A Guide For Newbies: What is a Shitcoin?

11 months ago

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For me Steemit was the gateway drug for entering the bizarre world of virtual currencies.

Since accidentally discovering Steemit on the internet five months ago, I’m now neck deep in digital currencies, trading them and researching new projects within the space. I’m grateful for the economic opportunity I have been given, even while I’m busy critiquing the obvious systemic flaws within Steemit’s design. Some people cannot understand this dichotomy. Unlike many crypto fanatics, I don't identify as one. I'm an outsider, therefore I have a more objective perspective and I'm very critical. The fanatics don't like this trait and it took me a while to understand why. I think I get it now. Cryptocurrency shares some characteristics with religion.

Bad design causes needless suffering while good design brings joy. (I think Gavin Andresen said this in a tweet).

When I see an underlying structure that is badly designed and that is causing many people unease, I point it out in the hopes that the designers will hear me and fix the issue. That’s another story, though. Let’s get back to shitcoins.

I first learned the word, shitcoin in @fyrstikken's over-the-top video, Do You Want To Trade Some Shitcoins?:

Digital currency feels like the Wild West again on the internet. And it’s taking place in the creation of new digital currency altcoins. Among these newly created coins lies the dreaded shitcoin.

So, what’s a shitcoin?

To understand what a shitcoin is, you first have to understand what cryptocurrency is. From Wikipedia:

“A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are a subset of alternative currencies, or specifically of digital currencies.”

Bitcoin, which you’ve probably heard of, is definitely not a shitcoin.

But way before Bitcoin became established, it was doubted as a viable project. I'm sure the first doubters called it crap or shit money. There had never before been a digital currency that was maintained in a decentralized manner. No one was sure if it would succeed. But it did.

Bitcoin was invented in 2009. The first altcoins, which mimicked or improved upon Bitcoin’s basic design began to emerge around 2011. In 2013, altcoins exploded onto the scene and have shown no signs of slowing down. Everyone wants to be God of money. Because this market is so new and relatively unknown, it’s not well received by mainstream society.

This is always the case when a brand new market emerges that has no little to no history and no known real-world equivalent.

To understand exactly what I’m talking about, take a look at Coinmarketcap which shows you in real-time how much each digital coin is worth.

A shitcoin is basically an altcoin that becomes worthless over time or one that turns out to be a scam operation. And there seems to be an abundance of badly designed shitcoins in the crypto world. New altcoins that don’t introduce any significant technological innovation are also usually considered to be shitcoins. There are many reasons people would be interested in creating a new altcoin and as you can imagine, pure greed is the number one reason. Who wouldn’t want to create money out of thin air? Creating a long-lasting altcoin though, is a much harder thing to pull off. It requires many of the same qualities that run successful businesses: great leadership, communication, transparency, marketing and community engagement.

In the Wild West of cryptocurrencies, as a newbie, it’s hard to separate the shitcoins from the good coins, especially during the birth of the coin.

The amount of collapsed exchanges, scam coin operations and hacker thefts is pretty staggering, too, which greatly diminishes the reputation of the cryptocurrency world. [For examples, Google the following keywords: Mt. Gox, The DAO, OneCoin, Bitfinex]. These types of collapses scare mainstream people away from adopting digital currencies.

On the exchanges, I’ve traded mostly STEEM, but I’ve also bought and sold Potcoin, Amps and Bitcoin. With Potcoin, I made some decent money because I bought some on October 10th, right before its value went way up. I sold it the same day for about twice what I paid for it. I’m not into taking big risks because trading is a very new game for me. But my dad was a day trader for a while on the regular markets, so I'm used to the idea. Steem made this all possible and all I did was invest my time and energy into Steemit in the early days, back in June, before the flood of people arrived in it.

I am in no way qualified to give investment advice. This is just my experience. It’s been quite fun and educational, too. And scary at times, especially when my account was hacked in Steemit. I believe digital coins are here to stay and in fact, I think in the future, they will replace a lot of fiat currencies. The benefits of using digital currency far outweigh the risks. As long as you can tell the shitcoins from the good coins, you’ll be fine. I recently set up 2 Factor Authentication on all my accounts, including Bittrex. Bittrex just changed its withdrawal policy, making it harder to withdraw larger amounts due to a recent security breach. But if you have 2 Factor Authentication, you can withdraw whatever amount you like. Bittrex uses Google Authenticator to make its second authentication. Google Authenticator is really good and is found in the app store.

I'm leaving you with a quote I found recently that describes some of the fanaticism with regards to cryptocurrency communities:

The promise of great wealth is a manic depressive trigger, as any behavioral economist and psychiatrist knows. This effect occurs because the unconscious mind is time-agnostic, as evidenced by temporal distortions in art and dreams. And so, the vision of future wealth becomes numinous and real in the present.

