The Crypto-Coin landscape

Here’s my case for or against most of the top crypto currencies, and a handful of others too.  The space is growing fast, and there are many important coins I’m unaware of.

See coin market cap for a list of the approximate 1000 coins which have value.

Bitcoin!

(yes!)

Bitcoin accounts for 55% of the value of all crypto currencies.  Bitcoin was the first, of course.  It solved the very academic “Decentralized Consensus Problem” which made crypto currency possible.  It has by far the most infrastructure (exchanges, trackers, wallets, communities, futures markets), the most scrutiny, and the biggest community.  I think that makes it the most stable, though in the crypto space, that really isn’t saying much.

“The killer app of Bitcoin is Bitcoin.”

In my opinion, all the value that entrepreneurial friends of mine are trying to create with Bitcoin games, arbitrage, building exchanges, building point of sale technologies, doing ICOs, will pale in comparison to the value of mountains of fiat value moving into crypto.

And because Bitcoin is the most famous, stable and scrutinized, it will be the entry point for a huge % of new users.

The bad news is that the Bitcoin community of developers is pretty toxic.  There have been lots of bitter feuds about changes, especially about increasing the block size.  Bitcoin has also left behind some value propositions – micro payments, and possibly retail.

Bitcoin may still regain these with future updates, but for now Bitcoin seems content being a store of value, and letting other coins specialize in other aspects of money.

Splitting the definitions of money into specialized products.

Money is defined by three characteristics:
1) unit of account
2) store of value
3) medium of exchange

Now that entrepreneurs can innovate money, these three characteristics seem to be getting serviced by different coins.

Unit of Account – Cryptos are too volatile.  The good old U.S. dollar ($) remains the unit of account.

Store of value –  This is Bitcoin.  It may also be Lite coin, and the more anonymous coins.

Medium of exchange – For human exchange, I think it’s a contest between Dash and Bitcoin Cash, for exchange by computers, look to IOTA.

 

Other Store of Value Coins

(yes!)

Litecoin was the early clone of Bitcoin.  It launched in October 2011, about 2 1/2 years after Bitcoin.  It’s the silver to Bitcoin’s gold.  No drama, no angry debates.  Litecoin has been a reliable second to Bitcoin for many years, staying more or less proportional to the value of Bitcoin.

It has a faster block time than Bitcoin, and recently adopted “lightning transactions” so you can argue it may be better suited for retail style exchange, like buying coffee.

Anonymous Coins

Anonymity is a big deal, and a huge value proposition.  Bitcoin, while pseudonymous (numbers instead of names), leaks a lot of information.  All transactions are auditable, as are their histories, and the future of the coins that come from those transactions.

(yes!)

Based on my readings, Monero seems to be emerging as the winner of the anonymity race.

 

(maybe)

Karbowanecs caught my eye just recently as a Ukrainian crypto currency.  I had only been aware of two earlier attempts that failed — KozakCoin and UkrCoin.  I was pleased to discover that Karbowanec is a clone of Monero.  It seems to have an active developer community.  It has also been mentioned on Ukrainian television, which may or may not be a red flag for a “pump and dump” scheme.

 

(maybe)

Zcash is Monero’s biggest contender.  JP Morgan has partnered with Zcash, which for some is a good sign, for others a reason to be cautious.

 

Medium of Exchange Coins

Bitcoin’s high fees and slow transactions have “left behind” the value proposition of being an every day medium of exchange.

 

(no)

Bitcoin Cash became the first Bitcoin fork on August 1st, 2017.  It achieved prominence in November when the Bitcoin team once again broke a promise to increase the block size for faster transactions.

A lot of the hype was a rebellion against Bitcoin.  I think the anger will fade and so will Bitcoin Cash.  Cash doesn’t have the infrastructure of Bitcoin, and it isn’t as useful for retail as Dash, imo.

 

(yes!)

Dash used to be discussed as an anonymity coin because of a privacy feature, but it has since turned fully toward the retail / point of sale market.  In contrast to the bitter feuds of Bitcoin, Dash prides itself on good governance and has a voting mechanism built into the coin.  As you’d expect for retail, they also have near-instantaneous transactions.

They also have a big marketing effort.  I know guys here in Ukraine who get contributions to promote Dash.  They’re the #5 coin right now.  I expect them to overtake Bitcoin Cash.

 

(yes!)

Really cool value proposition.  The needs of machines are different from the needs of humans.  Imagine paying as you go for CPU cycles on a computer, or for small watts of electricity, or for every byte of internet usage, or data usage.  The “IOT” in IOTA stands for Internet of Things.  Iota specializes in micro transactions between computers.  They have no fees at all, and do super fast transactions.

