1.
A market of many flavors

2.
 This is not an endorsement of or investment advice for the
purchase of any token, coin or service. This is strictly for
educational purposes.
 Consult with a financial professional and conduct thorough
due diligence before participating in this market. IANAL.

3.
 Altcoin: anything that is not
Bitcoin (i.e., in practice most
altcoins are near duplicates – in
both features and code base – as
Bitcoin. A minority of others
include new attributes, hash
functions and extensibility
characteristics providing room for
additional metadata, changes in
block timing, asset issuance and
enhanced privacy)

4.
 Commodity coins: linking
blockchains / reflecting
ownership with specific assets
in the real world (i.e., pegged
commodities that generate
value through future
appreciation)

5.
 App coins: tokens that generate
value through the ‘network
effects’ of the underlying
system (i.e., give users access to
decentralized applications
similar to how gift cards, loyalty
programs, frequent flier miles,
or subway tokens give users
access to specific facets and
elements of goods and services)

6.
 Scarce labor and lack of
compensation for working on
Bitcoin core (e.g., public goods
problem, see Lighthouse)
 New ways to raise funds, pay for
development and connect a
public/transparent accounting system
with property
 Market signals to other competitors
 Depreciating capital goods (ASICs)
incentivize pointing towards other
profitable chains after 3-6 month
window due to increase in
difficulty

7.
 Core devs rightly concerned
about damaging / introducing
new bugs into protocol,
becoming more conservative
 Altcoins serve as the outsourcing of
experimentation
 Open source turn key solutions
make it easy to tinker with the
protocol and create new
customized coins
 Markets like choices and freedom to
try out alternative attributes

8.
 Building, breaking, learning
and reiterating are the
zeitgeist of digerati and
altcoins allow this recursive
derivation to take place quickly
 Continues today: see Dave
Hudson’s proposal on 2
minute block times at
20mission
 The tweaking of code began in
earnest in the summer of 2011
◦ “The Guns of Altcoin August”

9.
 Namecoin (originally BitDNS) – April 18, 2011
 Ixcoin – faster reward schedule, premined – August 10, 2011
 I0coin – “fork” without the premine - launched August 11, 2011
 Solidcoin – 3 minute blocks, premined, launched August 20
 GeistGeld – 15 second blocks, premined, launched Sept. 9
 Tenebrix – 5 minute block, uses Scrypt, premined, launched
September 26, 2011
 Litecoin – 2.5 minute blocks, uses Scrypt, no premine, launched
October 11, 2011
 See Charlie Lee’s Miami presentation as well as ArtForz and
RealSolid

10.
 Blackcoin – proof-of-stake, 1% inflation
 Darkcoin – mixing via “DarkSend” and
hybrid POW (x11) and POS
 (Gold) Digital Tangible – CP asset linked
via Bitcoin to custodian (represents an
actual 1/10 troy ounce of gold)
 Let’s Talk Bitcoin (LTBcoin) – CP asset,
official advertising token of LTB Content
network (e.g., rewarded for proof of
content/activity)

11.
 StorJ – CP asset used to pay/reward nodes
on decentralized cloud
 Stellar – fork of Ripple, uses a consensus
ledger rather than POW, 1% inflation
 Uro – pegged to 1 metric ton of urea (uses
x11 POW) [Delisting impending]
 Counterparty – sits on top of Bitcoin, used
POB to create limited batch
 Monero – uses CryptoNote protocol (not
Bitcoin) notable feature is ring signatures

12.
 Over the past 9 months, liquidity has remained roughly 10% of all
mined bitcoins
 This can mean several things but in general:
◦ Roughly $2-$4 million in daily retail commerce (based on self-reporting)
◦ UTXO holders like to permastore in cold wallets
◦ The remaining liquidity can be further divided into
 Mining rewards
 Gambling, mixing (sending to burner wallets) and illicit activities
 Trading on exchanges
 (Note: percentages are difficult to estimate without full traffic analysis)
 Important for Bitcoin startups: watch out for ‘The Platform Trap’
could impede return-on-investment

