Now that the inevitable carnage has begun, and the most obvious flaws in Bitcoin are under serious attack, we will finally see a wave of understanding wash through the community at large; and some of these problems will finally get fixed. But the survival of Bitcoin is not yet 100% certain.
The largest single exchange, Mt. Gox, is currently shaping up as a complete loss. Prices there fell to the $250-$300 range as of this writing, and it is not at all clear when or if the remaining Bitcoins can be released to their actual owners. This event may trigger a major ‘fork’ (there’s that pesky ‘bifurcation’ idea again!) in the blockchain before the exchange can recover – or all the Mt. Gox accounts could get wiped out. At the Slovenian exchange Bitstamp, things look a little better as they have found a way to fend off the DDOS attacks on their exchange and resumed withdrawals. Consequently the price there is in the $650 range that everyone else is seeing.
The leaders of the Bitcoin Foundation (a bunch of clueless Software Programmers who maintain the code base) have recently admitted that Bitcoin is fundamentally flawed, in its current implementation. With a market capitalization that still lies north of Six Billion U.S. dollars, that makes Bitcoin one of the largest, riskiest, and potentially most expensive social/financial experiments in history, excluding those undertaken by the U.S. government. Correcting the problems – that’s going to involve a lot of skills other than coding.
http://blockchain.info/charts/market-cap?showDataPoints=false&show_header=true&daysAverageString=1×pan=&scale=1&address=
Most people today have at least heard mention of the Bitcoin phenomenon; but I’m willing to bet that few realize just how far, and how deep, development of this technological ideology (It sort of smacks of Scientology, to me) has already progressed. All of these problems were foreseen, and predicted. Clever mathematicians and assorted other variety geeks have been hard at work, and solutions to all of them have already been found – or at least proposed.
There are maybe hundreds of different coins out there now, with different algorithms, different propagation rates, different philosophies. Some number of dozens of them are already being traded for cash. It’s like the Pokémon monster, come back to life and on steroids.
Many of them have compelling stories behind them, too. Reading the whitepapers published by their inventors – that is an education in itself. It’s like a study of Money, strictly from a mechanical viewpoint. It’s looking ‘under the hood’ to see how and why a crypto currency functions. It both contributes to and borrows from classical economic monetary thinking. I see altcoins as a kind of ‘sandbox’ where new and radical ideas can be tried out in a limited area first, before general deployment.
Here’s the stats on one of the newest – Pandacoin – which launched this past Tuesday:
Symbol : PANDA
Max Coins: 100 billion panda coins.
Block time: 2.5 minutes
Subsidy halves every 840,000 blocks (~4 years)
Scrypt Adaptive-N with Kimotos Gravity Well
Block Rewards:
1 minute block target
Block 1-50,000: 0-1,000,000 PandaCoin Reward
Block 50,001 — 100,000: 0-500,000 PandaCoin Reward
Block 100,001 — 200,000: 0-250,000 PandaCoin Reward
Block 200,001 — 300,000: 0-125,000 PandaCoin Reward
Block 300,001 — 400,000: 0-62,500 PandaCoin Reward
Block 400,001 - 500,000: 0-31,250 PandaCoin Reward
Block 500,000+: 5,000 PandaCoin Reward
Notice the mining algorithm in use here: Scrypt Adaptive-N with Kimotos Gravity Well. What in the heck are they talking about?
You can also see the reward curve has been adjusted differently from Bitcoin; and the ‘limit’ of 100 billion coins is in effect no limit at all as it will never be reached.
Bitcoin uses a Proof of Work (PoW) algorithm called Shaw 256. It is a mathematical hashing function that produces a 64 bit number that serves as an account of the effort expended to produce it. The productive mining of Bitcoin is ‘geared’, therefore, directly to the ability to perform these hash function calculations as fast as possible. This task requires only a very quick adding machine; and the semiconductor industry has responded by producing some of the fastest ever built, using an off the shelf technology called ASIC – Application Specific Integrated Circuits. Instead of a general purpose CPU like we use in our laptops, this engine has been constructed to do just one thing, as fast as it can – compute SHA256 hashes. That’s a problem for a supposedly ‘distributed’ ledger system; as the rewards dry up (Bitcoin has an absolute limit of 21 million coins) mining will become unprofitable for any but the very few who invested the most heavily in mining equipment. Should any single entity ever achieve ‘51% control’ over mining, the currency is no longer a distributed system but spontaneously evolves into a centrally controlled one instead!
