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:
- Announce a new coin in Bitcointalk.org without advanced notice.
- 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.
- Mine the coin with zero difficulty after announcement to give the appearance that the coin is not pre-mined.
- 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.
- When difficulty rises after, remove the ‘private’ version from the network and mine with the ‘public’ version.
- Start conversations on bitcointalk.org about selling the newly minted coin. Post faux trades to pump up the price.
- ‘Convince’ exchanges to adopt the coin. This is done best incrementally, one exchange at a time until it reaches BTC-E.
- 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!
- 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.