The altcoin market currently has a market cap of $700mill compared to Bitcoin’s $7.3 billion.
Impressed by the size of this market, I set out to find 10 genuinely useful digital currencies to support that might become major players in future commerce and trade.
Disappointingly, it’s difficult just to find 10 altcoins that aren’t blatant premine /instamine/ fastmine pump and dump scams, never mind 10 coins that genuinely improve on bitcoin.
That’s pretty amazing to say, considering these coins have a chance to experiment with the most groundbreaking technology in the fastest growing industry in the world.
Looking at the price charts on coinmarket.com we can see a familiar pattern for most altcoins – A quick pump at launch by a few preminers / instaminers whose massive stake in the currency allows them to easily manipulate the price up, create an impressive market cap and percentage return which sucks in greedy investors through marketing hype, then dump it on them to send the coin crashing by 90% or more. PoW / PoS hybrids are particular notorious for this problem.
Most coins were disqualified from my “ethical / genuinely useful” list for the following reasons:
1 – Launch: Scam distributions leading to short life of the coin because instaminers look to cash out early after an initial pump
Distribution of a new currency is a huge and underrated problem for competing coins. Bitcoin remarkably solved this by taking a patient and meticulous approach to issuing coins in a steady, consistent supply over a long period of time. Satoshi didn’t give himself higher block rewards than the other early miners.
Bitcoin took 10 months to obtain any value at all. Most founders of altcoins reward themselves with a massive percentage of the money supply within the first few days and have a coin worth millions within 10 days.
The problem of a “fair” distribution where the coin isn’t susceptible to early investors purposefully cashing out is a huge problem.
Current large coins that are particularly bad offenders of this are:
Peercoin 3rd biggest in the world
Blackcoin, 10th biggest in the world
Megacoin 21st biggest in the world
2 – Snake Oil Cryptography Claims: A New Hashing Algorithm
Coins claim to have superior security and a unique selling point to bitcoin by using different algorithms.
This is an attempt to blindly impress with cryptographic jargon to create the illusion of a significant feature over bitcoin, when really none exists.
Security expert Bruce Schneier breaks it down in this post
3 – Lack of Understanding of the Economics of Bitcoin – Why a Hard Limit Resulting in Deflation Is Important to the World, Importance of Decentralization, Etc…
This rules out currencies such as Dogecoin, Freicoin, Ripple
COINS WHICH DO MAKE A GENUINE ATTEMPT:
CATEGORY 1 – ANONYMOUS COINS
The only obvious feature that could improve upon bitcoin is Anonymity > Pseudonymity.
Here’s a closer look at some of the anonymous coins.
1 – Monero
Was forked from Bytecoin, and was not premined.
It uses Greg Mawell endorsed Cryptonote, which is the “ring signature” tech behind bytecoin.
“I wouldn’t be surprised if none of the current implementations of it are around in ten years though: Bitcoin emerged at a surprisingly mature state, the BCN/MRO/FTM stuff isn’t yet anywhere near as mature. But certantly darkcoin is totally uninteresting compared to this stuff. They’re also free of the trusted initialization challenges zerocash has” – Greg Maxwell
2 – Bytecoin
It’s a little disappointing to see how much ZeroCash is hyped compared to Bytecoin (https://bytecoin.org/), since the former is still vaporware while the latter is something real that you can go use right now.
If you’re looking to compare ZeroCash with competing technology, the comparison point should be Bytecoin. It’s also an altcoin (lame, because metcalf’s law applies— dividing up the cryptocurrency network effect is harmfful to all), but unlike ZeroCash it isn’t just a proposal— its an actual functioning system already – Greg Maxwell
Bytecoin is a ground up rewrite (for better or worse) blockchain cryptocurrency which uses a pretty boring schnorr-like ring signature in an _very_ clever way to achieve strong privacy. The ring signature its using has been peer reviewed, though the partial uncloaking technique they use to prevent double spending is a novel application.
