A Strategy for DarkCoin As a Coin Mixing Service and Payment Gateway - Discuss

[coins101]

My hypothesis on DarkCoin over the short to medium term.

Litecoin

* Over the past few days $50m-$100m of LTC was traded. It didn't move any higher and has in fact lost some value. It was all pure speculation. Mostly non-Chinese betting on what the Chinese would do to the price on the new Chinese exchanges.

* The creator of Litecoin works at coinbase, a bitcoin payment processor. He has publicly stated that Litecoin will not be added to coinbase in the short-term because of priorities on bitcoin (small dev team at coinbase) and complications with multi-coin processing at the point of sale - how do you explain to the ordinary person how to switch between bitcoin and litecoin forms of payment. With a credit card, you just pull out the card you want to use.

Bitcoin

* Bitcoin has nearly achieved escape velocity. $100m - $300m in VC funding to push it forward, investment vehicles, global exchanges and general brand acceptance. The network effect is rooted and difficult to overcome. But the game is not yet done.

* Over the last few days around 75% - 90% of Bitcoin volume was within China, the other major volume could be mining and multipools exchanging mined coins into bitcoin. The Chinese can't spend Bitcoin too easily, so most of this Chinese volume could be speculation.  Aside from clearer regulations to propel it forward, Bitcoin could use an anonymous payment gateway to encourage spending volume.

Litecoin has been pushing to become recognized as a viable alternative to Bitcoin for some time, and yet it has difficulties achieving its goals. Now it has ASICs being deployed, the grass roots miners and supporters will shift away.  The last few days of extreme trading has underscored that Litecoin is not going anywhere. Litecoin doesn't have a strategy to overcome Bitcoin's payment processing lead or even become a niche day to day payment tool.

Litecoin is a few years behing bitcoin, so everything may change and VCs may start to invest in Litecoin; more likely investors will put their money into alternative coin payment gateways - but this doesn't just help Litecoin.


Darkcoin

For me, Darkcoin is e-cash. That means a payment mechanism first, store of value second. However, given Litecoin's struggle against Bitcoin's lead and the amount of investment going into Bitcoin, Darkcoin will take several years to become an offline payment processing option; a re-brand for consumer positioning; and a shake-out from discussions about privacy and e-cash. Online e-cash is easier for now and the brand works within the crypto bubble.

The short-term strategy for brand recognition and acceptance for Darkcoin should be as a decentralised mixing service for every coin, but in particular Bitcoin. BTC>DRK>BTC or BTC>DRK>Payment.

The problem with being a gateway protocol is volatility. There shouldn't be any. Darkcoin can't, in the short-term, attract speculators. Instead it should attract miners and as many nodes as possible to process transactions (Proof of Stake ignored on purpose). That means increasing fees to miners for processing transactions and encouraging diversification of the network.  Privacy gateway serivces for other coins should not be given away, but it shouldn't be prohibitive.

Nodes should be given random payouts, not just payments taken from ddos attackers, but random payments sliced off transaction fees. Over a 3 month period, the random payments should equate across all nodes to something worthwhile. This encourages further stability, scalability and a wider network for the decentralisation of the mixing service.


ZeroCoin

Zerocoin is due to launch, probably in April/May. It's aim is to become Bitcoin 2.0

When DarkSend goes live, the price will jump. We need payment processing fees to be available to ensure the rise in value is sustained.

When Zerocoin enters the race, the price of Darkcoin will become volatile. To overcome the perceived credibility that Zerocoin has achieved (the recent coindesk article being a case in point) over the past year, without actually having shown a working prototype, Darkcoin should engage with the crypto community as a payment gateway, not as their competitor.

[Alt-coin partners because, the DarkSend code will be open source, but the amount of work that has gone into it may make other alt-coins unstable if they don't have some way of supporting the integration work].

Zerocoin will therefore have to overcome Bitcoin's lead and Darkcoins integration as a trusted catalyst within the crypto community.  As with Bitcoin and Litecoin, why would you need Zerocoin if Darkcoin is already established, trusted and integrated?

This may mean giving up some level of being a store of value.

Once trusted as e-cash, Darkcoin can become integrated within offline payment systems.


NB: I hold some DarkCoins, so this post has some bias but I'm trying to be objective.

Coin Information
DarkCoin is the first privacy-centric cryptographic currency with anonymous block transactions powered by DarkSend. We currently have a fully functional public beta for DarkSend, see below.

DarkCoin uses a new chained hashing algorithm approach, with many new scientific hashing algorithms for the proof-of-work. This is so that the processing distribution is fair and coins will be distributed in much the same way Bitcoins were originally. ASICs will be much more difficult to make for these algorithms and will take years.  

With the chained hashing, high end CPUs give an average return similar to that of GPUs. Another side effect of the algorithm is GPUs run at about 30% less wattage than scrypt and 30-50% cooler.

Whitepaper
http://www.darkcoin.io/downloads/DarkcoinWhitepaper.pdf

The main Darkcoin thread https://bitcointalk.org/index.php?topic=421615.0

The recent article featuring Zerocoin (no technology in the public domain) and no mention of Darkcoin (DarkSend beta in public domain)  http://www.coindesk.com/taxonomy-bitcoin-mixing-services-policymakers/

A thread on Zerocoin https://bitcointalk.org/index.php?topic=362468.0

[HammerHedd]

Nice job.

