Recently I hear a lot of talk about how the alt coin world if full of scams. I agree with that observation. it is 'wrong' to design a coin with the only purpose to 'rip people off'. That is my opinion and many share that opinion but the scams keep coming. Some say caveat emptor. The latest proposal I hear being thrown around by people who have declared themselves 'experts' is something called proof of developer.
I won't name names but search twitter or google and you can see the people who are pushing this as a 'good' thing.
I am NOT one of those people. I think the proof of developer concept is something that on the surface sounds like a 'good idea' but if you step back and look at the big picture I think it could actually be a method to allow people to get away with scams easier.
First let me introduce you to this idea. It is basically a few people who want to work together to 'rate' developers of coins. The information they demand is someones full name , address (or where they live), details of all thier social media accouts they personally run, and if the developer being 'rated' works with other developers who may have credentials to push updates of source code to github.
These 'self proclaimed experts' (who to my knowledge have not made public what their qualifications are to evaluate anyone or even the information they want to demand from developers) want to rate developers.
Basically if you develop a coin and 'refuse' to participate in their 'program' you get a bad or poor rating.
If you are willing to give them your personal information, talk with them on the phone and answer all their questions you get a slightly higher rating.
If you verify your identity through a notary public you get another increased rating.
There is a higher rating available if you are available for video chats.
Some people claim this will 'clean things up' so there are fewer scams.
Let's take a cold hard look at the reality here.
First of all who is to say that the people doing the ratings are honest ?
They could potentially be scammers who rate a good developer low and a scam developer high either for a bribe or because they are promised a piece of the action.
Even if they are honest and 'verify' this information it would be pretty easy to just make a fake or borrowed identity to provide to them if you were really trying to pulll a scam.
Getting back to the honesty just because someone says they rated a developer high does not mean the coin they are going to release is fair.
Ok you know the persons name and had a video chat with them. So what.
They can still code a coin designed to rip people off and this 'high rating' would actually give them credability.
Once a coin is listed on an exchange or two and the developer has a high rating what is to stop that developer, the people doing the ratings, or some random person from manipulation of the market prices. All they need is a few different accounts on a few exchanges to buy and sell thier own coins back and forth.
Another flaw in this concept is that no matter who the developer is if the coins distribution system is 'staged' to be unfair it is still a scam. Here are some examples.
I won't name names but you can fill in the blanks. A very popular coin out there had a 15 day proof of work period and is now running on all proof of stake. So the developers rented farms of hash power for two weeks to mine their coins got them listed on exchanges and now the network is supossed to run on proof of stake. This coin has a large market cap, a planned payment network , mobile wallets and dedicated markets on some exchanges.
Let's pretend we had an excellent rating of the developer of this coin. Since the insiders mined the coins in a two week period there is no chance or even time for most people to find out about it. Now it is proof of stake so if you want to 'mine' more coins you have to buy quantities of this coin. I don't care what proof of developer you have.
This is nothing more than a pyramid scheme that is 100% designed to enrich the insiders. The insiders cloned some code and everyone else has to buy their way in ? I don't care if the payment system is real or a hoax. It is a scam.
Another example, this a more general one. We see coins listed as 'ipo's' ....
The developer mines some coins and sells them to buyers before a specific date for bitcoin of course.
On the release date the buyers get their coins and a wonderful new innovative payment network is promised.
The website looks great too.
Suppose this developer had a high rating. The coin fails. The developer can say, 'oh I'm sorrry I really tried to make it a success but it did not work out' . So what if you know thier name or thier linkedin profile or thier address. You can't do a thing legally. These are open source projects. If this developer wanted to start another coin next week and have the 'highly rated developer status' all he would have to do is have a friend submit information and put it in his name and the cycle can begin again.
If we expand this madness the only thing that will happen is someone will be smiling in your face while they rip you off. Think of some other world themed examples. Which scam are you more likely to be a victim of...
1) you get an e mail suggesting you wire money to a stranger overseas or
2) someone you met in person , (perhaps several times and you know where they live and follow them on twitter) asks you to borrow money. They never pay you back.
Here you can easily see that it is a natural instinct to 'trust' someone we know vs. someone we meet on the street or someone we never met. Both parties can rip you off but the person you trust is more likely to fool you or rip you off worse. Your guard is down.
So - what is the answer --- how do we make things better and prevent scams ?
