Let's Talk about Scamcoins - Researching for Let's Talk Bitcoin! show

[mindtomatter]

Hi everybody,
So we've been seeing quite a few new alt-chains release which is totally great!  Only problem is, it seems like instead of doing innovative things or adding improvements, instead they're just coins that are easy to mine but which don't actually have any advantages besides being new.  

This means they basically have no chance of succeeding, and instead of "IPO" coins where they are pre-mined, then released on one small exchange so "suckers" will buy them hoping to be buying early, but in fact they're buying late.

The miners sell, and this continues until people figure out that the coin doesn't actually have a chance in hell, at which point it collapses and the miners move on to a new coin.

I'm looking for suggestions of what you would consider a "Scam Coin" - What the benefit is of pre-mining, what alt-coins are NOT scamcoins.  Looking for people both for and against various coins, we want to represent a variety of perspectives.

This show will run middle of next month, we'll be recording interviews over skype with stakeholders in the next two weeks.  Please post your interest here, email me at adam@letstalkbitcoin.com, or send me a PM.

Thanks,
Adam B. Levine
Editor-in-Chief
Let's Talk Bitcoin!

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[franky1]

im not interested in doing a voice interview, but as a written opinion. here goes.

creating a new alt-crypto-coin should not only be for the sake of "pumping and dumping" much like the penny shares of industry do with new businesses that have no infrastructure, but to also have plans and developers/entrepreneurs/infrastructure in place to offer proper products and services for the coin.

this is why namecoin (offering domain names etc) and litecoin (offering a multitude of services on the same scale as bitcoin did in lets say late 2011) are what i would consider proper alt-crypto-currencies. and dare i say it, XRP (used as the stamped envelope/chequebook analogies for exchanging other currencies.)*

i wish to highlight and emphasise the difference between an alt-crypto-currency and an alt-crypto-coin.
an alt-crypto-currency is a item used as a medium of trade of products or services(has a function)
an alt-crypto-coin is just another coin offering nothing more, but speculation.(has no function)

i personally try not to use the term scam-coin as that is a social term used in the chatrooms of BTC-E and IRC for all coins that are not the top 3 alt-currency coins. There are obviously scam coins out there which never intend to offer use as a currency, that have been pre-mined and are only on an exchange as a temporary contract deal.  but they should only be called scam coins after the fact(after being dropped off the exchange). but highlighted as either a future currency tool or just a coin whilst active (based on who is involved and information on projects that are actually going on).

as a comparison, crypto-coins VS the internet. many people in the 1990s created websites, not to provide legitimate services for customers, but to be designed in such a way that gave websites value, such as domain name parking of popular keywords and submitting the domain to every search engine to show a high volume of visitors. purely to sell on for profit.
alt-crypto-coins is just the next generation to what was referred to as the internet bubble of domain parking.

overall opinion is that alt-coins are not necessarily scams if used right and have a proper purpose/function to fill. But i do find that having such a variety of them does dilute the perceived value of bitcoin as being a limited resource, due to the fact that anyone can replicate the bitcoin featuresmaking the hard code 21mill coins. not so hard because people can just flip to a new chain after the 21million is nearing.. which is why natural diamonds do not have the same investment scarcity as gold, because diamonds can be replicated using carbon.

with bitcoin's 6c transaction fee(0.0005btc) to be guaranteed a place in the next block, i can see the bitcoin being easily replaced by a identical coin code and rules. minus the transaction fee's(block reward being the only reward). which would take over the main-streaming projects. due to the fact star bucks wont take on bitcoin for 6c per transaction + 1% bitpay fee. and attempting to buy a candy bar or a loaf of bread is next to impossible now due to the transaction fee, as well as gavin andressens satoshi dust ignore feature in the latest client.

after all would you honestly pay $1 worth of BTC instead of just using 85c FIAT for a 85c candy, knowing that andressens 'feature' plus fee's are pricing small item's 'out of the game'?

*xrp is slightly different to crypto-coins as it was never intended to itself hold value purely for trading XRP direct, it was to be a tool such as a stamped envelope to transmit transactions. but even stamps in the real world have value and people trade/hoard for a value, not for the purpose of posting letters through postal services.

[justusranvier]

So we've been seeing quite a few new alt-chains release which is totally great!  Only problem is, it seems like instead of doing innovative things or adding improvements, instead they're just coins that are easy to mine but which don't actually have any advantages besides being new.  

This means they basically have no chance of succeeding, and instead of "IPO" coins where they are pre-mined, then released on one small exchange so "suckers" will buy them hoping to be buying early, but in fact they're buying late.

The miners sell, and this continues until people figure out that the coin doesn't actually have a chance in hell, at which point it collapses and the miners move on to a new coin.