I like the way you are going with this. I agree that the real value of a currency is it's capacity for trade, not it's value as a commodity. I think Evan did a good job making it relatively ASIC resistant, which keeps the whales away to some extent. It makes me laugh to see the speculators moaning about how the currency is too stable. What a concept.

As far as Zerocoin - it will be interesting to see if they live up to the hype. I hope they do well, but I don't see them really being a threat to Darkcoin either. I also think that aiming to supplant Bitcoin is gong to be a lot harder than they anticipate.

[eddywise]

I cannot got the whole information but I think DRK will be better in the near future

[illodin]

This should've probably been in the "Alternate cryptocurrencies" section instead of Anouncements.

[chompyZ]

In order for any crypto to gain real attraction, it must imho:
a. behave like cash only decentralized (transferable, anonymous, private)
b. become transparent and immune to ~200 countries regulators' changing agenda or definition (tax, currency, commodity, reporting, etc...)

As far as point-a goes (behave like cash), current crypros as well as Bitcoin deliver only transferability.
They fail to deliver privacy and anonymity.
Their ledger is an amazing accomplishment, but better put to use as a public 'asset registrar' rather than e-cash. This is where Darkcoin brings innovation and MAY solve the issue altogether.

As far as point-b goes (immune to regulators), I think that none of the coins currently in use solved the decentralization weakness. They all use exchanges, and therefore different governments/regulators and varying interests at different periods can shake any coin dramatically.

I therefore believe that assuming Darksend works perfectly and is proves valid by the community of white-hats, the next step in Darkcoin's evolution should be a decentralized marketplace.

I see such marketplace as something that runs on top of the wallet, thus dismissing the risk of transferring coins to a trusted 3rd party (exchange)..
This I believe, will make Darkcoin a real 21st century e-currency, whereas Bitcoin will be deemed "first generation" attempt.

** EDIT - in other words, imho don't get carried away too much by Bitcoin or Litecoin's early-entrant success. I remember the very very early days of the internet, when Compuserve and Prodigy RULED... so? better things came and they became an anecdote in the past.
Therefore, Darkcoin needs to push the frontier... again... and again.... and again...

[illodin]

I therefore believe that assuming Darksend works perfectly and is proves valid by the community of white-hats, the next step in Darkcoin's evolution should be a decentralized marketplace.

I see such marketplace as something that runs on top of the wallet, thus dismissing the risk of transferring coins to a trusted 3rd party (exchange)..
This I believe, will make Darkcoin a real 21st century e-currency, whereas Bitcoin will be deemed "first generation" attempt.

Isn't this something that james/jl777 said NXT is good at doing - or something that he was planning on implementing on top of NTX? I probably misunderstood what he was saying and should read more on NXT though.

[chompyZ]

I therefore believe that assuming Darksend works perfectly and is proves valid by the community of white-hats, the next step in Darkcoin's evolution should be a decentralized marketplace.

I see such marketplace as something that runs on top of the wallet, thus dismissing the risk of transferring coins to a trusted 3rd party (exchange)..
This I believe, will make Darkcoin a real 21st century e-currency, whereas Bitcoin will be deemed "first generation" attempt.

Isn't this something that james/jl777 said NXT is good at doing - or something that he was planning on implementing on top of NTX? I probably misunderstood what he was saying and should read more on NXT though.

a., to the best of my understanding - YES, this is exactly what NXT is doing, and I expect Darkcoin, NXT, and Zerocoin to compete had-to-head in the near future, placing Bitcoin as a somewhat dinosaur with the "only" real asset being it's market-cap and trading volume.
b. I hold darkcoin, and never held NXT because imho the fact the it was premined violates the Geni co-efficient threshold, and can therefore never reach equility among its users.
http://en.wikipedia.org/wiki/Gini_coefficient

[jolipenria]

I therefore believe that assuming Darksend works perfectly and is proves valid by the community of white-hats, the next step in Darkcoin's evolution should be a decentralized marketplace.

I see such marketplace as something that runs on top of the wallet, thus dismissing the risk of transferring coins to a trusted 3rd party (exchange)..
This I believe, will make Darkcoin a real 21st century e-currency, whereas Bitcoin will be deemed "first generation" attempt.

Isn't this something that james/jl777 said NXT is good at doing - or something that he was planning on implementing on top of NTX? I probably misunderstood what he was saying and should read more on NXT though.

a., to the best of my understanding - YES, this is exactly what NXT is doing, and I expect Darkcoin, NXT, and Zerocoin to compete had-to-head in the near future, placing Bitcoin as a somewhat dinosaur with the "only" real asset being it's market-cap and trading volume.
b. I hold darkcoin, and never held NXT because imho the fact the it was premined violates the Geni co-efficient threshold, and can therefore never reach equility among its users.
http://en.wikipedia.org/wiki/Gini_coefficient

I doubt very much that Darkcoin, NXT, and Zerocoin will become top cryptocurrencies. Great future is for currencies based on CryptoNote.