The privacy achieved by Bytecoin is better than any existing-in-production privacy tools (e.g. CoinJoin) and also as good as or better than every theoretical system I’ve heard proposed except for Zerocash. Relative to ZeroCash, Bytecoin exists today and has simpler cryptographic assumptions, better performance for signers, and no requirement for trusted initialization. Because it doesn’t mask values its anonymity set is potentially smaller, though the implementation does some clever denomination tricks to reduce the harm of value transparency – Greg Maxwell
Unfortunately Bytecoin was premined.
3 – Anoncoin
Anoncoin gets an honorable mention for having the ability to route traffic over TOR/I2P.
This does a pretty good job at preventing people from associating transactions with IP addresses, but doesn’t do much else. It’s not a great deal different than the proxy functionality already built into bitcoin based client. – Hazard
4 – Zerocash / Zerocoin (Not realeased yet)
It’s certantly better to see things like ZeroCash and Bytecoin being worked on… I’m really skeptical about the wisdom of splitting up the crypto-currency adoption network effect just to introduce some new transaction features. But certantly doing it with substantive new features is way better than just-another-worthless-clone – Greg Maxwell
For further reading on altcoins which attempt to improve on bitcoin’s anonymity weakness see:
CATEGORY 2 – HONEST COINS THAT SOLVE A PROBLEM OR HAVE POTENTIAL TO MAKE AN IMPACT
1 – Namecoin
Namecoin had a fair launch. It was not premined or instamined. It is a genuine attempt at a distributed DNS.
The current Domain Name System ICANN, is a centralized committee that meets 4X per year and has close ties to the US government.
A decentralized DNS makes internet censorship much more difficult. In 2011 Wikileaks claimed that Namecoin and Bitcoin will be revolutionary. Julian Assange has spoken about how a distributed DNS such as Namecoin is the most important technology to achieving free speech
2 – Counterparty
An honest attempt at a decentralized asset exchange. Currency issued through “proof of burn” which ensure an honest environment rather than the horrific launch of NXT or Mastercoin.
Done without the hype and and intense marketing of Ethereum.
CATEGORY 3 – GENUINE BUT GENERALLY USELESS COINS.
1 – Potcoin
Extremely rare for a coin to be launched with no premine / instamine. This is not a scamcoin.
It currently has a decent sized market cap and might appeal to a niche. However, it doesn’t have any real features to grow into a big currency. There is no reason not to choose bitcoin or an anonymous coin over Potcoin.
It’s difficult to see it going anywhere, but at least it’s an honest coin.
2 – Devcoin
One of the first altcoins.
Was not premined or instamined.
Extremely doubtful that it will ever scale. It’s been around for 3 years, but the price chart shows it dying a slow painful death.
3 – Litecoin
The fact that I included Litecoin shows how much I had to scrape the bottom of the barrel to find another coin that’s not simply an outright scam.
It’s been around for 3 years. There’s nothing particularly useful about it, and it offers no improvement over bitcoin but at least it’s not a pump and dump scam that the instaminers are going to offload imminently and destroy your holdings.
“Don’t let speculative experiments at the margin distract from the most mind-blowingly awesome monetary system mankind has ever seen – Bitcoin proper” – Erik Voorhees
The altcoin market is a shambles. “Speculative experiments” is an overly generous description of almost all altcoins.
What is claimed to be “experimentation” or “next generation” is mostly a lying fraudulent mess of worthless get rich quick schemes. This is unfortunate, as the stakes for creating a genuinely successful digital currency couldn’t be higher. Bitcoin is currently the market leader, but hasn’t won yet so you would think it would be all to play for.
This is not the case. Founders who have a decent name, brand, logo (blackcoin) or a seemingly decent feature (darkcoin) could not resist the temptation to cash in on a quick instamine pump and dump over a couple of months, rather than build a coin up that aims for real merchant adoption over a period of many years.
Bitcoin is a remarkable experiment. Despite having 5 years to create a better model, most competitors have failed to balance the tough problem of allocating a coin in a sustainable way.
Even after 5 years, nothing comes close to bitcoin in integrity and utility.