It looks like there's not much to talk about because you pretty much nailed it already.

[acoindr]

My post in a thread titled The end of Alt-coins pertains to this:

Guys, countless Bitcoin spinoffs were seen waaaay ahead of time. You don't think they were?

What gives a coin value isn't simply announcing one and hoping people that want to get rich start valuing/pumping it. That doesn't work because there is nothing to stop that cycle recurring repeatedly.

Instead, a coin has to have something other coins can't easily emulate, something of real value. When it comes to money, what gives money value in the first place is that a large enough base of users accept it as such. That's why spinoffs can't kill Bitcoin without offering something super superior. Bitcoin already has one of the largest, if not the largest, base of users/merchants that accept it as valuable. Litecoin is second or nearest that. Novacoin offers proof-of-stake with proof-of-work, which is pretty novel, so I think that one might hang around too.

All of this happening now was completely predictable (just as Bitcoin's price rise was). We're now just watching things play out.

I'm also going to reply to the alt-coin discussion in this Let's Talk Bitcoin thread with Erik Voorhees when I get a chance.

[TheDarKnight]

  Why do you want to know?!!.. Just so you can con us with releasing a new one, manipulating our perceptions by subtle semantic tricks and tricks of image?..I don't think we need any new coins, unless there's a serious purpose to them, and lots of strong support from some top members of the 'community'...To succeed, it needs users, as LiteCoin has got, and of course the original, BitCoin. It cannot be premined, like those gambling coins, I forget their name..but you get the idea, we're not interested anymore, let's just have BitCoin and LiteCoin cos' everything's a scam anyway, no matter how well done.

[misterbigg]

My thoughts are that any alt-coin which is 1) Based on the Bitcoin code base and 2) Fails to merge all of Bitcoin's relevant changes is either a scam, or mismanaged.

Litecoin is based on Bitcoin, have they merged all the commits since Litecoin was forked? What happened to the LevelDB versus Berkeley DB issue? What are they doing about dust? etc...

[DeathAndTaxes]

with bitcoin's 6c transaction fee(0.0005btc) to be guaranteed a place in the next block, i can see the bitcoin being easily replaced by a identical coin code and rules. minus the transaction fee's(block reward being the only reward). which would take over the main-streaming projects. due to the fact star bucks wont take on bitcoin for 6c per transaction + 1% bitpay fee. and attempting to buy a candy bar or a loaf of bread is next to impossible now due to the transaction fee

The min mandatory fee is reduced to 0.0001 BTC in 0.8.2 the fourth such reduction since Bitcoin began.  As for starbucks not being willing to pay 6 cents in processing fees?  Are you kidding?  Their gross profit margin is 44%.  Starbucks gladly pays $0.30 + 2% to VISA.  Bitcoin at <1% is a downright deal.

as well as gavin andressens satoshi dust ignore feature in the latest client.

A continual falsehood you keep repeating even after corrected.  0.8.2 doesn't prevent spending dust it prevents the creation of transactions below the dust threshold.  Miners can set that at whatever value they feel is appropriate.  The default value is 5430 satoshis which prevent creating NEW outputs that are (at < half a US cent in value) uneconomical.  

after all would you honestly pay $1 worth of BTC instead of just using 85c FIAT for a 85c candy, knowing that andressens 'feature' plus fee's are pricing small item's 'out of the game'?

Businesses do every single day.  Credit card, debit card, checks, ACH, bank wire they all have fees (and fraud costs).  Even cash has transaction fees.  Most business checking account charge a deposit fee of ~0.5% for cash beyond some low threshold that anyone except the smallest mom & pop will exceed.  For larger companies armored car services tend to run 1% to 2%.  Ever wonder why Walmart allows you to get "free" cashback when paying with a debit card.  Some genius realized that is enough customers opt to take this cash off the company hands they could reduce the number of armored car runs and net tens of millions in saving from "free" cashback each year.  Throw in the small but non-zero counterfeit risk and you can see that processing costs are simply a fact of business.  Bitcoin to date is far superior to anything out there.  

[acoindr]

My thoughts are that any alt-coin which is 1) Based on the Bitcoin code base and 2) Fails to merge all of Bitcoin's relevant changes is either a scam, or mismanaged.

Litecoin is based on Bitcoin, have they merged all the commits since Litecoin was forked? What happened to the LevelDB versus Berkeley DB issue? What are they doing about dust? etc...

One thing you have to understand is neither Bitcoin's or Litecoin's (or any other coin's) future is on any set in stone course. I amazes me some people seem to think there is some known path of progression for Bitcoin. Satoshi didn't leave any. He didn't know either. The block size issue, for example, validates this. It's a bit of a thorn for the community and until it's resolved one way or another will continue to be one. In other words, we're making things up as we go.