Other Bitcoin Forks

(no)

Bitcoin Gold tries to solve the problem of miners getting too centralized.  They changed Bitcoins algorithm to make personal computers with graphics cards more competitive in mining.  I think this is a theoretical problem only.

 

(no)

Bitcoin Diamond is also a change to mining, in this case throwing it away completely and implement the other solution to the Decentralized Consensus problem that Bitcoin first solved with Proof-of-Work (ie. mining).  Diamond uses something called “proof of stake”.  It’s not important to know the details, and not important enough to be valuable in the long run.  It isn’t even clear whether Bitcoin Diamond is going to survive the next few weeks.

Smart Contract Platforms

Bitcoin applies Blockchain technology (decentralized consensus) to money.  Ethereum was the first application of this technology to smart contracts, specifically to issuing shares of stock.

People can issue their own tokens on top of Ethereum.  Usually the tokens act as shares.  This is a very exciting (and lawless) new industry that challenges deeply entrenched investment infrastructures.   Over $3 Billion was raised in 2017, mostly on Ethereum.

I believe in this niche, but it’s not yet clear to me who the winners will be.

(maybe)

Just like Bitcoin has a big head start in the crypto-money space, Ethereum has a head start in the smart contract space.  But the head start isn’t as big.  I’m downgrading it to maybe based on the number of big competitors emerging.

It’ll be interesting to see how this space developers.  The different coins will probably find niches and specializes, though right now it’s difficult for me to even imagine what the niches will be.

(no)

This was a fork of Ethereum by about 15% of the community who were purists and refused to manually reset a $30 million mistake.  They believed that the immutability of the blockchain should be a founding principle.

(maybe)

China’s Ethereum.

(maybe)

Like Ethereum, but supposedly easier to use.

(maybe)

Another smart contract platform that exploded into the top 10 crypto currencies just this week.

 

Other Coins

(hell no)

I don’t think Ripple should even be considered a crypto currency.

Ripple is not entirely decentralized.  There’s a centralized mechanism which can kick nodes out of the system.  Ripple is not entirely open source.  Ripple trolls used to canvas the internet and argue with anyone who doubted their system.  They made the most hair splitting, word twisting, double-speaking arguments you could imagine.

Ripple was mostly pre-mined, so the community of miners never had a chance to get most of the coins.  That means the majority of coins is controlled by the Ripple project, and the market for them can be a fake one.

Ripple seemed to come out of the banking sector.  There are huge tech companies associated with it.  The whole thing stinks.  Stay away.

(no)

Primecoins emerged from people wondering if something useful could be done with all those computers mining like crazy.  They devised a coin whose mining algorithm requires miners to find sequences of prime numbers which are theoretically useful to mathematicians.  Unfortunately, this isn’t enough of a value proposition, and after some early enthusiasm, the price of the coin has been flat.

(no)

Half the coins went to the people of Iceland.  Half were left to be mined.  Cool idea.

(no)

I think Feathercoin wanted to be what Dash is now becoming.  They wanted faster transactions and  better governance, but it seemed their strategy didn’t go far beyond being well mannered British lads who’d be happy to join you for a pint at some bar which was the only business in the world that accepted Feathercoins.

But maybe they’re finally on to something.  In recent days the price spiked from pennies to about 30 cents.  Not sure why.

(no)

Before Bitcoin Diamond, there was Peercoin.  It was the first coin that used proof of stake instead of proof of work.  This is academically interesting as another solution to the decentralized consensus problem, but little more.

They also spiked in recent days for $1.50 to $3.50.  I have no idea what’s going on.  Maybe people are doing blanket investments in top-200 crypto currencies.

 

(no)

Total and hilarious marketing hype.  Dogecoin sponsored the Jamaican bobsled team in the 2014 Winter Olympics.  Meme magic is real, though.  Dogecoin stands at #44.

 

(maybe)

Namecoin is a really interesting and important application of blockchain technology.  It’s a system for reserving domain names.  This is a timely issue with increasing concern about censorship from the DNS bureaucracy.  Even if you’ve bought a domain name, they can take it away from you.  Look up “DNS censorhips”.

Namecoin is a system for domain name selection and ownership that is censorship proof.  Apparently it works, but your website needs to have a “.bit” extension, and any visitor needs to have special plugins installed on their browser.

Seems like a great idea.  I don’t know why this coin’s value has been flat.  Last news was in 2014.  There’s been some infighting, and little adoption of “.bit”.

 

Tokens

Digital tokens are the stocks issued on top of Ethereum or another smart-contract platform.  There are a few digital tokens I’m interested in, but I’ll save that analysis for the next newsletter.