[ANALYSIS] Altcoin Investing

[dailyarsenal]

nice analysis. thanks

[1715535474]

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[bitwho]

can we keep this awesome thread to minimal promotion, and more analysis basis. break downs of the three main subjects the OP started with or futures suitable to brag.


enough with the "my coin has bigger pennies"  

kthnxbuy

[r0ach]

Yeah, that's a good article and I was influenced by it early on. However, I don't think he takes inflation into account . . . he's talking about Bitcoin as if they are shares that are 100% issued already . . . but 50% of Bitcoins are still to be mined, so to reach those levels in the short time, trillions of dollars have to flow into Bitcoin . . . if there was 0% inflation already, it could reach those levels much more easily because only small numbers of Bitcoins need to be traded at those high levels.

This might be the most ridiculous view of the proof of work system I've ever seen.  If you're running a proof of work coin with no reward for mining it, you have 0 security for your blockchain.  Who cares if it doesn't have inflation when nobody is going to keep the block chain up.  No distributed  block chain security = no acceptance.  

You criticize Dogecoin about coin count, yet Dogecoin is one of the FEW coins going with a system that makes sense for PoW.  They're changing to two minute block times and 2.5% inflation per year.  That number is a little high and I would personally use something like 1%, but this means people will always be mining it and keeping the network distributed and secure.  Please don't tell me your solution to this problem is checkpoints....

[FreeTrade]

If you're running a proof of work coin with no reward for mining it, you have 0 security for your blockchain.  Who cares if it doesn't have inflation when nobody is going to keep the block chain up.  No distributed  block chain security = no acceptance.  

Yes - there's a balance between too little going to miners (no block chain security) and too much going to miners (rampant inflation) - you want something in the middle.

[FreeTrade]

You criticize Dogecoin about coin count, yet Dogecoin is one of the FEW coins going with a system that makes sense for PoW.  They're changing to two minute block times and 2.5% inflation per year.  

Yeah, those are better values. Are they planning a fork? I based my commentary on the published values.

[Phantomic]

I completely agree with your analysis on Cryptogenic Bullion. I think that coin is terribly undervalued with the scarcity and advantages.

[Percy520]

why not peer coin? It is currently on 4th at the list, should worth a mention.

[smooth]

This might be the most ridiculous view of the proof of work system I've ever seen.  If you're running a proof of work coin with no reward for mining it, you have 0 security for your blockchain.  Who cares if it doesn't have inflation when nobody is going to keep the block chain up.  No distributed  block chain security = no acceptance.  

You criticize Dogecoin about coin count, yet Dogecoin is one of the FEW coins going with a system that makes sense for PoW.  They're changing to two minute block times and 2.5% inflation per year.

This suffers from exactly the problem you describe in your first paragraph. The market cap of DOGE is about $50m. With 2.5% inflation that's only $1.25m per year in mining costs. Ignoring ASICs, that's only 6000 250W GPUs at $0.10/kWh. At $300 each that's only $1.8 million worth of GPUs to run a 51% attack. At some point soon there might be 6000 GPUs on Amazon Web Services available for well under a dollar an hour. Someone who wants to vandalize the network for whatever reason could do it for under $1000.

Not going to work.

Low inflation rate can only work if the coin has such an enormous market cap that transaction fees can support the network. That might be BTC in some hypothetical future. It will not work for any of the altcoins, other than perhaps by defining "work" to mean limited supply and rapid short term speculative gains. I won't use the cliche three-word phrase, but that's really what you're talking about here.

[r0ach]

At $300 each that's only $1.8 million worth of GPUs to run a 51% attack.

Really, that's all I need to attack Dogecoin is $1.8 million dollars in r9 290 video cards?

How much did the 9/11 attacks, or alleged government patsy attacks (pick your choice), cost again that destroyed several financial institutions at the same time?  $5 for a box cutter?

I wonder if the neighbors will notice $1.8 million of r9 290 fans running in my house.

[The One]

Freetrade

What is your definition of inflation and how did you work out the inflation rate for each coin?

[FreeTrade]

Freetrade

What is your definition of inflation and how did you work out the inflation rate for each coin?

Money supply inflation.

[The One]

Freetrade

What is your definition of inflation and how did you work out the inflation rate for each coin?

Money supply inflation.

how did you work out the inflation rate for each coin?

[peterzz]

Preamble:
This is not investment advice. People always say that when giving investment advice, so I thought I'd start with it. I guess some guy once did badly and sued some other guy and now nobody advises anybody about anything anymore. If you're a litigious guy, you should stick to T-bills, whatever they are. I hear they are very safe, but don't take my word for it, as this is not, as I have already told you, investment advice.