Development of Bitcoin and cryptocurrency in general is experimental and fluid. Bitcoin hasn't worked out all technical issues, so how could anything else? Indeed, what if Litecoin died before going above $0.04? Should it have mirrored every development as it happened? I don't think so.

I see cryptocurrency as a huge and fascinating experiment, one with real world implications, but an experiment nonetheless. Things can go one way or another. It's not paramount any alt-coin solve and implement every technical issue in the near term, just as it's not paramount Bitcoin deal with the block size in the nearest term. Rather, people speculate and make plans on what may happen for everyone's best interest, and that seems to work well enough for now. That's one reason I see alt-coins as strengthening cryptocurrency overall; they can sit back and watch what works and what doesn't for Bitcoin and learn from mistakes.

[Gavin Andresen]

That's one reason I see alt-coins as strengthening cryptocurrency overall; they can sit back and watch what works and what doesn't for Bitcoin and learn from mistakes.

Except they're not learning from Bitcoin's mistakes; how many alt coins have fixed the problems on Bitcoin's hard-fork wish list?

[misterbigg]

Bitcoin hasn't worked out all technical issues, so how could anything else?

Well what I'm saying is that if the developers of an alt-coin based on the Bitcoin code base only contribution is to change a few parameters like choice of hash function and block generation time, without closely monitoring the Bitcoin code base and merging any of the bug fixes and useful improvements that would be applicable, then its either a LazyCoin or a ScamCoin.

A legitimate alt-coin will be under constant development and improvement because like you said - Bitcoin hasn't worked out all the technical issues. So if Bitcoin still has work to be done, shouldn't we also expect that the alt-coins are doing similar work? If an alt-coin doesn't get any commit volume past the initial tweaks then as far as I'm concerned its just a toy.

[acoindr]

That's one reason I see alt-coins as strengthening cryptocurrency overall; they can sit back and watch what works and what doesn't for Bitcoin and learn from mistakes.

Except they're not learning from Bitcoin's mistakes; how many alt coins have fixed the problems on Bitcoin's hard-fork wish list?

Gavin, I mean "learning" in an abstract not literal sense.

I think Bitcoin faces the hardest challenges for cryptocurrency, because Bitcoin is spearheading real world implementation. I also think the strongest development happening for cryptocurrency is with Bitcoin, for the same reason. Similar to speculating 51% attacks would become less worrisome at some future date I imagine as alt-coins like Litecoin become more established stronger development interest will arise with the benefit of history to learn from (which Bitcoin doesn't have).

[acoindr]

Well what I'm saying is that if the developers of an alt-coin based on the Bitcoin code base only contribution is to change a few parameters like choice of hash function and block generation time, without closely monitoring the Bitcoin code base and merging any of the bug fixes and useful improvements that would be applicable, then its either a LazyCoin or a ScamCoin.

What you're missing is any coin can change development participants.

A legitimate alt-coin ...

There you go again with your preconceived expectations. Again, it amazes me Bitcoin didn't exist in 2008 but now some people talk as if they've studied textbooks on it. Nothing is set in stone, and nobody can say definitively what does or doesn't constitute "correct" courses of action about any cryptocurrency. There is only what works in practice and what doesn't.

... will be under constant development and improvement because like you said - Bitcoin hasn't worked out all the technical issues. So if Bitcoin still has work to be done, shouldn't we also expect that the alt-coins are doing similar work? If an alt-coin doesn't get any commit volume past the initial tweaks then as far as I'm concerned its just a toy.

As I said, development participants can change over time. The point is Litecoin, and even Novacoin, now has significant traction and growing monetary user base. Obviously it didn't take more than tweaking a few parameters to establish that (actually Novacoin did a bit more), because the basic building blocks of the original Bitcoin are so good already. People considered Bitcoin a toy when it traded for pennies did they not? Now look at Bitcoin. You have to be able to see how the future can bring about things not always seen present day.

[Impaler]

That's one reason I see alt-coins as strengthening cryptocurrency overall; they can sit back and watch what works and what doesn't for Bitcoin and learn from mistakes.

Except they're not learning from Bitcoin's mistakes; how many alt coins have fixed the problems on Bitcoin's hard-fork wish list?

Well in a sense any legitimate alt exists to do things that explicitly prohibited be hard-forks in BTC.  Any one making such a coin is by definition exploring a design space outside of the prescribed envelope of permissible changes to BTC and will thus have as their primary focus things not on the BTC hard-fork wishlist.  As a secondary priority sure but we shouldn't be surprised that they leave these issues to core BTC developers such as Gavin, he's the one trusted to do this work, and he's paid for it too.