13.
 Bitcoin: 38-48 TPM
 Litecoin: 2-3 TPM
 Dogecoin: 37-40 TPM
 Source: www.chain.so
 Not all TPM is equal (see previous slide, is FOREX commerce?)
 Why has Litecoin stagnated?
 Different community dynamics than Dogecoin / and uphill institutional inertia of
Bitcoin
 Why has Dogecoin succeeded at getting this far?
 If cryptocurrencies are a startup, traction channels are key. Dogecoin utilized
new traction channels to market (e.g., guerilla) whereas Bitcoin community has
largely saturated its traction segments (e.g. handful of social media channels)

14.
 Proof of burn with Dogeparty (fork of
Counterparty on top of Dogecoin)
 1.85 billion dogecoin burned in 28 days
(August 14 – September 11)
 Roughly equivalent to 2.01% of Dogecoin
monetary base
 Compare with Counterparty – 2,130 BTC
“burned” in month of January, or 0.01% of
monetary base
 9/17/2014: Transaction, XCP: 2,499 and BTC:
79,784. CP accounted for 3% of Bitcoin tx volume.

15.
 Merged mining (AuxPOW) has proven fairly successful for the
‘scrypt alliance’ (Jackson Palmer’s name for the conglomerate
of coins mining with DOGE/LTC)
 May not be sustainable (still contingent on block rewards)
 “Litecoin has essentially become the profitability layer that
drives the security of Dogecoin's network” (and other scrypt-
based coins piggy backing)
 If value of litecoin falls, then the overall hashrate will decline
once again and/or when LTC block reward halves in Q3 of
2015

16.
 Dogeparty (like CP) could have disproportional rewards issues
long-term
 Cannot multiply TX volume by USD/EUR on any chain
 Very few pay TX fees on any chain
 Most, if not all, tipping is done off-chain

17.
 NXT (problems found by Garzik?)
 Stellar/Ripple
 Mastercoin
 Counterparty
 Bitshares (Invictus)
 Open Transactions (not fully released)
 Koinify (CP)
 Coloredcoins (Coinprism, Chromaway)

18.
 Ethereum (tries to be an appcoin but...)
 Tezos (POS)
 Tendermint (POS)
 Pebble (POP)
 Nimblecoin (MM)
 Dogethereum (Eros)
 Factom, formerly Notarychains (POE/MSC)
 SKUChain (DPOS)
 Hyperledger (PBFT)
 Filecoin (~Bitcoin, see also Permacoin)
 Treechains/Sidechains/PeerNova
 Several “stealth” projects (Vpal)

19.
 Beyond scams and pump & dump what are other hurdles?
 Dev team may lack the skills to make robust code that can
achieve its promises
 The economics of appcoins may not be well-thought out:
◦ The only way to reflect changes in demand for an inelastic money
supply (limited app tokens) are changes in the price. This could result
in price appreciation incentivizing holding and not spending,
diminishing the value of a network and lowering overall liquidity for
market participants.

20.
 List of deployed POW hash functions:
◦ SHA256d, Scrypt, Scrypt-N, Scrypt Jane, Groestel (Grøestl), Keccak,
Quark, X11, X13, X14, (n+1…)
 List of coins hit with 51% attack:
◦ Coiledcoin, Auroracoin, Feathercoin (several times), Worldcoin,
Powercoin, Terracoin, numerous others
 Legal uncertainty of cryptosecurities, digital currency crowd
sales (e.g., Howey test, indemnification, UPL, money
transmitter license)

21.
 The transition of alternate consensus algorithms from highly
speculative in 2011 - 2013 to increasingly accepted (see
annual Dijkstra Prize)
 This has opened a new space where consensus algorithms are
chosen based on use-case rather one size fits all
 This also drives greater fragmentation in the code bases and
increases the requirements on developer skill
 Need to incentivize mining otherwise becomes self-
terminating (or as Nicolas Courtois calls, “self-destructive”);
perhaps sidechains/treechains will ameliorate that

