Shitcoin vs. buttcoin: a dummies guide to cryptocurrency manipulation
counterthink.com
counterthink.com
Serious question, not trolling. I am asking as there's a sea of shilling and mis-information out there and it's getting very difficult to figure out what's real and what's pump-and-dump / shilling, painting the tape, washtrading type scam.
My question is, What makes a "Sh* t" coin a "Sh* t" coin? I'm getting varying answers depending on source. Is it the current price (like fraction of cents) or is it a coin that has a landing page site with a "White paper" but no usage, or something else?
I thought Ripple ( XRP ) was onto something when they claimed that they have "partnered" with 100+ Banks, Financial institutions to provide liquidity and fees saving in cross border transfers.
Further research unearthed the fact that they do not have a SINGLE real customer, and that all the ones they hype on reddit r/Ripple and on CNBC are "Trials" / Pilots of their xCurrent and xRapid blockchain based software.
So does this make XRP also a Sh*t coin?
Shitcoins are the ones that put up a fancy website, a babble-filled whitepaper, maybe have an ICO, but their economic model makes no sense (blockchain for dentists anyone?), or they have no product at all and just clicked a few buttons to generate an Ethereum/Waves/etc token. Thus their ‘currency’ is likely to have zero utility. They still go up on wild speculation, because why not.
Of course not. Judging by the fact 75% of the top 20 coins on CMC are premined, the only people who have an issue with founders premining the coin are delusional.
Even if you did want to launch a coin with no premine in today's market, due to the insane amount of interest in cryptocurrency, it's virtually impossible for founders to mine their own coin en masse (per Satoshi). In the absence of an explicit premine, industrial scale miners effectively "premine" the coin in lieu of the founders premining the coin.
And typically, coins that claim they aren't premined have a checkered history of ninjamining or cripplemining or instamining etc; while the founders tout "no premine" to noobs, in reality they just played games to get around the (pointless) stigma of it.
A great heuristic that will cut a lot of the chaff is: how organic/productive is their community, and is the technology there/actually possible? A more formal method is SpacesuitX which is a method of breaking projects down into categories and rating them based on personal research. http://SpacesuitX.org
Cryptocoins are reproducible software databases. Production and minting of the supply is trivial.
> Cryptocoins are reproducible software databases. Production and minting of the supply is trivial.
Educate me then; because when it comes to tech stocks, and especially pure software based tech stocks like TWTR which pay no dividend that I'm aware of, I'm unsure what investors really think they're getting which is meaningfully different from cryptocurrency.
When you invest in Bitcoin, you're investing in Greg Maxwell and the usual suspects of Bitcoin-land. When you invest in Ethereum, you're investing in Vitalik Buterin and the usual suspects of Ethereum-land. Maybe it's a bit more dynamic than this given the lack of official titles and the ability for new actors to come and muscle out old actors, but ultimately there's always a mutually shared profit motive and organizational structure behind any given cryptocurrency.
The coins you buy are effectively bearer shares on steroids, because they're exactly like traditional bearer shares in spirit and in form.
IMO it isn't very useful to pidgeonhole cryptocurrency as a mere software database, when investors are in practice investing in the teams backing the software (see: above). The leadership/management team behind the coin develops the coin's ecosystem, and spearheads user adoption. It's basically like a startup.
To this end, one standout example is the cryptocurrency Decred, which features a passive income stream component for investors along with a shareholder voting component. Decred's coins can be thought of as publicly traded shares in a company like Stripe, only in bearer form and built on the blockchain.
The more applications built on top of Decred, the higher the transaction volume on Decred, the more valuable Decred becomes. Is this really so different from how tech stocks work?
Investing means you would make money from the activity of an underlying enterprise, but with cryptocoin software you're simply buying a number in a database that someone else already created. With each new block the supply inflates more. Sometimes the supply is premined. Often blockchain "startups" tokenize their service, which would be like if Gmail started asking for payments in gift cards but worse because the service or product doesn't even exist yet.
Most of these database tokens were created for little to no effort (see the 10,000BTC pizza).
Risks like Bitfinex/Tether [1] collapsing, or the unregulated exchanges manipulating prices along with those large stake holders cashing out could easily evaporate the price far below what the last few weeks have seen.
Market confidence could be lost and it would be incredibly hard to regain because database coins have no inherent value beyond the hope that you'll find another buyer.
[1] https://medium.com/@bitfinexed/latest
They're getting a claim to part of the companies assets, which will be liquidated and distributed if it goes bankrupt (after paying the debtors). They can overpay for that right, of course, but they're not getting 0 out of the deal.
By all means make a "Ripple Company" and own 100% of its stock, but if you grab a massive supply of the tokens for yourself you can't claim to have an interest in decentralization.
Look at Ethereum on CoinMarketcap.com.