Now what we have seen is alt-coin developers doing a lot of innovation in areas that are THEIR high priorities for their own survival, paramount amongst these is difficulty adjustment.  PPC, TRC and most recently FRC have each altered their difficulty algorithms from basic BTC algorithm in response to violently fluctuating hash-rates as miners jump from coin to coin based on profitability.  BTC (and to an extent LTC) because of their large network sizes don't need this kind of change so it's not on their wishlists.

Occasionally though other coins will create something that can be ported back to BTC.  Over at FRC we have set our the goal for our next hard-fork to adding a block-chain compression feature originally proposed by etotheipi that will solve the notorious huge-download-barrier-for-new-user problem.  Our lead programmer has secured 3 months funding generously provided by evoorhees on behalf of SatoshiDICE on the promise the code will be back compatible with BTC.  Our motivation at FRC is that while our block-chain is small now we expect to be around a long time and don't want to have that download problem in the future so it's in our interest to solve this problem.


You can read more at https://bitcointalk.org/index.php?topic=204283.0

[misterbigg]

The whole premise upon which Freicoin is based, that "hoarding" is somehow bad (we prefer to call it "saving") is flawed. It springs from the Marxist school of thought that is against the concentration of wealth in the hands of anyone, even if the that concentration came about by providing goods and services that people want.

[acoindr]

The whole premise upon which Freicoin is based, that "hoarding" is somehow bad (we prefer to call it "saving") is flawed.

I completely agree.

[Impaler]

The whole premise upon which Freicoin is based, that "hoarding" is somehow bad (we prefer to call it "saving") is flawed. It springs from the Marxist school of thought that is against the concentration of wealth in the hands of anyone, even if the that concentration came about by providing goods and services that people want.

Well besides the fact that were discussing technical innovation levels of alternative coins (an area in which FRC is clearly achieving) and not their economic philosophies your somewhat off topic.  Second Silvio Gesell was in fact a staunch anti-Marxist who embraced private property, private decisions on what and how much to invest or produce and the prices to sell at, aka the Free-Market.  Gesell opposes only wealth accumulation by usury aka interest, wealth acquired by work, risk and innovation are all legitimate and encourage by Gesell and by the developers of Freicoin.

[justusranvier]

I think it's good for alternative systems like Freicoin to exist because now, for the first time ever, people will have a free choice between currency theories without central planning or coercion.

What I expect to happen is that virtually everyone will reject demurrage when they are free to choose between that and a currency that gains in purchasing power over time but the best way to prove this is for the alternatives to Bitcoin to be as credible as possible.

I'm do not think the monetary theories underlying Bitcoin will lose in a free marketplace of ideas, but if it turns out I'm wrong at least I'll be wrong because something even better than Bitcoin showed up. From that standpoint it's a win-win outcome.

[maaku]

I think it's good for alternative systems like Freicoin to exist because now, for the first time ever, people will have a free choice between currency theories without central planning or coercion.

...

I'm do not think the monetary theories underlying Bitcoin will lose in a free marketplace of ideas, but if it turns out I'm wrong at least I'll be wrong because something even better than Bitcoin showed up. From that standpoint it's a win-win outcome.

Wise words.

[Meatpile]

The whole premise upon which Freicoin is based, that "hoarding" is somehow bad (we prefer to call it "saving") is flawed. It springs from the Marxist school of thought that is against the concentration of wealth in the hands of anyone, even if the that concentration came about by providing goods and services that people want.

That opinion is a little narrow minded, if the freicoin (or some alternative) had other properties that somehow made it really easy to exchange into and out of, then whats wrong with it acting as an economic exchange mechanism where saving can be done in another currency? Isnt it possible a digital asset could be more price stable if it wasnt hoarded in?

Just because a tool is designed for not saving it... Doesnt mean it wants to outlaw all saving of other tools

[misterbigg]

I'm do not think the monetary theories underlying Bitcoin will lose in a free marketplace of ideas, but if it turns out I'm wrong at least I'll be wrong because something even better than Bitcoin showed up. From that standpoint it's a win-win outcome.

Great point!

That opinion is a little narrow minded, if the freicoin (or some alternative) had other properties that somehow made it really easy to exchange into and out of, then whats wrong with it acting as an economic exchange mechanism where saving can be done in another currency? Isnt it possible a digital asset could be more price stable if it wasnt hoarded in? Just because a tool is designed for not saving it... Doesnt mean it wants to outlaw all saving of other tools

This is true on some levels but I despise the notion that someone took Bitcoin and modified it to enforce their sense of social justice. Of course, it's perfectly within their right. I just feel that it is not particularly innovative. You have a good point about an alternative that has interestingly different properties - but what properties does Freicoin have besides turning your account balance into a hot potato?