Bitcoin Hopefully you already know why Bitcoin is great. This article is for people who already understand Bitcoin, so I won't dwell on its strengths. Those are name recognition, network effect and first mover advantage. I'm going to focus on its weaknesses by looking at the questions altcoins need to answer to succeed where Bitcoin is failing.   a) Inflation - How does the coin solve the inflation problem? Don't be fooled by the econ 101 grads who wax on about deflation. Right now Bitcoin is highly inflationary – running at about 9%. That's a huge problem for the 'to the moon' proponents. Here's why -    There are 3,600 new bitcoins mined every day. It requires $3 million (3,600x$800) to enter the market every day just to keep the price where it is.      Let's say you want a modest 100X return on your investment. You need 1BTC to go from $800 to $80,000. The cost to keep BTC at $80,000? Every day $300 million (3,600*$80000) has to enter the market. It's difficult to see how that happens. The exchanges and markets aren't equipped for anything like that.    This problem will ease over the years – the number of coins mined will halve every 4 years, but realistically, who can wait that long to be a billionaire? b) Development - How is ongoing development, promotion and protection funded? Bitcoin currently has a $10 Billion market cap, and there are lots of services and companies hopping on the Bitcoin bandwagon, but how much effort is going into securing the core-technology and making Bitcoin easy to use? A paltry amount. There's the Bitcoin Foundation which relies on donations, and open source developers contributing their time. The Bitcoin millionaires and billionaires should be co-operating to finance huge development of the core-technology. There is no mechanism for them to co-ordinate that, and it doesn't make any sense for any one person to do it individually. Who is going to pay for the legal, lobbying, PR that is going to be needed down the road? Ain't nobody going to do that. c) Decentralization - How is the coin going to stay decentralized? Bitcoin has become centralized in two ways – large pools and specialized hardware. China has worked out what Bitcoin means for capital movement and currency control and they don't like it. One of the first moves was to ban mining hardware – the ASICs – highly specialized computer equipment. Any government that wants to take control of Bitcoin will target this hardware first. Good luck to anyone trying to keep it a secret. The NSA already knows the colour of your underwear.The pools are a problem too – a co-ordinated shutting down of the major pools could cause severe disruption. Bitcoin Verdict : Recommended 10X Possible – Despite these problems, Bitcoin is the market leader and safest cryptocurrency and gives good general exposure to the crypto-currency market. Keep 50% of your allocated crypto-currency holdings here. 10X short-term price increase still possible. Reduced potential for explosive growth in price.

Quark I was recommending Quark way back in July 2013. It's since appreciated 50X. Let's see if the case still stacks up. Q1: Inflation: The inflation problem is solved, most of the coins have already been issued and the inflation rate is now 0.5%. You'll hear people complaining about the 'pre-mine' – that's a really bullish sign. People don't complain about coins with unfair pre-mines, they ignore them. If there are complainers, it means they want in . . . but . . . yesterday. Well done Quark. (3/3) Q2: Development: Community effort based on donations – same problem as Bitcoin (0/3) Q3: Decentralization: Quark attempts to solve the hardware centralization problem through complexity. The proof-of-work algorithm is complex, so it's difficult to program for GPUs and GPUs are poorly suited to that kind of work. It'll slow down FPGA and ASIC development too, but they'll show up once the reward is high enough. Overall, a good effort – (2/4) Quark Verdict (5/10) – There are still possible 100X returns with this coin.

Primecoin I was very excited about Primecoin from the beginning. I think the hook that the proof-of-work might actually do something useful (finding primes) would be enough to get it a mention in any story about crypto-currency. Let's look at the questions Q1: Inflation: This was the thing that turned me off Primecoin. The inflation formula is 999/(difficulty^2). Difficulty is currently around 10.4 – so approximately 9 coins are issued each block. Difficulty increases by 1 every time computing power increases 30 fold, so you'll have a gradual reduction only with HUGE increase in the network. This coin will remain very inflationary. (0/3) Q2: Development: Community effort based on donations – same problem as Bitcoin but +1 for SunnyKing (1/3) Q3: Decentralization: Similarly to Quark, this has proved to be GPU resistant because of its complexity. Expected to be vulnerable to ASICs with sufficient reward. (2/4) +1 Bonus for newsworthy proof-of-work Primecoin Verdict: (4/10) - Still a buy – 10X returns are possible.

