The Past, Present and Future of Altcoins
By Mark Rees
The following article illiterates how survival of the fittest and game theory will likely halt bad altcoins from tricking people out of honest money.
From the “Sacred text of Bitcoin” – Book of Mark, Chapter 1 verse 1
In the beginning, a block of data called “Genesis” entered a world. At that very moment of singularity, an alternative universe was born. This silent and strange new universe contained only empty slots for data, organized for information to one day occupy them coming from all points on Earth. Like stars in the night, they would be viewable by all but understood by few. Its creator, Satoshi, saw that it was good and gave unto it the name “bitcoin”. The new dimension he discovered would not be understood to most of the world for years to come; although in time its name would become legendary. A handful of brave pioneers we will call “Satoshinites”, gathered around to study it. They were not held bound by the limited earthly knowledge of men, and they peeked into this new wondrous gateway and saw… the future.
As time passed, more knowledgeable men found themselves drawn to this new and fantastic portal of discovery. An ever increasing population were drawn unto it. Slowly they began to understand the possibilities that might result from this discovery. Meanwhile, many willfully ignorant people remained tied to their limited earthly understanding of the world. The unbelievers began to mock in disbelief; to these people we assign the name “Krugmanites” . They were those who were convinced by the great and terrible leader Krugman that “bitcoin is evil”. And he led into darkness many unbelievers who then began murmuring against the enlightened “Satoshinites”.
And it came to pass that much value began to be reaped from the seeds sown by Satoshi’s discovery and many clever Satoshinites created other parallel creations in bitcoin’s image. They called these things “altcoins” and became masters of their own parallel universes with only slight changes to the laws which governed bitcoin. The elders of the Satoshinites did not approve of these new creations and considered them abominations and cast them out.
Fortunes would soon follow the earliest Satoshinites who put forth effort into the new discoveries locked inside bitcoin. Soon others learned of the fortunes and the human flaws of envy and greed did descend and took root in the imaginations of some of Satoshinites. Eventually, some clever but flawed Satoshinites did surface and did trick and steal – doing great harm to believers. Many loud Krugmanites declared to their own followers that all Satoshinites were false prophets and to look away.
As time passed, some false prophets did arise from some of the bad altcoins. The law of all things of this world applied itself to altcoins. When a thing becomes valuable, they also become the object of lust, envy, and greed for humans. Some of the Satoshinites that were the newest in the tribe were swayed into believing the false teachings of some non moral altcoin masters. Some Satoshinites gave money to clever men who told beautiful lies that tickled their ears. Those dubious men claimed greatness of their own bad altcoins which hid under façade of witty names and interesting back stories invented to create passion in the hearts of Soatoshinites.
Seeing deceiving altcoin creators fleecing the innocent, the hero Charlieroad into town. So great was his leadership that he gave the world a gift he called “litecoin” And we will refer to this gift as “Charlie’s Angel”. His followers became a splinter group which had descended from the Satoshinites, and to these people we will assign the tribal name “Scrypt” . Most Satoshinites remained with the bigger “SHA” tribe for the safety of network effect. And there was peace and cooperation between leaders of the two tribes. And it came to pass that many more altcoins from both tribes multiplied and replenished the earth. But not all were good.
End of “Sacred text of Bitcoin”
Fast forward a few years and the early adopters of the new technology now watch any new announcements for altcoins with suspicion. By now many altcoins have come and gone leaving tears and disappointment in their wake being now recognized as “scams” or “pump and dump schemes”. These actions have left deep scars with the some newly curious population believing they will benefit by the chance of bitcoin magic lightning striking twice. Some still naively listen to to whispers of secret “new and improved” altcoin promises from bandits preying on them. When they are later dumped, by tricksters with no interests in digital currencies the reputation of ALL digital currencies are lowered in public opinion. The larger audience does not have the sophistication and background to recognize the differences between legitimate and honest technology progression, and get-rich-quick schemes conducted by trading bandits with no ties to the technology.
