Bitcoin Forum

Hello folks. Here's a write-up of an important upcoming feature in our platform that we hope will improve the overall market for memecoins. We hope our feature here will inspire others in the industry to implement similar controls.

Problem Statement

As many of you know, my project's central theme is creating a friendly, safe, and fair platform marketplace for altcoins/memecoins. We are trying to remove barriers for average end-user consumers to experience the world of digital currency trading.

Haypenny is a digital currency platform, allowing anybody to create their own memecoin in just a few minutes and start trading it with others. (The platform is still in Beta and currently does not trade to outside currencies).

In our quest to identify the key barriers to mass adoption, the problem we ran into over and over again is the many forms of the pump-and-dump scam.

The pump-and-dump scam is, in its essence, a form of fraud. A new currency will launch an ICO and release a small portion of the total units to the marketplace, signaling to the market that there is a certain supply of the units, giving them a certain value. The lack of liquidity in the marketplace serves to "pump" the value of the coin because there are a lot of investors chasing just a few units.

Then, in an instance and before the wider market can react, the owners of the project will "dump" a large number of units onto the marketplace at the price that was predicated on a smaller supply. The owners of the project get to sell a large portion of their units at the higher price, but the original buyers are left with greatly diminished value because their holdings have lost their scarcity as compared to when they purchased them.

This "pump and dump" scam, which is sadly very common in memecoins/altcoins, ruins the market for memecoins and altcoins. It makes it so that only experts and those who do a lot of research can even have a hope of not getting defrauded--and even experts are routinely taken by these scams despite their best efforts.

Our Solution

Our solution at Haypenny was to take a page from traditional securities IPOs and allow large portions of the currency's units to be "locked" such that they cannot be traded until a certain time elapses. IPOs for stocks and other securities typically institute controls as legal contracts, and they basically ensure to investors that the liquidity of the instrument will remain relatively stable since large holders will be unable to dump more units into the marketplace until a specified time--and that timeframe is known to investors, and more importantly analysts and brokerages, who can quickly assess the risk factors of the security and let investors know about that.

Using the reg.BlockLock API (and the Haypenny front-end as the UI if desired), you can specify a block, which contains a certain number of units, and a timeframe in seconds, and after that the block cannot be Split or Combined until the timeframe elapses. This action cannot be undone.

Then using the reg.CoinLockList API (or just viewing the coin's homepage the Haypenny site), you can view the coin's outstanding block locks, and determine the number of units that are locked, and on what schedule.

We envision that all future "serious" ICOs on the Haypenny platform will involve the use of at least some Block Locks, which will ensure investors. Further, we hope that in the future, the notion of buying into an ICO without a feature like this will be seen as risky and unadvised by investment professionals.

High demand on a specific utility is the only weapon fashioned against pump and dump, when utility meets demand no one will want to dump and move on, I don't think that anything else can solve this because it is not even a problem to begin with, it is just that we can't stop having stupid people who don't want to learn first before jumping on anything.

I have heard "locking until a certain time" over and over again, many fundraising platforms are doing this, even few new projects have this mechanism built in them right out of the box, but in the end it depends on the demand of the token or coin.

If I can throw some advice out in the world, to investors and developers, I will say that people need to stop creating shits and people need to stop running after shit jobs in crypto space, but it won't change a thing, because even useless tokens are performing better than good projects, just like you've said, pump and dump, this can't seize to exist in crypto space sorry to say.

This blame is on people patronising the act.

It turns out that "stupid people", as you call them (also known as people who don't do this for a living 24/7), are most of the market for investments.

If you want the digital currency business to grow to $15 trillion, the business is going to have to be "idiot proof".

Maybe you don't want that, but that's what we're working toward at Haypenny. This business is going to be much larger in 5 years and we intend to build a product for that market :).

Just a quick update: this functionality is now live on the Haypenny platform.

