adoption of NXT has been mostly restricted to tech savvy people because of the lack of an easy to use client. That is about to change. There are 3 or 4 very nice, open source clients coming to NXT within the next week or two. I would encourage anyone who is interested to take a really good look at the facts on NXT. I think you’ll be pleasantly surprised.

  • NicholasOccHH

    The NXT community is indeed very active, new clients & websites pop up all the time. I think it NXT has big potential, especially with features like the alias system and built in exchange.

  • JGries

    I stumbled upon the NXT community on the bitcointalk forums late one night while looking for a new investment opportunity. Expecting another new pump and dump slightly tweaked version of bitcoin, I was very pleasantly surprised by what I had found. NXT is one of the most impressive young communities I have seen. After diving in and reading a few pages you realize something very special is going on here. If you think you have missed the boat, you havent.- we are just barely getting started. This crypto is a totally different animal, and its feature set is very impressive. NXT is impossible to ignore. It raises the bar to a whole new level. In my mind, no other cyptos can compare to what is happening here at this moment with NXT. It is the only crypto that I have decided to hold for the long term besides bitcoin.

    • gs02xzz

      I felt the same way when I found this community on the bitcointalk.

    • Miles Cowan

      I second this view. The qualitative difference in the NXT community is immediately apparent from even the first few pages of the notoriously voluminous thread over at bitcointalk, and is only furthered by the fascinating evolution that takes place over the following 1400+ pages.

      I’m less qualified to speak as to the real technical merits of the PoW/PoS approaches, but I note that many of the claimed disadvantages of PoW are met not with denial, but instead with a proposed workaround. Perhaps the workarounds are all that’s needed, but until they are implemented, we don’t know if the issues are resolved. Somewhat ironically, Bitcoin’s success could impede its progress; I image it would be pretty nerve-wracking for the Bitcoin developers to muck around with fundamental features of the protocol and risk introducing a serious unforeseen problem.

  • gs02xzz

    NXT looks very promising to me. Great dev team and great community. Now it is still cheap. Don’t miss the train.

  • DRIV003

    Great article! NXT has such a great community and you can tell they are focused on long term growth. Very exciting to see so many people involved, this is exactly what it takes. Can’t wait to see what the future brings!

  • James

    NXT, is cool, but eMunie is the safer bet. Has more features than NXT, better economics model with price stabilizing mechanisms in place, actually 100% anonymous and will have a open and fair IPO, unlike the NXT coin fiasco where they silently cut the funding short so the result was that just 70 people have all the coins. Look into eMunie and thank me later.

    • Uniqueorn

      Please stop spreading myths and lies, thank you.

    • James

      BTW, you can still get in on day one with eMunie as the IPO starts on the 15th of this month. (disclaimer- I have no affiliation with eMunie, I am just genuinely excited and enthusiastic about seeing this project revolutionize the scene, which it will if Dan can hold true to his promises)

    • erik_t

      I don’t know. Nxt has no inflation. I suppose if you plan on being a “hatcher” you might do pretty well with emunie otherwise investors will be fighting debasement through inflation with that coin.

    • Tim

      EMunie has too many mechanisms. NXT is neat and simple. – It just needs a non java rewrite.

  • Steve

    I have been reading the NXT discussion for a few weeks now. It has an amazing variety of extremely talented people involved in its development.

  • erik_t

    I much prefer the proof of stake model for virtual currencies as it conserves resources. I’ve owned peercoin for awhile and bought some Nxt when I found out about it.

  • GT

    NXT has some interesting times ahead of it. The community is very agile and responsive. Hopefully the distribution will find some horizontal equity in the near future.

  • bluedot

    Very nice article! In the end. when the dust has settled, we will see what coins will remain. My bet is on NXT, keep up the good work!

  • J. Ramon Gros

    WARNING BITCOIN: GHASH.IO IS NEARING 51% – LEAVE THE POOL

    • Autumn Yellow

      You see, this cannot happen in the world of Nxt 😉

    • Guest

      You see, Nxt makes it impossible ta have this problem 😉

  • Georg

    Thanks for the article.

    >> What’s Next for NXT?
    – I think, the future for Nxt is DAC (Decentralized Autonomous Corporation).

  • Autumn Yellow

    Reading the forums and seeing how active this community is and the novel ideas that bubble up there makes me think the future is bright with this platform :)

  • S3MKi

    thanks for good interesting article!

  • zorke

    Thanks Adam for a great article about a truly new and innovative coin that makes us all very excited. NXT has a bright future with a lot of new features. The NXT community is awesome. Many great people and very smart DEVs, all working together and helping each other to improve this project.

    I am calling out all the people who are thinking about investing into NXT just to dedicate an hour of your time and to read maybe 50 pages of the official thread and you will easily realize that NXT has a very bright future.

  • Flow with the Go

    I’m really looking forward to watching the development of alternative currency platforms this year. 2013 was Bitcoin’s breakthrough year. It got lots of mainstream attention, as we all know, and has paved the way for new platforms to be imagined and created. I see this year as a race between NXT and Ethereum. At the moment NXT has a head start but I’m sure Ethereum will hit the ground running. As an investment, I prefer NXT because it’s not inflationary and has amazing support from a global network of incredibly intelligent and capable developers who are obviously dedicated to making this a success. I’m not a developer. Just a fascinated investor who wants to be a part of the movement and evolution of the Internet. Reading the threads on bitcointalk, I’m often in awe of how quickly and effectively this decentralized, grass roots network of computer computer geeks (I mean that in the best possible way) is able to coordinate itself to get so much done it so little time. Anyway, I want to say thank you for all the hard work. It’s great to watch it progress.