Next, find Counterparty.io on CMC. You'll have to scroll to page 2.
What you'll notice is Ethereum is worth over $100,000,000,000 today while Counterparty is worth about $100,000,000. It's a difference of 1000X.
Importantly, Counterparty wasn't premined whatsoever (wow!!11). Conversely, 70%+ of all ETH which will ever exist was explicitly premined by the Ethereum Foundation and investors in the Ethereum ICO. At this point, in retrospect it would've been WAY better for the founders of Counterparty to premine the coin and ICO it to smithereens. At least then they'd have millions in capital to hire people with, while the founders would be heavily vested in the coin.
But this didn't happen, and since then we've learned real world investors don't care at all about fairness in coin distribution. It isn't like any coin, to include Bitcoin, is "fairly distributed" by any reasonable definition of fair. Something like 90% of all BTC is controlled by less than 10% of all Bitcoin holders, meanwhile billions of people don't own any BTC whatsoever.
Of the top 10 coins on CMC, 70% are premined: Ethereum, Ripple, Cardano, NEM, Neo, Stellar and IOTA. Of the top 20 coins, 75% are premined.
IMO the only conclusion we can draw from this is cryptocurrencies are de facto bearer share companies, and investors in these companies actively seek out coins where the founders of the company scoop up a good amount of the pseudo-equity for themselves. It vests the founders in the project, and gives them a source of funding, if indirectly.
While I for one really do wish your "knowledgeable" friend was correct, alas.
I think it is a complete different story when a project has a pre-mine that is held by a formed legal structure with a fiduciary duty to spend the resources on the project's development. Obviously in pure proof-of-stake systems, a "pre-mine" is de facto the only path you can take.
Fairly distribute tokens is a problem that lacks a completely satisfying solution. It should be noted that "fairly" doesn't mean "evenly".
A fair distribution is one that lets the demand shape the final supply of tokens. In other words, you let people take the position and degree of investment they want to take without manipulating the supply to force pressure the demand.
Writing this comment gave me pauses, I hope that I conveyed my points clearly. Let me know if you need me to clarify anything.
It's very possible for project founders to forego a premine, even in pure proof-of-stake systems. All they need to do is determistically distribute coins in proportion to the funds raised in an ICO. Ofc, this would mean the project founders themselves have to fund their own ICO with their own money, and so in practice this is exceedingly rare.
Unfortunately there are plenty of prolific high-ranking members of the cryptocurrency community who accuse coins which are explicitly NOT premined by any technical definition, of being premined. Many of those coins can only be accurately described as "ninjamined" or "cripplemined" or "instamined".
Admittedly, some do consider ninja/cripple/insta-mining as being on the same spectrum of a premine, in that the end result is essentially identical. But this is a bit of a slippery slope, in that it opens up all coins to "premining" accusations, and then the simple technical definition above loses all meaning.
For example, many have speculated Satoshi Nakamoto must've been running a network of 20-50 Bitcoin mining servers prior to the launch of Bitcoin, given the blockchain evidence we have of Satoshi's hashrate maintaining consistency from Block 0 onwards. Is this a ninjamine? If a ninjamine = a premine, then Bitcoin is arguably premined by this definition. So you can see it's not very meaningful to diverge from purely technical definitions.
Ethereum epitomizes the technical definition of premining: their ICO raised BTC on Bitcoin's blockchain, and the founders of Ethereum initially hard-coded all ETH owed to their Bitcoin-based ICO backers into their blockchain prior to its public debut. The Ethereum Foundation premined still more coins on top of this.
But this doesn't necessarily mean all ICOs are premined, although I don't personally know of any ICO which doesn't exhibit some amount of premining; at minimum the project founders usually scoop coins in a premine on top of an ICO, Ethereum-style.
Now I agree that you can make that premine "fair" and that there is some semantic cleaning to do.
https://www.reddit.com/r/CryptoCurrency/comments/7r6chx/here...
Not to mention that nobody really uses any coins right now because of all the hype, so it's not a great time for people who want cryptocurrency usage to eventually be widespread.
It's doubtful that any of those people would want to acquire USD if it couldn't be traded for bread, gasoline, or anything else. People want USD, precisely because it can be traded for items.
Most of it comes down to the common sense test: ponzi. Did the founder give themselves 50% of the lions' share of the coin supply? Is the code just a copy of something else but changed to give the founder extra coins or abilities? The list goes on. Pretty much everything out there is a mixture of both. No founder wants to be poor if people will accept these diluted offerings. After all, you take $1 from everybody, and no one screams and shouts, yet you become one of the richest people in the world. Same principle applies with initial supply dilution in some respects.
Yes.
