Jan 032015
 

Best Altcoins of 2015

These are the best altcoins to invest in, in 2015, in my opinion. Each one has promising prospects that may or may not pan out, but if you’re willing to take the risk, these are worth exploring further. If not, just hold on your Bitcoins! There are many interesting cryptocurrency projects out there. Unfortunately, it’s hard to separate out the best and most promising ones from the rest. In my view, the following are the ones to keep an eye out on, in 2015.

Note: This shouldn’t be taken as investment advice. Please do your own due diligence before putting any money into anything in the cryptocurrency space.

Counterparty

Counterparty is one of the most interesting cryptocurrencies out there, with a large potential reward. The biggest win for this would be if Medici goes live and becomes an actual stock exchange (for those who don’t know, Overstock hired the original Counterparty devs to work on Medici, a blockchain-based stock-trading platform). Even if it lists a single low-value stock, the value proposition would be huge. Also, it would mean it has overcome all the regulatory hurdles associated with such a project, which in and of itself would be a big achievement. The developers are also quite good, and actively work on the project (e.g. they were able to port the functionality of Ethereum on to the Counterparty protocol). It has other advantages, such as being built on top of the Bitcoin blockchain and an initial proof-of-burn instead of ICO/IPO model. Counterparty is definitely something to keep an eye out on, going into 2015.

Bitshares

Bitshares is another ambitious project, which has a lot of potential to do well in 2015 and beyond (in spite of a rich history of missing every deadline and reneging on their original promises several times). At its core, Bitshares provides a way to trade assets like BitUSD and BitGold, which track the value of USD and Gold through a clever mixture of price feeds and prediction-market-style price convergence mechanism (giving incentives for longs and shorts when the price deviates either way). It is also a good way to short, say, BTC, through bitBTC, which should help accelerate the price discovery of Bitcoin itself, assuming it is able to have significant volume.

It also uses a delegated proof of stake mechanism to secure the blockchain. Risk factors include the centralization of decisions (e.g. making a deflationary currency inflationary, which has already been done) that might keep investors up at night and a belligerent community that expels any criticism, thus keeping away many good members of the wider crypto community (such as a whole drama with Adam Levine of Lets Talk Bitcoin). Even then, the project has some good potential and would be interesting to see its growth into 2015 and if the ecosystem can mature. In addition, there are new products planned, especially an auction-style decentralized DNS system which could gain more traction than Namecoin (due to the profit model and disincentives to domain-squat) and a decentralized voting system.

MaidsafeCoin

Maidsafe, as a project, goes back to before Bitcoin was even invented. It is probably the most ambitious project of them all, since it isn’t blockchain-based like all other projects on this list, but wants to ‘decentralize the internet’. There is a lot of theory behind how Maidsafe is supposed to work, and it’s not all easy (there’s your big risk factor right there). On the other hand, there is a lot of progress being made, and quite a few developers are already building apps for this system. If the release is successful, expect the coin to rise significantly in value.

Stellar

Stellar is just like Ripple, but is hoping to have a better distribution model. Also, it is backed by some big names in Silicon Valley, which might give it some edge. Being a more trust-based system than say Bitcoin, Stellar needs connections in its network which will be used to transfer value. Ripple actually made some significant progress on the business front in 2014, and if Stellar can get some banks, especially across continents, to use their network for clearing trades, it would be a significant win. Stellar also has quite a few developers working on apps and gateways for Stellar, which is always encouraging. I am not holding my breath, but Stellar has a lot of potential to grow, especially when you compare Stellar’s marketcap with Ripple marketcap.

NXT

NXT is a cryptocurrency that always surprises to the upside, since its launch (remember the initial crowdfunding?) and you never know what 2015 is going to bring. There are many features being implemented, and even though Counterparty is gaining a good deal of traction, several new ‘appcoins’ are being built on top of the NXT network. It has a good developer community, and has had a relatively quiet 2014, so I am definitely looking forward to what 2015 will bring.

Ethereum

Ethereum is perhaps the most talked about altcoin in existence today. Over a period of a few years, its programming language might change the way we look at applications. It is powerful, and it needs a lot of developers building on top of its blockchain. It was arguably the most successful IPO/ICO ever in the space, so be aware of that before you decide to invest. It seems futile to try to predict Ethereum’s success in the short term. Unfortunately, the technology is yet to prove itself in the battlefield, so I’ll defer my comments. It does have a lot of potential though.

Photo Credit: David Diaz

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Dec 062014
 

Stellar Fork

For the time being, the promising new cryptocurrency Stellar has become completely centralized. Completely centralized, as in, there is exactly one validating node for the entire network. In traditional finance, the situation is called ‘becoming a bank’. Hopefully, this would be temporary, and they can find a quick solution to their woes. Even though the move may have been necessary, it sets a bad precedent and dents trust in the system.

So What Happened?

Well, turned out, there were serious flaws in the Ripple-style consensus algorithm that Stellar uses. This caused the network to fork, a serious issue for any altcoin but particularly so when your underlying consensus mechanism itself is to blame for the fork. To their credit, Stellar announced this publicly and said it is looking into possible solutions of changing the underlying consensus algorithm itself. Read their own blog post for more details on this.

It is also important to note that this particular scenario was already established by Prof. David Mazières, head of Stanford’s Secure Computing Group. He showed scenarios that would result in this type of a fork, but it was dismissed by Stellar and Ripple as being unlikely. However, as it turns out, if you have enough accounts and transactions, the probability dramatically increases.

And yes, Ripple would be vulnerable too.

Solution

The temporary solution adopted by Stellar is to replace the entire consensus algorithm with one single validating node, which means there is nothing left to form a consensus with – whatever that one node says is right is right and whatever that one node says is wrong is wrong. Obviously, this is a very less than ideal situation, but it seems like it might be the right path forward to save Stellar.

There aren’t too many Stellar gateways now, and it is possible that this would really affect no one really. However, it’s a dangerous precedent and definitely will be on people’s minds when they try to use Stellar or Ripple in the future. Ripple has a wider network and relationship with banks and precious metals dealers, so it would be interesting to see how they react. Things can turn nasty if double-spend attacks are successfully executed.

Big Investors

Stellar started off with big hype and lots of users and investors on board from the very initial days. They were giving out free Stellar to anyone who confirms their account with their Facebook accounts, which prompted people to post tasks on Amazon’s Mechanical Turk to game the system and get more Stellar before any official exchanges were in place.

Funding wise, it is already backed by some of the big names in Silicon Valley, including Naval Ravikant, the co-founder of AngelList. Also, Stripe owns a bunch of Stellar for helping out the project at its very initial stages, and said it would sell it to other companies to decentralize the ownership.

Photo Credit: Stefan

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