Scrypt was the first whack at preventing this (seemingly inevitable) outcome. It was used first by Litecoin, which gained the distinction of being only the second crypto currency accepted on the Black Market when it was briefly supported by the ill fated Atlantis marketplace. To me, that is the bell-weather event in a currency’s history; if it is accepted as payment by smugglers them it is actual cash for all intents and purposes.
http://forexmagnates.com/litecoin-anonymous-marketplace-atlantis-goes-under-after-just-six-months/
The Scrypt algorithm incorporates several memory access steps in its execution, as well as calculations, interspersed in such a way as to defeat the SHA256 ASIC mining hardware that existed at the time. It reduced the advantage of these super speed, highly parallel processing units to the point it is uneconomic to apply them to a Scrypt based currency. So, problem solved, right?
Nope. You can build an ASIC engine to do just about anything you can imagine. The Chinese (clever devils) appear to be testing the next generation ASIC miners – targeted directly at the Scrypt algorithm – right now. The currency designer’s response to this is, Scrypt with an adjustable memory requirement – first used by VertCoin, the direct predecessor of Pandacoin:
Vertcoin has now been released as the logical evolution of Litecoin and introduces what's known as
"Adaptive N‐Factor". The N‐factor component of Scrypt determines how much memory is required to
compute the hashing functions. Vertcoin N‐factor increases with time to stay one step ahead of any
possible ASIC development.
Just as the difficulty of the work adjusts to respond to ‘supply side’ forces, now a gradation is possible in the dimension of the memory requirement as well. This innovation will suffice for its intended purpose for quite a while, I believe. But, there are always people looking for an advantage, so it’s not a 100% guarantee.
So that’s what the first part of the name means. Now, what in the heck is a Kimotos Gravity Well? It’s the solution to a different unforeseen problem in the evolution of crypto currency. In order to answer that question, once again I need to explain the problem it is targeted at first.
Multipools –
https://cryptofrenzy.wordpress.com/2014/02/09/multipools-vs-gravity-well/
“What is the problem exactly? Multipools are pools, which can switch between coins after each round. The can mine some TIPS and switch to WDC a few minutes later. In theory, this enables them to always mine the most profitable coin. In practice it is a little more complex, but I do not want to talk about mining now. The problem for new altcoins is that the network hash power is relatively low. A single multipool joining can spontaneously and significantly increase the network hash power. Usually the mining difficulty should increase accordingly, but that only happens after a lot of blocks. This means high profits for the multipool, since blocks are found much faster than intended for a while. As soon as the difficulty adapts, the multipool will switch to another coin and the network hash power plummets. This means blocks will now be found much slower than intended. This creates a vicious circle: The difficulty is so high that it will take a long time until the difficulty decreases again. As it is quite unprofitable to mine in this time, more miners will leave and hashing power plummets even more. For example, out of desperation the Fedoracoin community asked the Dogecoin community, if they would donate some hash power.
The solution is called Kimoto Gravity Well invented for Megacoin. This algorithm can adapt the difficulty much faster. It adapts the difficulty after each block, which means a multipool would have to switch constantly. The challenge of such rapid change is to prevent too much fluctuation of difficulty. As many coins adopt this solution, Kimotos Gravity Well seems to work fine in practice. Exempt from this problem are networks with a big enough hash power that multipools are no danger. This means Litecoin and Dogecoin are safe.”
And that’s the reasoning behind that. I want to point out, the evolution of these ideas has proceeded form direct experimentation that was launched when Bitcoin reached a level of general acceptance as a store – or at least, as a carrier – of value. These are all lessons learned from real experience, by people who have an ideological stake in the concept of a private currency. When they find something that works, well, ‘you can take it to the bank’ because it’s been field tested to a certain extent already, and the reliability of these constructs is actually not that difficult to analyze when approached on the right basis.