Their ability to turn numbers into money, and therefore influence, is a classic example of transmutation and blurs the line between illusions and delusions of grandeur. The more money investors have sunk into a cryptocurrency, the more they will defend it. Not only to rationally increase their wealth, but to preserve this ideology and their new future status. - Medium, Why Bitcoin is a Religion by Filip Martinka

This article first was published on Medium and has been modified for Steemit: https://medium.com/@stellabelle/what-is-a-shitcoin-80f4e31ec160#.deybbiy34

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The idea of doing video responses as created by @steempowertwins is one worthy of copying, with a puppet. I just might be adding video responses to my posts, too. Give me some time......here's their novel idea: https://steemit.com/introduceyourself/@steempowertwins/steempowertwins-guerrint-and-modernmama-bring-life-to-the-comment-section-with-video-replies

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Bitcoin has died 113 times. Clearly a shitcoin. Heheheh.

Great post, @stellabelle. I'm glad you're learning more about this crazy world. I agree your position as a relative new comer gives you quite a bit of objectivity, but I also think there are some really smart people in the space who write the actual code, the language of cryptocurrencies. Their technical understanding is complicated and unique and we often ascribe supernatural characteristics and perspectives to things we don't personally understand (i.e. get religious). Some (myself included) will get too excited about one coin over another or ignore one all together based on complexity and lack of understanding, not on actual technical fundamentals and usefulness. Sometimes it just takes time to understand these complicated things, especially when they include internal economic systems like steemit does.

It's the wild, crazy west indeed.

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Oh man, that bitcoin obituary is amazing. hahaha. It would be fun to call up those authors from time to time and see how life inside the box is working out for them. ;)

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Is there some sort of document out there that details the different cryptocurrencies and which are stable or not?

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You can check out their whitepaper, how large their development staff are, what makes their coin truly unique and valuable. There aren't that many really good coins. Not many with a real community, a developing and contributing community. one that handles all aspects of the coin from promo, graphics, news, public awareness, economic incentives, and continued innovation, etc.

Most of the coins are clones of earlier coins with limited resources, vision and skill

You have to be wise when investing in anything because there is always a price fluctuation and you don't want to be buying something that is at it's all time high. There's a saying in the stock market, "the trend is your friend". If you're interested in trading, learning how to read charts and market mentality are most helpful.

I never murdered anyone in the name of holy bitcoin, but I do talk about it to everyone I know like a man possessed, everyone should know about this new tech/money.

This post has been ranked within the top 10 most undervalued posts in the second half of Nov 08. We estimate that this post is undervalued by $21.96 as compared to a scenario in which every voter had an equal say.

See the full rankings and details in The Daily Tribune: Nov 08 - Part II. You can also read about some of our methodology, data analysis and technical details in our initial post.

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Thank you for your information. I am happy to know that my posts are currently undervalued. This gives me great hope.

FWIW, I am the founder of "CRAPCOIN" and if you want to buy some CRAPCOIN's, you can do so here (I shit you not) ...

https://bitshares.openledger.info/#/market/CRAPCOIN_BTS

If you buy some CRAPCOIN, holla and I'll send you a FISTBUMP. ;)

https://bitshares.openledger.info/#/market/FISTBUMP_BTS

I think that nowadays it's a lot harder to identify a shit coin than it was like 4 years ago. Marscoin, Leafcoin, Quarkcoin I still have them somewhere. They were Utter shit coins.

I actually lost money on Quarkcoin because it was promoted by Max Keiser. I thought he was trustworthy. I was a fool.

Now all the shit coins have amazing websites and white papers. It's really hard to say this project is crap and this project is good.

I like Bitcoin, Ethereum and STEEM. Bitcoin and STEEM I like because I use those a lot. That gives them value to me. Ethereum I like because I have faith in the Ethereum Foundation and see a future in Dapps.

Thank you for your post.

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if the whitepaper reads like a marketing doc more than their technical intentions, that is a good sign it will be at most a hypecoin for awhile.

Clearly, there are many fanatics out there, clinging to their fanatic ideas. Too see religion at play, try interacting a bit on https://reddit.com/r/btc and https://reddit.com/r/bitcoin ... it's a sorry state, such a simple question on how, when and why the 1MB block size limit in bitcoin should be lifted has sort of caused a trench warfare. (http://reddit.com/r/bitcoin certainly looks best on the surface, but only due to overly heavy moderation policies)

Excellent post valuable information congrats. Thanks for sharing this wonderful post

I certainly enjoy these posts of yours more than the rants. For starters, these posts have some timeless value in them and that's very good for your brand. As for shitcoins, as a concept, this is concepts is actually content-dependent. 7 years ago, as you astutely noted, Bitcoin was a shitcoin. But those who saw the content correctly realized it's not a shitcoin. I think the same perspective should be applied to any digital coin that appears: analyze it in the bigger context (not on what happens this week, or in two weeks). For what it matters, Steemit is the most complex real experiment in digital cryptocurrency. And where there's complexity, there's a bigger "attack surface" as the security specialists love to put it. It's just normal to be like that. As those "attacks" are faced and solved, the ecosystem will grow stronger. And by "attacks" I understand also the massive dump that sunk the price during the last 2-3 months.

Anyway, I loved your post. :)

hahah.. great post. Thanks most of all for introducing me to that video of @fyrstikken!! Alone worth the price of admission... in fact, priceless. :)

Love the post! I think we've all been victims of at least one shitcoin lol

Informative & amusing. Thanks.

Very informative! I want to believe that Steem is not a shitcoin. I haven't invested my own money yet. When I do, I will defend it ferociously! :)

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