Start by understanding that 99% of people involved with cryptocurrency are involved with it because it is a business opportunity for them or a chance to make money. This is true for miners, developers, 'so called experts', exchanges, companies that sell mining hardware, and I could go on and on.
Let's define 'Coin 'Developers' -- Understand that just because someone calls themself a developer and runs a coin and has pushed code to github and released wallets and says they are a developer does not prove or mean they developed anything.
Almost every alt coin is a clone of another coin, anyone can open a github account in a specific name and push code. Lot's of people know how to compile wallets and run nodes for coins. A majority of the so called 'developers' on this forum or anywhere else have never developed anything or coded a single line. They may have paid someone to push that code to github in thier name and make their wallets. They may have paid someone to clone the coin source code also. Even if the maddness of 'proof of developer' were to become a reality these 'proven' developers would have to hire out the work.
If you think this is not going on now I am sorry to bust your bubble. I personally am aware of two different people that are each responsible for dozens of coins, some of which are quite successful. None were ever launched in their name all were paid jobs handed off. The successful projects pay people to maintain the coins.
In reality there are very few 'real developers'. Whoever made the bitcoin source was a developer. Gavin Andresen the man who controls the github repository of bitcoin is a developer. Sunny King who coded peer coin and prime coin is a developer. A real developer is someone who can build it from scratch. From nothing.
I am not a true developer under my own definition. Yes I have released coins, I can write code and I know how to do a lot of things but if you gave me a sheet of paper and a pencil and sat me down in a room and said ...." Here Cinnamon write up the entire code for a coin" I would not be able to do it. Still at least I have actually learned enough about how coins work to be able to build or clone one, maintain it, fix some issues and still for as many things as I am really good at I have a lot to learn.
I communicate and work with a few people who I consider real developers and I am learning new things all the time.
A genuine developer is not something you can just slap a name tag on and declare. I don't care what kind of notarized document you have or what your resume says.
When I look at coins to support I do look at the developer or person in charge and the team of people who run the coin and their reputation if they have one. Most important I study their code. I examine the basic design of the coin, block time, block award, total coins, premines, retargeting , and about five hundred other things. If it looks honest and the design seems fair and I can't 'break it' or see an obvious way to attack it or otherwise compromise it that is a good start.
If a new coin is launched I don't care if there are pools available at launch (since new launches often attract dishonest pool operators that may have nothing to do with the coin) or how fast it is going to 'get to an exchange' . If it is truly a coin I plan to mine and support this is unimportant to me and will be for a long time.
On the other hand if someone launches a coin to try to earn money they certainly would care about these things.
They will have an army of twitter accounts to tweet about their coin and buy retweets to gain exposure. They will advertise the coin and pay popular blogs and 'coin publications' to do a story on how 'innovative' and 'unique' it is. They will have people on irc and in every social media platform and forum around the world bumping their threads, mentioning their coin, raving about how GREAT it is. They will get votes to be listed on exchanges or pay for votes to be listed on and exchange. They may even offer you free coins to go and vote for them. They will make appearances on internet radio or video podcasts or anywhere someone will invite them to listen to their lies and use 'buzzwords' to try and impress you with how talented they are.
Right now on a daily basis I also see people who will give their name, they will call you on skype, they are mentioned in blog posts as experts (yet they were not involved in bitcoin before 2013 or 2014) and they are telling people how great this coin is and how great that coin is. Some people actually believe them until they get burned a few times. The blogs don't care they want to make the money so they will run a feature on almost anything if you pay them.
As crazy as all this is I can see a future when cryptocurrency does gradually get more and more acceptance in the world. There will be people on radio,television and other media who are going to be worse experts.
Remember I have never said I am an expert. I am not trying to sell you anything or suggest you buy anything. I hardly even brag about my own projects. (Some of them are actually great , others did not turn out as I planned but I have learned many things) I am just a woman who knows a little bit more than bitcoin , altcoins, cryptography and advanced mathemetics than the average person on the street.
Proof of developer is not a solution. It will solve nothing and actually make scamming people easier.
There are about a dozen coin developers I have learned the most from study of their code and writings and all of them except one keep thier real identity private just like I do. No one knows who they really are. If you cannot accept that go and delete your bitcoin wallet and all the backups right now and quit the scene.
I made a short list of things to consider when you are looking at mining or buying a coin.
Most of these statements below are facts. Some are my opinion. If you follow my advice you may thank me someday.