22.
 Or during bull-runs (e.g., price appreciation)
does inelastic supply incentivize movement
into other liquid chains? Substitute goods?
 How to define success? Does it have to be
immediate or does it get a 5.5 year
runway/grace period like Bitcoin has had?
 What about double-standard: anonymity of
Satoshi is “okay” but not for other alts? (or for
anonymous miners?)
 Ray Dillinger’s Deathcoin list (Necronomicon)
 What are attributes of longevity? See failure
vectors too.

23.
 1. The dev is not anonymous. If a coin has an anonymous
dev, it’s about three times more likely to be a scam than not.
Further, if the dev is not anonymous, there are things you can
legally do if it does turn out to be a scam and if the dev is
anonymous there aren’t.

24.
 2. It doesn’t halve its remaining coin supply more often than it can
double its value. That’s kind of hard to predict, but at this point I think
the double-value time for cryptocurrency is up to about a year, maybe
two. It’ll get longer until it catches up to double-value period for the
rest of the economy, which is 7 to 15 years depending on the
industry. This is important because whenever the block reward goes
down, the hash rate goes down in the same proportion; and when the
hash rate gets too low, the blockchain becomes vulnerable to an attack
which can destroy its value completely. Expect any coin that mines out
its coin supply too fast, to collapse. I think even Bitcoin is going to be
too fast in the long run; there’ll come a point when its double-value time
is slower than its block-reward halving time and alts will start sucking
up the hashing power making bitcoin vulnerable to attacks.

25.
 3. It isn’t an IPO where you’re supposed to “buy” coins for some
other form of money. A few of those are honest, but most turn
out to be scams.
 4. The dev actually knows how to fix problems in the
software. This is hard to judge straight out of the gate.
 5. There’s a point. To put it gently, in order for it to be
reasonable for someone who’s not scamming to release an altcoin,
there has to be something wrong with Bitcoin and they have to
believe that they can do better. In order to believe any altcoin has
a long-term future, there has to be something wrong with Bitcoin
and that altcoin has to be able to survive where Bitcoin
cannot. Anytime there’s an alt, ask what it does that bitcoin
cannot do. Then ask, does that enable it to survive where bitcoin
cannot?

26.
 6. Don’t be taken in by talk of philanthropy. Money, when
functioning as money, has no morals whatsoever, good or bad. It
flows in the reverse direction of the profitable allocation of
resources. Any money that attempts to do anything else will cause
market distortions that cripple the economy it’s working in and
ultimately cause it to function less well than its competition.
 7. If there’s a premine, be sure that the devs are absolutely honest
about the premine. If they claim that it’ll be used for the good of
the community, then the community is entitled to know how every
last dime of it gets spent.
 8. If there is any difference at all between the block reward
structure they advertise and the one they implement, stay away.

27.
 It would not make much sense if the NYSE or NASDAQ only
listed one asset, such as MSFT, which was the only asset
traded by brokers.
 And looking at the Cambrian Explosion of altcoins and
appcoins created over the past year, it's increasingly clear that
consumers and developers are interested in testing out and
experimenting with new functions, features and extensibility.
 In short, they want to poke, probe and most importantly: have
choices.

28.
 According to Venture Scanner, there are 22 funded exchanges that
have raised $113m
 Daily volume on public (non-OTC) exchanges for bitcoin is $40m -
$100m (on certain days litecoin is 1st, usually 2nd)
 Two general types of exchanges - bitcoin/fiat exchanges, or
everything-under-the-sun altcoin exchanges
 At Melotic, we focus more on due diligence and working on
providing liquidity and price discovery / value discovery for unique
assets that run on different chains, platforms and protocols

29.
 tswanson@gmail.com
 Follow: @ofnumbers
 Visit: OfNumbers.com