[XPM] Investment Analysis: Why Primecoin is Useless, Doomed to Fail?1) Primecoin is not a CommodityUnlike Bitcoin, there is no cap to how many Primecoins will be made. What determines XPM production rate is the demand.
XPM is not scarce – this is what drives BTC prices up constantly.
Due to difficulty algorithm of Prime, here is what happens:
Demand Increase ->
Supply DecreaseDemand Decrease ->
Supply Increase (higher demand -> higher difficulty -> less reward per block, but the rate of block generation per day is dynamically adjusted by the client to be stable at approximately 1400 blocks per day. => that means higher demands leads to less Primecoins production rate per day).
Primecoin:
- 1 block per minute.....How often is difficulty retargetting?
- Reward is 999 divided by the square of the difficulty....So,
diff reward
8 15.609375
9 12.33333333
10 9.99
==========
That means when demand plummets, Primecoin price can bottom out to zero, but when demand rises fast, its price can sky rocket above BTC's level very easily.
This characteristic, while appealing to day traders, because of huge
price swings as we have observed, is a bad element for long term investors - unlike bitcoin, there is no guarantee or a logical prediction that each XPM you hold will gain value in the future .
Put it this way: when demand decreases, the difficulty will drop, that means there will be more Primecoins mined everyday, but since no one wants them anymore, it will be unprofitable for miner to keep mining, so they give up, leading to more difficulty drop, which means even more Primecoins will be generated, and so on... until everyone have a huge stash of Prime worth exactly nothing (by which time your investment has evaporated). This is why
it's a very bad idea to invest in Primecoin.
2) Primecoin is not a CurrencyPrime is less secure than bitcoin, more prone to 51% attack (attack can happen with even less than 50% priming power) as stated in white paper.
Prime still takes minutes to confirm, not 3-4 seconds like Visa => no average Joe will ever use it, even if Sunny has plans to promote it, speaking of which...
There is no plan for any further development. This start to look like PPC - pump and dump scheme, just waiting for the next Primecoin alt to be released with a few parameters changed, like different difficulty algo, for example.
Besides that, Primecoin is pretty much a Bitcoin clone with different hashing algorithm.
3) ConclusionIf you release a new PrimeClone that is exactly the same as Primecoin but with limited, lets say, 20M coins cap, it will quickly get more interest than Primecoin, because your
PrimeClone will be scarce and will attract long term investors.
Demand is simply perception,
Perception is based on believes,
When people stop believing all the crap talk about Primecoin, such as usefulness for scientific research (because some smart mathematicians have spoken out in this forum confirming no validity of such arguments, but pure speculations) the demand will fall. Shortly followed by price drop and VPS mining farms down.
By the time only botnet scammers remain operating, Primecoin is over, paving way for PrimeClone or something else, or perhaps Sunny can make a new coin based on new innovative hashing algorithm!
Even his supporters got pissed when he announced Primecoin last month!
This is hilarious, check it out.========
Rumor/Truth? (you decide!)
Primecoin does have purpose other than solving for primes. It's meant as an attack for mining market share. The plan is that this will help gain acceptance of PPCoin in the long term. Whether this actually happens we'll have to wait and see.
Sunny King says it best here:
http://www.ppcointalk.org/index.php?topic=288.msg1715#msg1715
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