The past year has seen what some the “Cambrian explosion” in altcoins. Most are complete pump-and-dump scams. Others experimentally toy with a couple variables and a remote few actually bring something genuinely new to the scene (like proof-of-transaction in Fluttercoin).
Wouldn’t it be neat to see a list of all the known altcoins and a little bit about what they were before they became ledger rot?
For the last couple of months Ray Dillinger on Bitcoin Talk has been attempting to chronicle this digital death in: Necronomicon thread: Altcoins which are dead. I wonder who holds the record for creating the most alts? Is that something you brag about at a bar?
Furthermore, here are some patterns that Ray sees are emerging based on alts that are not (completely obvious) scams:
- Alts have a plethora of different hashing algorithms, but there are really only three divisions that matter between their proof of work. Either they are CPU dominated, GPU dominated, or they are mined with a particular kind of algorithm-specific ASIC. ASICs exist for SHA256D coins like bitcoin and for Scrypt coins like Litecoin. No other algorithm-specific hardware exists, so no other difference in hashing algorithm matters.
- Within each division, coins rapidly reach an equilibrium where whichever hardware generates their proof of work is allocated in direct proportion to the financial reward per minute of the block reward. Usually this means that halving the block reward of an alt, other things being equal, halves the hashing power securing its block chain.
- Most alts become unstable when 3/4 or more of their coin supply has been mined (second reward halving), even if no other factors have made the cryptocurrency unstable prior to that time. If the value being secured exceeds the block reward by too great a fraction, 51% attacks and forks are to be expected.
- “Burst mining” or “automatically switching multipools” act like positive feedback amplifiers with a delay loop in mining – they make it VERY difficult for an alt to maintain a ‘stable’ block rate when its hash rate gets too small relative to the pool (GPU, CPU, or specific ASIC type) of hashing power it belongs to. This is a heavy contributing factor in the 51% attacks and forks mentioned above.
- Several alts switched to proof-of-stake after to this instability led to bad forks or “stuck” block chains where miners essentially had given up due to a burst miner leaving the chain at a ridiculously high difficulty level.
- A shift from proof-of-work to to proof-of-stake, whatever its effect on market value, has usually led to stagnation or decline in the community surrounding the alt. In turn this usually leads to a collapse in value of the alt, unless heroic measures (such as direct giveaways by stakeholders to non-stakeholders) are used to bring people into the community.