New onto the scene are supposedly well-meaning vigilante crypto squads that have created websites to warn consumers and the less-knowledgeable about the existence of what they view as “scam-coins”. Several coins were called out, with one example being “Phoenixcoin”. They claim that operators of this coin used a controversial method of boot-strapping a currency called “pre-mining” and used allegedly unfair distributions to make a quick profit for themselves before running off with proceeds when the coin hit the market and they drove the price up. The early investors were harshly punished for their enthusiasm owning a near worthless coin as the creators soon abandoned the coin and any development or contact with investorscoin owners. All people in the digital currency community bear the punishment of a tarnished reputation left in its wake.
These vigilante groups that have been trying to keep lists of suspect coins, but have likely found the work to be unmanageable as new coins are created so quickly they are now counted by the hundreds. The pace of new coin creation is now beyond the ability to practically track, analyze and warn consumers. One site now counts crypto currencies tracked to be 555 varieties. Some think the real count of digital currency variants are now in the thousands.
Some people are saying that the digital currency market is going through an altcoin fatigue. Some say we might have reached the saturation point for new marketable altcoins. Battle lines are appearing and factions seem to be organizing between proponents of various smaller swarms of new coins. The network power of Bitcoin should safely keep it out of the fray of any tampering. But smaller coins have smaller networks still trying to get established. These are vulnerable and can be subjected to 51 attacks. This attack involves using a concentration of computers that have enough combined hashing power that can overwhelm the smaller currency. Once the attackers have control of the altcoin’s block-chain they can rewrite the coin’s history and make double spending possible. This would cause a breakdown in faith of the coin and possibly destroy it. A 51 attack has already happened for a few coins in the past. (See Feathercoin).
When there were only a few dozen alternative coins competing for attention, the longtime supporters of bitcoin rightly worried that there would be confusion due to lofty promises made by the new promoters of the fancy-sounding coins. With Silk Road and other various unscrupulous bad-actors being the de-facto public face of the technology, bad press using scandalous headlines were bound to be propagated. The creators of the “scam coins” are considered by many to be bad actors on par with dishonest exchanges and money launderers.
The barriers to entry for making your own alt coin are low. Because the computer code is open-source even programmers with little knowledge can tweak a few settings and call it their own, but have just enough knowledge to be dangerous. Most of these “crap-coin”creators are likely to put more time and effort just thinking of fancy currency name than to do any actual code changes or safety measures. The con artist creator simply needs to create a website, and give it some kind of compelling back-story using ageless con-game tricks of the trade. Coin names and background stories were created to bestow trust, or play on a person’s sense of nationality, or fear of government and secrecy. To see some of these tricks in action, you only need view the world of unregulated penny stocks made recently famous again in the movie “The Wolf of Wall Street”. The ‘mark’ (in con-artist terms) blindly put their money into these exciting sounding currencies and hope for the same riches sought 150 years ago by the would-be miners during the California gold rush.
More talk of altcoin wars has begun. On bitcoin related forums there have been several “call to arms” with groups attempting to organize resistance or attacks against those altcoins they’ve perceived as “bad” for the community. For example, one of the latest skirmishes is entitled “Shades of Altcoin War”. Although it might at first glance sound racist, it has nothing to do with race. The title of three coins in struggle according the bitcointalk.org post, are Blackcoin, Darkcoin, and Whitecoin.
The new weapons of choice in this new kind of war include “mass-spamming” and FUD (Fear, uncertainty, doubt). Each side recruits armies of supporters they’ve convinced to assist their cause. These groups of ad-hoc response teams are sometimes referred to as “useful idiots”. The loosely organized “geeks” may not even realize themselves that they’ve been selected to repeat the misinformation they believe to be true. The conduits of the attacks commonly use altcoin forums and Twitter. They attack the reputation and motives of the various altcoins in question and attempt to create a fear that will make holders of those coins panic-sell which could destroy the price and possibly the viability of the coin itself.
A new coin called Battlecoin was created to specifically target other altcoins. By purchasing this coin, you are allowed to “vote” on which of the smaller alternative currencies you want “attacked”. Their goal is to use huge pools of computing power to overtake and swamp the smaller selected currency with something like a 51 attack. They intend to be altcoin mercenaries. In the natural evolution we find in nature, and predictions using game theory, these strategies and outcomes might be expected at some point. Without making judgment statements, the predators will evolve. The big fish will eat smaller fish. At some point, you can probably predict that governments will get involved once the money becomes big enough that oligarchies become possible.
