Cross post from newbie forum...it properly fits in this forum anyway.
~
Altcoins are springing up like wild fire. The sooner we address which are good and which are spurious the better.
There are a lot of people divided on this issue. Should we support only bitcoin? should we support alt coins? In my opinion, either way we should have a system of evaluating each coin as they appear. If you are only for bitcoin, the evaluation system (hopefully) exposes the flaws and potential scamminess of the coin. If a supporter of multiple cryptocurrencies, the system will help newbies quickly identify the really good alt coins, the iffy, speculative alt coins, and the straight up I'm-coming-for-your-wallet coins. It doesn't matter which side of the fence you fall on, a system to evaluate a new coin is necessary to both sides.
I don't pretend to have the answers, but maybe if many people post here we can set up a stickied topic with tons of useful information?
Here is my 2 millibits on the topic.
PREMINING AND INSTAMINING
This is a phrase that is used frequently when people talk about a new cryptocurrency. I see it in two slightly different contexts. On one hand, a "premine" can mean that the coin was created and official mining had begun but only insiders were allowed to begin mining at the easiest levels. This means the coin was not announced properly to the public and only friends of the developers gobbled up much of the first coins. The other context is in the nature of the amount of coins allowed to be mined in the very outset of the coin. Let's jump right into an example using a very useful (if incomplete) website called
www.cryptometer.orgTake CloudCoin. Go to the above website and click on the CloudCoin link for the first 96 hours the coin ever existed. scroll down to the graphs labeled "minted currency" and total supply. Notice that within the first three hours, almost 1,000,000 coins were minted. Now notice in the next three days, the average minting of coins drops at least ten times the amount to 100,000 or even less. If you go back on your browser and click the "rest of days" CloudCoin link, you can see that it was averaging closer to 10,000 newly minted coins a day. That means coins were made in 100 times higher frequency in the first few hours then in the rest of its life.
Looking at the total supply (albeit this graph is not up to date), those one million coins minted by day 1 account for more than 33% of total coins. This is a major red flag. What is tells you is that whomever mined the first few hours of this coin got a significant percentage of total coins minted. A small number of people potentially own the currency. Now, does this make the coin a scam? Not necessarily. But it DOES SUGGEST tha a few people could sell their stake and conceivably crash the currency's value. It is also worth noting that SOMEONE CAN CREATE A COIN WITH THIS INTENTION. They can mine up as much as they can in the beginning, make a bunch of PR on the net about how cool their new coin is, and as millions come in, they (not so) quietly sell ten percent of their coins every milestone their coin reaches. That should be a concern if you are considering investing.
Look at Bitcoin's cryptometer charts for comparison. Thankfully, millions of bit coins were not mined at the first few days. Primecoin is another sexy graph for anti-premining folks. In fact, take a look at a dozen of them and you'll be surprised at the number of coins that had a mining similar to Cloudcoin. Millions mined the few day or so, and then the amount of mined daily drops significantly, making the first miners (probably developer buddies) hella rich.
So there you have it. Cryptometer doesn't cover all the coins out there, but maybe someone can post another link of someone who does? Check out your coin, do some digging.
People can post another genre of study for an altcoin and if it gets enough QFT (Quoted for truths) I will copy and paste it into my first post. Then we can have a nice study guide to begin your alt coin quest!