  • Ivan

    It is a big pleasure to watch how Nxt community is getting bigger every day. New articles, exchanges, features, participants…
    Thank you for the article. I really hope to see more about Nxt in the near future. I can’t wait to see an article about the decentralised asset exchange!

  • netprofit

    Even non-techies like myself can see NXT’s potential – its
    features and benefits clearly distinguish it from the others and
    should make it a serious rival to Bitcoin within the next 12 to 18
    months.

    • alllwelder

      Nxt have the best community and dev ,we all talked about the tech, market ,and so on.

  • Ron

    Show me the source, and not some decompiled java crap.

    • brooklyn mister

      Source is written in Java, what is your expertise at reviewing at code? Easy to say “show us the source”, but what does it show you?

      • Ron

        As far as my expertise go, I have reviewed the BTC and LTC client source, and regularly read over commits between my last review and the most recent. However it’s not so much just my expertise, but the community’s as a whole. It shows us users that the developers are not trying to hide anything and care about the currency enough to allow others to help solidify the implementation.

        The client being written in Java is not the problem. What I meant by that is that someone is passing around a decompiled version of the NXT client and stating that it’s just as good as open source, which is not true at all.

        • NineCoins

          I’ve understood that the code will be published in April.
          To prevent immediate copy-coins, the publishing is delayed and also that’s why the reviewed code had flaws injected.

  • CoinManiac

    The thing I like abt NXT is its long term sustainability, Bitcoins require huge hashing power and for people like us, it is not sustainable. NXT on the other can be forged by anyone having a PC or a laptop and it is energy efficient.

    • ChuckOne

      Indeed. I am no environmentalist but the idea of having a sustainable crypto is amazing. I was interested many other coins, but the concepts of NXT have really been refreshing.

  • brooklyn mister

    I think one of the best things about NXT is the communal aspect to solving problems, and ensure true decentralization. Sure its a bit Student Union / Anarchist book fair / Freegan soup kitchen at times, but it comes down to PoS.

    All the free thinkers, utopians, and crypto-freaks involved are financially invested, and forging both with their wallets and their 2 satoshis. Forming groups, paying for programmers, marketing, and organizing this well informed response to an informative article.

  • Mistafreeze

    Thank you for the article from someone that appreciates what the Nxt community has become :)

  • Brenton

    Thx BitCoin Magazine for the article. Can you do a follow-up with a bit more detail? For instance, answering the following quesitons:
    Is the code open source? Is there any central point of control in the system or is it entirely democratic (51%)?

    • NineCoins

      Good issues. Though there is lot of other coins and features to be followed 😉 I wonder if some centralization is still needed to keep track what is going on in the world of cryptocurrencies.-)

  • SuperResistant

    Nxt is the most interesting crypto-currency ever created. It is like a paradigm shift and a lot of people cannot handle the change. The biggest change is the absence of mining that make miners very frustrated and angry. Haters gonna hate.

  • irunic

    As you pointed out in your article, Nxt seems to make a few steps forward in the world of crypto. Although it is rather early to say anything of value i would like to admit that i admire a new perspective and the mental will on behalf of the devs on taking a bold step forward and reinnovating a standard procedure. It sure looks promising!!

  • hotsurfing

    I love the leader! Nxt #1

  • Timmy

    Well done BTCMag. Spot on as usual

  • Deadelus

    I confess I am no crypto nut. I found Nxt at the end of December. I was thinking about investing some money in cryptos instead of gold. I didn’t have time to babysit it, I need set and forget. I am looking at the long term (retirement supplement). Biggest plus for me with Nxt? NO INFLATION! Big plus for a long term investment. Later, I find that I could earn a income from Forging. It is a small fraction of 1% so far but this could take off and is a huge plus (since I have chosen to buy a 5 figure sum of Nxts). Without having to beat inflation every year, a very modest rate of return would be fantastic.

    Another big plus for me, Bitcoin has made the money for its version of cryptos. The alts are mined and converted to BTC when the opportunities occur. Nxt stood out as it was something genuinely new and has since removed all my worries over being a scam. If it is, it is so elaborate and intricate, such a confidence trick makes Madoff look amateurish.

    Then when I understood the other features, I thought this could mop the floor with every other alt that currently exists with a single feature: Transparent Forging. What this means in practice for the layman (like me), instead of BTC max 7 transactions per second, NXT is said to be capable of 1000s of transactions per second. It could rival Visa and lead to mass adoptions. That is why devs are swarming around Nxt. Don’t expect any fireworks until April at the earliest, when Transparent Forging is fully implemented. Worth my money on that alone, the rest would be nice additions for me.

    Pump and dumpers: adjust your mindset or go elsewhere, this isn’t for you. Sell your GPUs and buy Nxt, no more scouring the net for the next victim. More time to spend developing Nxt and creating more value in your investment.

    But always, ALWAYS remember the first rule of investing in cryptos (and gambling for that matter) which is….(someone help me out here)….