ProtoShares This is the first coin that has backing – Invictus Innovations have pledged that all further chains they launch reserve 10% for ProtoShares holders. They seem intent on keeping this promise, so buying into ProtoShares is like buying into an early stage crypto-startup. The CEO, Dan Larimer is something of a genius in my opinion, and has a strong team so it's a good play based on that alone . . . and it works as a plain old altcoin too. Q1: Inflation: – There's a 5% reduction in block rewards every week, so inflation will be down to 10% before the end of this year, and 1% by the end of next year. Solved in time. (2/3) Q2: Development: – The coin is backed by a startup with funding so some level of development and promotion is guaranteed. The team does have higher priorities with their other projects, but ProtoShares owners will get a cut of those, so that is offset somewhat. (1/3) Q3: Decentralization: – It uses a clever new 'momentum' proof-of-work based on the birthday problem. However, GPU miners are operating privately and expected to dominate when they are generally available. The jury is still out on FPGA/ASIC resistance. Pools seem to be a problem with one pool dominating the mining (2/4) +2 Backing by Invictus Innovations Verdict: (7/10) I should mention bias here – I was involved with the launch of this coin. I'm not recommending it because I was involved with it . . . rather the reverse . . . I got involved because it was possible to recommend it. 100X returns possible.

MemoryCoin I should mention bias upfront here - this is the coin I started to address the problems with Bitcoin. Again, I'm recommending this coin not because I started it, rather I started it because it is possible to recommend it. Here's why - Q1: Inflation: – Similar mining schedule as ProtoShares, 5% reduction in block rewards every week, so inflation will be down to 10% before the end of this year, but reduces to a 2% inflation rate rather than 1%. Solved in time. (2/3) Q2: Development: – This is the reason people are excited about this coin. 5% of block rewards are earmarked for development and promotion. Coin owners vote like shareholders as to how the funds are distributed. It has resulted in huge development effort already, within weeks the coin has more services and support than even Litecoin or Quark. (3/3) Q3: Decentralization: – This coin heavily leverages memory and special instructions found in recent CPUs. There's a battle going on now between GPU and CPU developers to see who can make the most efficient algorithms for mining this coin. CPUs have pulled ahead dramatically in the past week. Uniquely, the project has distributed mining as a high priority so it well placed to avoid centralization of mining. The jury is out on FPGAs and ASICs. (3/4) Verdict (8/10)  1000X gains possible. This coin is still in the very early stages with only 30% of coins issued, and not many people understand it yet, but is quickly gaining a large development community and does large volume on the Chinese market already.

Litecoin I didn't want to talk about Litecoin, but I should because it has the second highest market cap. Let's see how it does with the questions. Q1: Inflation: No attempt made to solve inflation problem – it's got the same schedule as Bitcoin. (0/3) Q2: Development:  Community effort based on donations – same problem as Bitcoin (0/3) Q3: Decentralization:  Litecoin was first to try to address the harware centralization problem but failed. Semi-specialized equipment (GPUs) already required, FPGA are here and ASICs on the way. I've relented a little and given 1 point here because it is more de-centralized than Bitcoin for the moment (1/4) Verdict (1/10) – stay away from this one. Remarkably, there are coins worse than Litecoin – those are the coins trying to be the next Litecoin.

Infinitecoin Infinitecoin is a misnomer. It refers to the number of coins out there (90.6 Billion) which is very high. It's not infinite at all. It's very much limited edition. It was one of the first coins to realize the importance of keeping inflation under control. Q1: Inflation: So far 99% of coins have been issued, and the block rewards keep being halved with no intention to stop, inflation is less than 1% and will be effectively 0% by the end of the year (3/3) Q2: Development:  Community based development, but more difficult to include Bitcoin's improvements because it is a Litecoin based coin (0/3) Q3: Decentralization:  Scrypt (Litecoin) based coin, so same problems. It has a high-cap, but the difficulty for this coin is very low because the block rewards are very low - making a 51% + double spend attack easy. Essentially all the hashing power could be concentrated by a single individual with a handful of powerful GPUs who could re-write a long string of blocks. With the high value of IFC, we might see the first big altcoin heist.(0/4) Verdict (3/10) – I still quite like this coin because of it's hard line on inflation - but it needs to take steps to solve the blockchain security problem, or we'll see a big heist, and that'll be very damaging for it. One to watch, but needs a rescue.

Dogecoin Someone smart once said that the market can stay irrational longer than you can stay solvent. He must have been predicting Dogecoin. There's a lot of interest in Doge now from some of the nicest, coolest, funnest people, or as they are known on Wall Street, bagholders. Q1: Inflation: Very high inflation right now as the coin is issued, but with halving block rewards until inflation reaches 5% in about a year. Little bit high for my taste, but could be worse. (2/3) Q2: Development:  Community based development, but more difficult to include Bitcoin's improvements because it is a Litecoin based coin. Lots of talk about projects right now, but these kind of people get bored easily and move on to the next fun thing. Expect to see lots of half-finished, half-working projects.(0/3) Q3: Decentralization:  Same problems as Litecoin (1/4) +1 First big Meme coin (newsworthy) Verdict (4/10) – Over 1 million USD per day needs to flow into Dogecoin to keep it at its current price levels. That doesn't mean it couldn't go up another 2X or 3X, but trading Doge is gambling. One day you'll wake up and there will be zero buyers at any price. Try to imagine how funny and well supported a 'Gangnamcoin' would be today.

