Category Archives: Alternative Coins

A Survey of Crypto Currency Exchanges

Here’s a quick survey of existing crypto currency exchanges that support alternative currencies.   This survey does not include exchanges that support only Bitcoin like MtGox, CampBX, Coinbase and Bitstamp.   That will be for a future survey.

BTC-E

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The most popular of the exchanges with very deep liquidity.   Approximately 8% of Bitcoin transactions go through here and possibly 95% of Litecoin transactions.   BTC-E is extremely robust and rarely does it go down due to trading volume.  Handled DDOS attacks via CloudFlare which on occasions prevents access to the site.  Limited options to send USD into the exchange, however extensive option to send USD out of the exchange.   Charting not very good in that no volume is shown and the time scale cannot be changed.    Withdrawal of money is protected via the requirement of an email confirmation.   A very popular trollbox that can be extremely noisy.  This is the most important exchange in the alternative crypto-currency world.  Exchange is hosted in Germany but run by Russian operators.

Vircurex

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A lot of different currencies (12 at this time) that can be traded in all combinations.  That is, one can trade FRC to LTC if the need arises.  This is the only exchange that supports this, most other exchanges can exchange only to BTC.   Liquidity is extremely poor in the exchange.  Charting does show volume but no time scale option.  Charting can show inverse relationships.  Trading can at times be extremely slow, this is surprising since there is no liquidity.   Vircurex has gone offline several times,  more recently due to a hacking incident.   Fortunately, accounts did not lose their funds.   Employs YubiKey for 2 factor authentication. Exchange allows only one way to add and remove USD funds.  Exchange appears to be hosted in Canada.

McxNow

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A few currencies ( MNC, LTC, SC and WDC) can be traded to BTC.  The exchange is extremely fast and never has a downtime with the exception of upgrades.  Charting is simplistic and only shows hourly averages.   Personally trading history very difficult to keep track of.   Exchange provides incentives to trading by drawing a lotto every 5 minutes.   Chat box is quite popular.  No ability to exchange to USD.   Poor support for two factor authentication and password recovery.  Exchange hosted in Australia.

Bter

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Multiple currencies (10 at this time) all exchangeable to BTC.  Charts shows volume with a time scale option.   Prices can only be set up to 5 decimal places.  This makes it very difficult to trade most currencies since this makes the spread extremely high.   No option to exchange to USD or any other currency.   Extensive use of 2 factor authentication for security.  Exchange is from mainland China.

Cryptsy

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Multiple currencies (18 at this time) all exchangeble to BTC.  Very low liquidity.  The best chart among all the exchanges, shows volume and allows time scale change interactively.   No option to exchange to USD.  Exchange is of U.S. origin (Florida) and claims to be registered with the BSA as a Money Services Business.

Cryptonit

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Multiple currencies (7 at this time) exchangeable in multiple ways.  Very low liquidity.   Exchange is built of the Drupal platform.  Employs OpenID for log in allowing existing accounts for other sites to be used as login.  Uses Google Authenticator for two factor authentication to secure withdrawals.   Exchange is extremely slow.  Charts do not show volume.  Money has been known to be lost in the exchange.  Exchange is extremely buggy and maintained as a hobby by the operator.  Site operator cannot afford a proper site certificate.  Hosted in Germany.

Anatomy of a Pump and Dump Coin

pumpndump 

image source: microcapclub

In recent days, the Coin Pump and Dump has been one of the most lucrative of schemes.   This scheme goes like this:

  1. Announce a new coin in Bitcointalk.org without advanced notice.
  2. On release, create a ‘private’ version of the daemon with target spacing between blocks of just a few seconds.  However, claim that the coin allows miners to mine at a rate of about 30 seconds or more.
  3. Mine the coin with zero difficulty after announcement to give the appearance that the coin is not pre-mined.  
  4. Release the public version of the daemon with the advertised target spacing and let miners scramble and struggle to mine the coin.  Watch as miners get mostly orphan blocks trying to keep up with the fast growing block chain.
  5. When difficulty rises after, remove the ‘private’ version from the network and mine with the ‘public’ version.
  6. Start conversations on bitcointalk.org about selling the newly minted coin.  Post faux trades to pump up the price.
  7. ‘Convince’ exchanges to adopt the coin.   This is done best incrementally, one exchange at a time until it reaches BTC-E.
  8. Pump up the price on each exchange when listed.  This is possible because it wil take time for other sellers to transfer the coins they have to sell.  That’s assuming they have any coins to sell!
  9. Dump the coin in a discrete manner.