1) Buy the coin on an exchange. 2) Install the wallet from the coin's official website. 3) Get a text based pass phrase or private key so that I can restore the wallet at any time from a paper backup. 4) Transfer money from the exchange to the wallet. 5) Restore my wallet on another computer using step 3 and verify money from step 4 is present. 6) Transfer some coins back to the exchange.
Ripple only passed steps 1-3. It failed for step 4, in the sense it was a bad user experience, because you find out the wallet will cost you 20 XRP which you can never get back ($40+ when I tried it). It failed step 5 because the website suddenly stopped letting you download their wallet, which is still in Beta, even if you agreed to all the popup warnings asking you to accept the risks.
Some other results...
ADA/Cardano: I tried installing their wallet 5 times on 3 different computers (macOS and Windows 10) and just got random errors or hang ups. I got one wallet to work out of 5 attempts and was never able to restore that wallet from my pass phrase.
ZEC/ZCash: The macOS GUI wallet often crashes immediately. When it didn't crash it was easier to find a "donation" address than my own public (send to) address.
PIVX: Fails step 3.
Verge: The video at the top of their website to "learn more" before installing the wallet is beyond words bad -- I couldn't bring myself to perform step 2.
NAV: Great, passed all steps. Just not sure how it will compete against Monero long term.
Monero XMR: Looks good so far. But my exchange (Binance) charges about $15 for each transfer to my wallet. Transfers for most coins cost under $1.
ARK was absolutely the best experience. Passed all steps first try and took very little time. I really loved the UX and UI.
Binance CEO Changpeng Zhao recently stated that they have only 20 support agents handling over 25,000 tickets every day. That's nuts. Why wouldn't they hire more? Minimum wage?
> Binance receives more than 25,000 support requests (tickets) every day, with a 20 agent support team, that means each agent can only spend 20 seconds or less on each ticket. Unfortunately, as a result, we have a backlog.
Source: https://www.linkedin.com/pulse/binance-q2-changpeng-zhao/
"A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation."
Long answer - It takes lot of research before you can label something a shtcoin. How to do that research is one of the longer blog posts pending in my draft folder.
Starting point can be the ownership aspect of a coin. There are coins which are pre-mine or instamine. Shameless plug and a badly written blog post:
https://blockchaintechblog.com/2017/09/02/ico-token-explaine...
Ethereum is one of the biggest example. During it's launch developers owned ~12% of the supply.
Now, pre-mine is not exactly bad. Developers need money for things like listing. HitBTC, consider to be one of the worst exchanges, cost 25 BTC per listing.
But, on the other end of spectrum you have Veritaseum where the developers still own 95% of the coins. People might support it but in my book it is a shtcoin even at $373 per coin.
[1] https://www.investopedia.com/terms/p/paintingthetape.asp
Cryptocurrencies are not magically immune to all of the financial regulation of the past few hundred years just because they’re not specifically called out in those regulations.
“Cryptocurrencies are unregulated” is not just a myth, it’s propaganda created by shady people trying to sell you something.
It’s secondary to my point, though.
Certain types of market manipulation are encouraged by exchanges in order to provide liquidity. I wouldn’t be surprised if the major cryptocurrency exchanges engage in market manipulation. In fact, it would be trivial to do so. They have access to the order book before anyone else, and they write the matching engine.
My main point is that regulations come after the fact, not before. Until the SEC states otherwise, cryptocurrencies aren’t securities. So why would securities regulations apply?
There is no comparison between electronic market-making --- which "preys" on "institutional" traders by ensuring that their large block trades immediately influence market prices, rather than doing so after the trade is complete and the institution captured its free money for being able to trade without moving markets on the spot --- and "painting the tape" scams, where there is no underlying liquidity, no buy-side or sell-side at all, just fraudsters bidding up prices in a pump-and-dump scam.
This is unequivocally false, and we can’t look just past this claim because it’s “secondary to your point.”
High frequency trading (and market making in general) isn’t market manipulation. The paper you’re citing uses pejorative terms like “exploiting” and “scalping”, but to the extent that HFT “exploits” market microstructure, it’s just rapidly buying and selling securities. This is not market manipulation; on the contrary, the decreased latency and increased trading volume actually improves both net liquidity and price discovery.
This is a seriously great video.
The 'bubble' will only stop when we can finally use these currencies in the real world, until them, it's purely speculative on their potential future use.
[1]https://www.bloomberg.com/news/articles/2018-01-16/bitconnec...
Monero is the only private, untraceable, trustless, secure and fungible cryptocurrency.
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There is new Monero only marketplace called Annularis currently being developed which has not been created for those who value financial privacy and economic freedom, and there are rumours Open Bazaar is likely to support Monero once Multisig is implemented.
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The use-case and features of Monero are well explained in this post: https://np.reddit.com/r/CryptoCurrency/comments/7ra409/your_...