You can take a look at the API on our developer site here:

https://haypenny.net/dev.html

Unfortunately, too many projects promises too much and deliver little, the reason people give up and dump. If projects can deliver on what attracted people to invest in the first place, we will not be seeing much of pumps and dumps. There are also people that have the plans of pumping to dump from the beginning and will never care about if the team is delivering on their promises or not. They are mainly after their fast profits that is why they work to see the price go high so they can dump and move on to the next project.

This does not solve anything if the project have no potential. People should see the utility of the token because that is what will encourage people to hold and not sell. Even if they lock 99% of the token yet deliver nothing, people will still dump the 1% and move on.

A lot of projects that have taken billions from investors were clearly designed, from the outset, to defraud investors. They were never meant to have long-term potential, despite how hyped up they might have been on the short run.

They have been doing this with IPOs for stock offerings for decades now, and it has improved confidence for investors. The reason is because share lock-ups make it much more difficult for the project founders to simply bail out: they have to stick with their coin for the long term or they will get nothing. This aligns incentives between investors and coin founders.

That's something to be wary of when working on a project, because usually they create a scenario that seems good in it, in order to facilitate and attract investors, so that they invest in it, by manipulating the market by increasing the price, that's what they do, of course we need to be careful in assessing a project.

I believe we should prioritize the adoption of decentralized swap contracts over a pool system. Buyers and sellers should be able to trade their assets at prices of their choosing. Of course, this might sound a bit utopian, but it’s on the verge of becoming reality.

At Haypenny we are actually considering a managed ICO process that would mimic the Dutch Auction approach that Google used for their IPO. The Dutch Auction is a very fair system that ensures that all buyers into the IPO/ICO get the same price.

IPOs have been worked on in the securities world for a hundred years now, so I think we can all learn a lot from them.

Also, the Haypenny system itself allows people to freely and anonymously trade currencies with each other using a clearing price auction. You can read more about it here:

https://haypenny.net/#help-trading

Thank you for the insightful response. I appreciate the perspective on using a managed ICO process and the Dutch Auction approach, which indeed brings fairness to the table. At Ruferium, we tend to be a bit more idealistic in our approach, envisioning a future where decentralized swap contracts become the norm. That said, your approach offers a valuable and pragmatic perspective. Perhaps our paths will cross sooner than expected as these ideas begin to converge.

Pump and dump scam is not done by controlling the supply although it is the easiest way to do this scam but even by influencing the demand it can create a fake high demand and suddenly the trading is very low causing the price to collapse. In addition the service requires complete trust from you and if any successful scam occurs it will damage the reputation of the platform.

Not sure how far you have started, but good luck with your efforts. What is clear is that trash/shitcoin/memecoin and whatever you call it can be profitable for the collector but not for those who come to collect a few percent and then lose more. Instead of dropping money into memecoin, it is better to go into gambling because it makes no difference. Same outline but modified to wrap it with the words "trading and investing". ;)

Yes, we're well aware that we need our users to trust us--that's our whole business!

And yes, I agree that this tool won't solve every problem, but I think it's an important tool.



Thank you. This functionality is available now to anybody who creates a Haypenny currency (which is fast, easy and free!). Our platform is still in Beta and we're not yet hosting full-on ICOs, and the only currency you can buy right now (for a fixed price) is Legiteum, our platform currency.

You can read more about the platform, and this particular subsystem in our whitepaper (https://haypenny.net/whitepaper.html).

So you are asking investors to trust you to execute a successful scam? I thought you were promoting a service that helps investors identify pumps and dumps, not promoting a scam.

You will get a negative trust, FOR ALL avoid dealing with any service that promises you profits from pumps and dumps.

What are you talking about? We run a business that protects our user's privacy as well as helps protect against pump and dump scams. Our platform gives investors tools to avoid pump-and-dump scams, and we will suspend any currencies that try to defraud our users in many other ways.

You seem to have gotten something... very wrong here...

Does anybody know what you are supposed to do about totally insane, incoherent accusations of scamming?

The post above is totally mindless, and this entire thread is about preventing pump-and-dump scams in the memecoin marketplace, yet the poster marked my account as "promoting pump-and-dump scam" (???), which is the very opposite of what I am doing.

Any ideas?