What are altcoins?
Since great success of Bitcoin. There have been a huge amount of altcoins releasing everyday for past year. And many of them had a huge success e.g litecoin, namecoin and quark. People started to mine most of new altcoins for a profit. Some mined them as a novelty item.
What are multipools or automatic profit switching pools?
Because of huge number of different coins are in the ciculation. People started to setup multipools to mine most profitable coin. There are simply profitability calculators used to calculate the profit of altcoins. And multipools simply use those calculators to mine most profitable coin and then users sell them to buy bitcoins from exchanges.
How is it hurting altcoins?
Whenever a new coin comes out and people start to mine it, due to nature of calculations and coins difficulty, some coins become so profitable to mine. Let's say if a coin has a difficulty of 1. And difficulty retarget is every 50 blocks. Now its mining on difficulty 1 and 100mhash/s. Then a multipool switches to said altcoin and takes it to 5000mhash/s or 5ghash/s. Difficulty goes to 100 or more than 100. Block retarget time naturally was 60 seconds. Now because of 5ghash on current difficulty (1) the block time drops to 5-10 seconds. which was before 60 seconds. Then multipools stay there until those 50 blocks are mined by multipools and when difficulty increases and profitabaility decreases, they leave the coin. Thus the network is left with 100mhash of small pool miners, difficulty sitting at 100+ and block time increases to 5-8minutes. That takes 4 hours for 100mhash to get the coin to normal difficulty. Once the difficulty drops again, multipools jump back. And it keeps on going.
There have been a number of coins hurt by this behavior of multipools. e.g etoken(ETOK) was doing great and suddenly a multipool hit it, leaving the difficulty so high. That miners did started to leave. Now its around 20mhash/s from 1 ghash/s. Then there is this one fedoracoin (TIPS) it was good coin, network was strong and huge number of miners. The coin was about to die but thanks to community that stepped up and helped it regain its value.
There have been so many coins that died or are dying because difficulty is too high for small pools.
How does it hurt cryptocurrencies?
Cryptocurrencies are backed by merchants, and other investors who believe in the cryptocurrency. Once they're left with nothing to believe on cryptocurrency. After a huge loss they completely leave the cryptocurrency. The only way cryptocurrencies are running today is because of the investors and merchants.
How multipools do not earn you way more than what you'd normally earn?
Multipools do a sipmple calculations like one of those available on coinwarz.com Just because a coin is earning you a few cents more. Its listed above all the coins. These coins are dying so that come greedy miners can dump them for a few more cents a day?
Solutions?
There are a few solutions which can be initiated by miners and some by developers of new coins. Miners should use smaller pools to mine when a coin is new. so you can add health to its network. Most of the coin devs are now using kimoto gravity well. From what I understand kimoto gravity well or KGW retargets difficulty rapidly which makes sure the difficulty doesn't go sky high when multipools or autoprofit switching pools jump on the coin.
I posted this article originally here
http://cryptodir.com/are-multipools-killing-new-altcoins/English is not my first language. So a lot of grammatical and spelling mistakes. And I know proofreading is still required. But please do not make negative comments
Some of the things in the thread are for newbies and should not bother you if you're a vet