If you don't believe me it's ok, go back to sleep and believe whatever you want to believe.
1) A coin designed where it has a limited supply available that can only be mined for a short time (anything less than several years) should never and will never become a world wide solution to anything. It may be ok for a novelty coin at best. Don't be fooled to think it can become a 'store of value'. That is a marketing tactic that has yet to be proven possible.
2) It took me a long time to figure out that proof of work is always best. Proof of stake has about a half dozen ways to be attacked or manipulated that I know of and I know I don't know them all. I don't care what codebase you cloned or invented not one yet is stable without some centralization that I have seen. Coins that are 'only' proof of stake are often more stable but then there is the problem of distribution. How do people get the coins ? Anything like NXT or sold ipo fashion is a pyramid style scheme to benefit insiders. Stay away.
3) The difficulty of a coin network determines how secure it is from attack. The higher the difficulty the safer the network. A blockchain that is not secure is a risky investment. The shorter the block time (this applies to anything on bitcoin style codebases) the less likely it will hold together in the long run. Longer block target times provide stability. Some algorithms can shorten the block time to 2 or 3 minutes with safety. I have yet to see a stable network with block times shorter than around two minutes without centralization of some type.
4) Another lesson I learned : A coin that retargets it's difficulty quickly is a common design flaw. Sorry to destroy all your research and everything you have been told about the kimoto gravity well and digishield or just simple linear block retargeting. I am not saying a coin is a scam or a failure if it retargets every block. I am saying a more gradual dificulty retargeting system is much more stable and less likely to have technical issues. It will also be more 'smooth' on average to transmit coins and keep the network running. (The possible exception to this is coins using the cryptonote codebase which I am still studying and testing)
5) With very rare exceptions a coin that has any premine is one to avoid. The same can be said for a coin that is 'instamined' . If a coin has been running 2 months and 50% or more of the money supply available was mined in the first few hours or days of release I would avoid it. Same is true if 50% of the money supply is mined in 2 years and the coin is going to run for 100 years. (Also watch for coins with large block reductions in short time frames - avoid them)
6) With the exception of coins based on cryptonote codebase (which I am in the early stages of studying and learning about so I am not qualified to make statements about them) avoid ANYTHING that claims to be untraceable or anonymous. This is a lie. Even if the coin only connects over the tor network I can assure you it is not anonymous. You can run bitcoin or almost any alt coin over tor and sorry: it is not anonymous. If the people running the coin are willing to lie to you about something like this or don't know any better that speaks for their character or skill.
7) If a coin is launched and there are problems with the wallet working or there is no wallet move on. If a coin is launched and there are several pools and none of them pay out or claim they were ddos'd I may not junk it but be careful. Minor problems can happen when coins are launched. If they go on for days the coin is dead if it is not relaunched.
Don't expect to become wealthy mining or investing in cryptocurrency. It is not impossible if a coin goes up in value over time but since bitcoin started running with a very few exceptions it has never been profitable to mine based on difficulty and value at time of mining plus costs. The only reason some people are 'bitcoin millionaires' is they mined early at a loss or purchased bitcoin when it was worth pennies. I know someone who sold out several thousands of dollars worth of bitcoin the first time the price was around $12 or $13 and told me it felt like they hit the lottery at the time.
9) If it sounds too good to be true it probably is. In particular if you hear it from the people running the coin or 'popular' blogs or known 'experts' on social media. It is sponsored. They are paying for the exposure.
10) Don't just follow what everyone else is doing if buying or selling coins to try to earn profits. For example you see a coin rising gradually in 'value' vs. btc over the last few weeks and everyone is tweeting about it and there are articles on all the 'usual' blogs mentioning the coin. It is really the next big coin. The bitcoin killer !! The price pump may last for a while but usually not very long. Sometimes there is a second or third pump often with additional hype.
You may get lucky and end up with a profit. You may get burned. Most people end up getting burned because once a coin is out there traded on exchanges anyone can manipulate the price and they have an advantage over you since they know exactly when they are going to make thier move.
11) Don't be afraid to hold or mine some coins that are not traded on exchanges or are only traded on a few exchanges or just one for very low prices. There are some coins out there which are very well designed from a technology standpoint, have a very fair reward scheme, actually maintain a safe level of difficulty so security is not a concern and have a few services or other things being developed. A few good ones are so cheap if you buy five or ten dollars worth and 'baghold' them for a few years you might just make out ok.