That’s how Coin Pump and Dump works.   The actual record of step ’2′, that is, using a private copy of the coin, can be seen in the first blocks of the chain in a block explorer.   Check your favorite alt-coin to see if it has minted coins every few seconds with zero difficulty.   The block chain should confirm if your coin is indeed an Pump and Dump coin.

 

The problem with Alt-Coins is that there are too many of them!

700+year+old+gold+coins+Tipp+Yahoo

image source: Irish Central

In the last month, there has been a extremely violent increase in the number of alternative crypto-currencies.   This frenzy was kicked off with the release of Feathercoin, a coin that is almost identical to Litecoin with the exception of a few naming changes in the source code.   Feathercoin, minted 1.6 million coins in 3 hours, and within a week almost 5 million coins had been created.   Furthermore, the coin was released for trading in 4 different exchanges with a week of introduction.   The remarkable speed and ease in which this coin was released emboldened many other parties to release their own coins.

In just this month of May, the following new coins have been created:

  1. FTC FeatherCoin - A Litecoin derivation that mints at 4 times the rate. 
  2. MNC Mincoin -  A Litecoin derivation with 1 minute confirmations and a low mint rate of 2 coins per block.
  3. CNC CHNCoin - Derived from Feathercoin, release a week after.   Purportedly a Chinese based coin.  
  4. BTB BitBar-  Derived from NovaCoin. Very low inflation.
  5. JKC Junkcoin- started as a joke,  Litecoin derivation, but appears to be surviving.
  6. YAC YACoin- Yet Another Coin. NovaCoin derivation, with proof-of-work based on ChaCha rather than Salsa.  Presently CPU only mining.
  7. WDC Worldcoin- Litecoin derivation with 15 second confirmation.

In addition to these 7, the following have been created RYC Royalcoin, FRK Franko, NBC Nibble,  PWC Powercoin, SRC SunrRsecoin, GLD GLDcoin, SPC Supercoin, BitGem, DGC DigitalCoin and Elacoin.

Interestingly enough all these coins have one commonality.  All these coins are scrypt based.

It has become increasingly apparent in the Crypto-Currency world that alternative coins based on the same proof of work scheme as Bitcoin are increasing vulnerable to ASIC based miners.   These SHA256 based coins are TRC Terracoin, DVC Devcoin, IXC IxCoin, FRC Freicoin and PPC P2PCoin.  No new SHA256 based coins have been released since PPC was release in late 2012.

Clearly the creation of a new coin appears to be as easy as creating a new site.  In fact, it is inevitable that more new kinds of coins will be created in the future and may just be as prevalent as websites.   This is the natural evolution of Crypto-Currency,  more new coins are a given.   However, darwinian selection will kill of the coins that cannot provide differentiation and value.  The question though is this, does the creation of new coins hurt the overall economy of Crypto-Currencies?

My answer to this is that it does not.  There are currently 3 pools of money.  One pool are in the Bitcoin world, the second pool is betting on Litecoin, the first scrypt based coin,  finally the extremely speculative money is in a single pool that bets on new alt-coins.   The trend has been that with each introduction of a new coin into an exchange,   the value of the other alt-coins tend to decrease.  This is a consequence of the limited amount of money that gets spread across more new coins.

So for example, in the BTC-E exchange, where previous to the introduction of FTC and CHN,  the alt-coins PPC and TRC were trading.   Upon introduction of FTC and CHN, PPC and TRC prices loss 25% of their value.   The effect on BTC and LTC however were not obvious, the two major coins have tended to trade in unison.

In summary, I expect to see more new coins introduced.   Each new coin introduction dilutes the value of the previous coins before them, essentially spreading the wealth around more.   The trend in value of almost every alt-coin will go down unless the coin can show unique differentiation and value.