Cryptogenic Bullion CGB has some very nice qualities that give it a very good shot of making it into the top 10 and staying there. It combines low-inflation with a secure blockchain and interest payments for holders. This is a well conceived coin, on a stable foundation.  Q1: Inflation: 94% of coin already issued, in 10 weeks, inflation will be down to 2% (most of that paid as interest to CGB holders) - effectively 0.5% inflation (3/3) Q2: Development:  Community based development so usually 0 points for this, but currently has 2 effective and committed devs, so 1 point for that (1/3) Q3: Decentralization:  Less than 1K USD per day is required to soak up the new CGB being created. This is similar to other coins like QRK and IFC, but those coins don't solve the problem of blockchain security. CGB does - and in a very clever way. It uses proof-of-stake, effectively paying interest to CGB holders to secure the blockchain. Thus mining can be as decentralized as its ownership  (3/4) Verdict (7/10) – Potential for 500X returns. At the moment, it's a hidden gem. Sometime in the next 10 weeks, as the inflation rate falls to 0.5%, the market is going to pick up this coin in a big way.

FAQ: X Coin has fast confirmation times, why no points for that? I don't think confirmation time is important. When ordering via BitPay with Bitcoin, you'll get immediate confirmation. Retail merchants will offload the risk of double spends to third party processors - much better than asking folks to wait for a confirmation that may come in 30 seconds, or 30 seconds after that or . . .. - I'm more inclined to see very low block times as a negative because it weakens blockchain security for some cheap marketing that only impresses the naive.

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This is a living document - bookmark it now - I'll update with new coins, corrections, and as my view and the market changes. I'm also interested to hear what coins you think are good bets for the future - but don't just drop in the name of your coin - tell me, how does it answer the three important questions?

*nb I'll be deleting trolling and inflammatory posts - keep it civil please.

I buy some MMC,CGB,QRK at today, waiting 100X~

[x0rcist]

Freetrade

What is your definition of inflation and how did you work out the inflation rate for each coin?

Money supply inflation.

how did you work out the inflation rate for each coin?

thats just simple math; coins produced per day * coin value

then you only have to look at run time of total coins; example BTC ~ 2040 for last mined blocks.

if you then count that (money needed per day * 365 * running years) you get an estimate of money needed to keep up with the coin value.

[smooth]

how did you work out the inflation rate for each coin?

thats just simple math; coins produced per day * coin value

The inflation rate is even simpler than that, it is just coins produced divided by coins outstanding. You don't even need to know the value.

[x0rcist]

how did you work out the inflation rate for each coin?

thats just simple math; coins produced per day * coin value

The inflation rate is even simpler than that, it is just coins produced divided by coins outstanding. You don't even need to know the value.

sometimes..... keep it simple stupid

[dadon]

well i got me self  over 5k of CGB and im happy because the community is alive with great ideas, and innovations and the DEV's are very impressive, i have a lot of quark already so no need to worry about them, some others to keep your eyes on are DMD and BTG i hold both and i have been watching the community's behind these coins and the devs and they are really dedicated and in it to win it. big things to come for BTG, CBG,DMD, and QRK and  not just saying that because i hold these coins in large amounts, i have many coins in large amounts i have never mined a single coin, every one i bought, i'm currently the largest holder of DMD and one of the largest holders of BTG, CGB and top 100 wallets of QRK and i bought all these because i saw the potential, don't miss out on these, not bragging, but i have already made a considerable amount of money, and i hope that everyone here can, but your not going to make it in dogecoin, im sorry doge supporters, but it's a fad, it's like beanie baby's it is not going to stick around, and no serious business is going to use them, we are coming up to a time in this world, where people will be struggling to keep a roof over there heads, doge is going to loose it's funny appeal very quickly, and the only crypto's that will survive are ones that can be a store of wealth like gold and silver, and maybe, maybe a few that can be used as an actual currency, my advice get out of doge while you still can, and if you don't, don't say you were not warned....

[FreeTrade]

the community's behind these coins and the devs and they are really dedicated and in it to win it.

Yeah, that's a great indicator for a coin - maybe the best . . . long term interest of community and devs.

[MesoPlanet]

I don't understand why you said that Cryptogenic Bullion is reliable coin !
Seriously, it have the worst name of all, and this coin is quite the same than many other cryptocurrency.

[dadon]

I don't understand why you said that Cryptogenic Bullion is reliable coin !
Seriously, it have the worst name of all, and this coin is quite the same than many other cryptocurrency.

it's not really it is designed as a store of wealth like gold or silver instead of a currency, and you really think it has a worse name then things like dogecoin, catcoin, kittycoin, junkcoin.....junkcoin probably is a good coin haven't really checked it out, but if it is the name hurts it in my opinion