But this is right out there on the cutting edge of the work in this field. There are still a lot of people that wouldn’t take a Bitcoin if you gave it away for free. Not very many of those left, but there’s still some. Next in line, in terms of Market Capitalization, is Litecoin, and then Peercoin – a serious attempt to craft a truly peer based currency. But I’ll spare you that story, and leave it for another time.
The designers of Pandacoin are of course Chinese, and it is targeted to flatter Asian tastes. It seems to be modeled on an actual physical commemorative coin, also called a Panda Coin.
http://www.pandacoins.com/history/
And then, something odd – it seems like there are actually two different PandaCoins in the altcoin world – one with a limit of 21 million like the original Bitcoin that was first minted back in January of 2014. Wait, there’s actually three?
The curious case of Pandacoin(s)
http://cryptolife.net/the-curious-case-of-pandacoins/
I thought you might be interested in some of the stuff that’s been going on with Pandacoin. Specifically that there are three different Pandacoins now.
The first one, launched January 4th, is a Scrypt coin with a max of 21 million coins, a block reward that lowers every day, and uses the Kimoto Gravity Well. It had a 2% premine, but slightly more than half of the premine was given away. Overall, nothing too remarkable about the coin, and it has been fading away.
Then comes the pre-announcement for a new Pandacoin. This coin was created by a pretty well known trader named Wolong. The coin logo even says “In Wolong we Trust.” “Trader” is too nice of a term to describe him however. “Scammer” is much more accurate, as he has fooled dozens of people into giving him their BTC so he can run pump and dumps on multiple coins. Dogecoin, Earthcoin, Unobtainium – the list goes on. A blatant market manipulator.
He even collected over a million Dogecoin to “fund” a book about market manipulation. When recently pressed about releasing this book (as it is behind schedule), he freaked out and said that only his paid followers will get it, because the rest are unworthy. Those who eventually learned to question Wolong got exiled, and the rest blindly follow him with the devotion of a cult. He actually refers to himself as “God” in his private trading channels sometimes.
Wolong’s second Pandacoin has a 3% premine (claiming this is done for “stability”), a max of 100 billion coins (just like Dogecoin) and a block reward system just like Dogecoin. It uses Scrypt Adaptive-N (from Vertcoin) along with the Kimoto Gravity Well. It was made in partnership with the Unobtainium developers. The coin also has an IPO. 50% of the coins go to Wolong directly, “unable to be traded for 6 months.” Another ploy for “stability.” He repeatedly claims he will prevent a pump and dump on Pandacoin, but he is known for doing nothing but pump and dumps across the crypto markets. It’s a full-blown scam of the highest order.
Enter the third Pandacoin. It is being thrown together in a rush to release shortly after Wolong’s Pandacoin by an online group that has grown to absolutely despise Wolong. Its purpose is not to be an actual coin, but simply to directly call into question Wolong’s scam and why the hell he is ignoring the fact that there was already a Pandacoin in existence. It is using Wolong’s coin’s logo but with two minor changes: a subtle edit to make the panda look like it is flipping the bird, and the phrase “Don’t Trust Wolong” replacing the “In Wolong We Trust.” The extra twist here is that it is also a clone of Dogecoin, but does not use Scrypt Adaptive-N or Kimoto Gravity Well, and has no premine.
I hope that you will look into all of this and write up a warning for anyone who might be looking at Wolong’s second Pandacoin. He simply cannot be trusted, and he will be creating a lot of bag holders while he runs away with insane amounts of BTC if it starts hitting exchanges.
Quite the expose – I wonder how much of it is true. I myself have noticed the possibilities for forming a cult around these kinds of ideology. It’s not that hard, really. The Nazis were not really supermen, after all is said and done.
In another way, it is also rather reminiscent of the ‘War of the Currents’, back in the early commercialization of electricity. Politics and personality are still in play here, too.
So – the rumors of Bitcoin’s demise – they might be true. But sure as shootin, something will pop up to take its place if it ever does succumb. That’s perfectly clear to me now. The world wants this, so it’s going to have it, one way or another. The only questions left are how will the sides get chosen up for the coming currency wars.
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