For the current day, many opponents to digital currencies gleefully point out that bitcoin cannot possibly survive in the long term because “something better might come along”. This is possible, but we can now easily demonstrate that the currency itself is only one small component of the entire picture that makes a digital currency. There is no other coin or technology coming close to the computer resources devoted to protecting the network. The thick protective shell protecting the block-chain is measured in computer hashing power. Using the popular yardstick of the top 500 supercomputers combined; Bitcoin is now about 2,500 times that number and continuing to climb.
Technologies and efforts like “Battlecoin” can pick off the small fledgling currencies that might have a chance at becoming valuable. New serious innovators are now looking at the shelter found inside the bitcoin network. It remains to be seen what new more complex variations of Scrypt may bring. And we may see many altcoins turn to merged mining for combined protection. But this all just proves the critics wrong that “Anybody can make a competing coin”. So dominant is this power of protection offered by bitcoin, that new development of “side-chains” are being designed to work with it rather than finding some way to compete against it.
Future of altcoins:
The alternative currency world seems to be teaming with life. A new service called “CoinGen” will now make you your own altcoin. At coingen.io you can answer a few drop down boxes, give them an icon / logo for your own personal coin and *poof*, in thirty minutes they spin you out your own executable generic “copy-coin”. They allow you to choose which of our two tribes to join (Sha or Scrypt). There are questions by some in the community if this is valuable, or even reliable, but it does exist. The service lists itself as “beta” and charges around .2 bitcoins ($100) at the time of this writing. They inform you that although they create the software, it comes with no support, and it’s up to you to actually build the network and start the genesis block for your new currency. (Watch for a follow-up article about this).
As Satoshi could attest, it’s one thing to come up with your own currency but without a network and protocol to keep it alive, it only exists in a vacuum and is unusable. The currency itself was only half the battle. If you want to do it like Satoshi, you’ve got to invent a new protocol, network, miner, and get lots and lots of help testing and tweaking. Good luck with that.
Mini-Satoshi, you are not.
Now that creating your own altcoin is becoming relatively trivial, what does this mean? Just because you can, does that mean you should? Consider a world where there are hundreds of thousands or millions of altcoins. How would that affect the viability of “scamcoins”? Stepping back and looking at all of the currencies together – it might all become “noise”. It could be like the world of publishing before the internet. First you only had a few powerful voices that dictated what information they wanted us to hear. Then online publishing, blogs and Facebook came into existence and spread that power equally. To make your voice heard these days you have to offer something valuable and unique. You have to be good. Information itself has become … noise.
If these altcoin currencies follow the same path that the internet provided, there might not be anything stopping them from being created endlessly. If this is the case and we can expect millions to come … they might also become noise. Perhaps only a few might become spectacular and will rise above the rest like Facebook and Twitter. But they will do so on their own merit and it might take extraordinary effort to attain. With the development and release of Ethereum waiting in the wings, the foundation of what will become possible may shift in likely unexpected ways.
Perhaps one day soon, creating your own altcoin will be a required subject in college IT courses. The skills learned may be invaluable for the future marketplaces. In our lifetime, Satoshi might be respected and celebrated alongside Einstein or Newton at our universities. Future businesses we haven’t even thought of yet might look for block-chain skills on a resume. Perhaps some year after that, junior high school students will build altcoins as a science fair project. Perhaps in some decade, the technology could become so widely known and used that children will no longer play with blocks, but instead play with their block-chains.
This isn’t to say that altcoins are useless. To the contrary, some unique and innovating concepts are found in these creations. Evolution tends to happen in most things in nature as we’ve discovered. What might become of many of these technologies is anyone’s guess. The best ones will likely find their own niche where they will thrive because of their differences. It’s as if we’ve just now opened the door to a new dimension we did not know existed. This previously unknown and wondrous new world may contain unimaginable creations still awaiting our discovery. The altcoin wars might result in a necessary clearing that creates a pathway that leads to those discoveries.
Author note: There is no such thing as the “Sacred Text of Bitcoin”. It only exists in my imagination.