There. I’ve said it. Shitcoins are a good thing. If you’re not familiar with what a shitcoin is, the definition ranges widely. Some people will label anything except Bitcoin as a shitcoin. Others will list a few different crypto currencies as good, and everything else as a shitcoin.
If you’ve spent any time in the BTC-e trollbox, you’ll already be very familiar with what people call a shitcoin. Some even have their own special shitcoin nicknames, e.g. Feathercoin is often called “fagcoin” and Terracoin is often called “trollcoin”. Considering that BTC-e is fairly picky about what coins they list, it’s pretty obvious how diverse opinions on the topic are. In the “List of all cryptocoins” thread at Bitcoin Talk Forums, Feathercoin and Terracoin are listed as “major alternatives”.
Why Shitcoins are Good
But shitcoins offer a wonderful array of experiments in what works and what doesn’t work in crypto currencies. The range of experiments varies from simple copy & paste and value changes for block rewards and coin names, to actual innovations that could have some value.
Most coins, such as Dogecoin and Kittehcoin, offer little additional value beyond a rebranding of Litecoin. While those 2 coins offer random block rewards, that isn’t a particularly innovative change. Still, Dogecoin has gone viral and offers the broader world a peek into the world of crypto currencies. Dogecoin’s value isn’t in being technically innovative, but rather its value lies in its ability to reach a broader audience.
Feathercoin does offer a real innovation. It uses a technique to introduce advanced checkpoints that help make it resistant to 51% attacks. While the Feathercoin system is centralised, it is still an excellent experiment.
Namecoin offers the potential to replace the DNS system with a decentralised DNS system (.bit domains) that is resistant to censorship. This is an incredible innovation with practical value. Again, another excellent experiment.
Anoncoin builds in I2P and TOR, making its usage anonymous. Again, another great experiment.
Primecoin uses an algorithm to discover a specific kind of prime number chain. Again, this has practical value, although it is rather esoteric compared to Namecoin’s ability to replace the DNS system.
Datacoin offers the potential for censorship-free data storage. Again, this has practical value. The practicality of it is another matter though as the blockchain maximum size is over 500 GB per year. Definitely a hefty blockchain.
But Feathercoin, Namecoin, Anoncoin, Primecoin, and Datacoin all offer some very real kind of innovation. Whether or not they succeed, and whether or not they are practical are other questions. The point is that they are excellent experiments that will show us what works and what what doesn’t work. This is crucially important – that they can show us what doesn’t work.
This point is almost entirely ignored in modern academia and in modern science. Academics and scientists always seem to aim for a positive conclusion. The reality is that negative conclusions can be very valuable as well. They can show us what doesn’t work, and save us time and effort by helping us to exclude certain paths. With crypto currencies being so new, this kind of exclusion is important. Would you want to include a “good idea” into Bitcoin? Probably not unless you already know that the idea works and that it can be implemented without any issues/problems.
The Litecoin team works closely with the Bitcoin team, and can experiment more easily to determine what does and does not work. This directly benefits Bitcoin and Bitcoin users. Whether or not you think Litecoin is a shitcoin is not particularly relevant – it is being used to benefit Bitcoin, and that by itself can give Litecoin value.
Most coins do not have any such innovation though. They merely fork Litecoin and tweak a few settings. These kinds of shitcoins can only show us what kinds of marketing work. That isn’t particularly interesting. Most will die, with some dying slower deaths than others. What we will learn there is that “me-too” coins won’t be generally accepted in the market. A closer look at any specific characteristics of a shitcoin that succeeds can yield some insight into whatever that characteristic is about. Few “me-too” coins have any characteristics beyond marketing.
But even the most cynical shitcoins can have real value. Take Bernakoin for example. Bernankoin completely redoes the rewards system, which it calls “Quantitative Easing”, and “prints” coins in ever increasing amounts. Bernankoin is a jokecoin, but it is a joke with a message. It illustrates the insanity of modern economic theories and modern monetary policy. It demonstrates conclusively how government ‘backed’ fiat currency has no real value in a free market. So while Bernankoin is pretty much a worthless currency for practical usage, it has a lesson to teach, and its value is in that lesson.
Vaporware Coin doesn’t even exist. Does it have any value? A little bit. What it demonstrates is that people are willing to jump on a coin without understanding anything about it. Where Vaporware Coin is an obvious joke and even the name says that it will never be created, people will take things seriously because they don’t read and understand things. Vaporware Coin is such a total shitcoin, that it doesn’t even exist, and yet some people will take it seriously!
Why Bitcoin Purists Hate Shitcoins
Many people loathe many shitcoins, and not without good reasons.
The main arguments advanced are:
- That can be implemented in Bitcoin anyways, so the coin offers no real advantage.
- ASICs and high hashrates secure the network. Shitcoins don’t have that.
- Shitcoins divert resources and distract from real issues.
- Most shitcoins offer no technical innovation.
They are legitimate arguments.
The advantages in Anoncoin could be implemented in Bitcoin. There is nothing to stop that, except perhaps for Gavin and the Bitcoin dev team.
The advantages in Namecoin can also be implemented in Bitcoin. Again, there’s nothing to stop that.
Quark uses a set of 6 different cryptographic algorithms with 9 rounds of hashing. It has a much smaller user-base than Bitcoin or Litecoin, and doesn’t have the high hashrate that Bitcoin, Litecoin or Dogecoin have.
Some Quark-haters will rightly point out that the hashing algorithm in Bitcoin can be swapped out for another algorithm, such as the one Quark uses. While this is true, it’s not very practical. Swapping out SHA-256 for a new algorithm would require Bitcoin miners to replace all of their equipment. To achieve the same kind of network security against a 51% attack, ASICs would already need to be in production and in sufficient quantities to replace the hashing power of the SHA-256 ASICs that were on the network. This effectively makes swapping out a hashing algorithm for a coin with a large hashrate nearly impossible without years of planning in advance. During that planning time, ASICs being produced would be used for another crypto currency, which would give rise to a viable contender to Bitcoin. Whether the switch actually occurred, and which currency miners chose to mine is the real question. The only hints for the answer are in how much adoption the new currency had at the planned mining “switch”.
If the NSA manages to crack SHA-256 with quantum computing, then there is a sudden crisis for Bitcoin as the NSA can then steal what they want at will and do irreparable harm to Bitcoin. Panic selling would ensure, and a currency like Quark would become the new “king of crypto”. However, it is unlikely that SHA-256 will be cracked and further unlikely that Bitcoin will ever be threatened.
Where Quarks offer value then is perhaps not in Quarks themselves, but in the possibility of the creation of a new type of ASIC that can secure a currency.
The argument about diverting resources and diluting mindshare is again a real argument. But how else can we experiment without creating new coins? You cannot experiment with every idea in Bitcoin.
But the examples I have given are mostly for coins that do offer some real innovation and are real experiments with some kind of innovation or significant difference. There are many more out there, e.g. Freicoin uses demurrage (distantly related to seigniorage).
The most righteous anger against shitcoins is against those coins that offer absolutely no technological innovation of any value whatsoever beyond some idiotic marketing spin. They merely clone another coin. Many are pre-mined for the benefit of the cloners. There are many of them out there. These only serve speculators who play with them for profit. Their value is only in enriching individuals, and not in supporting the core crypto-anarchist principles behind Bitcoin.
So What is a Shitcoin?
What makes a coin a shitcoin depends on how you view many of the issues involved. If network hashing power is important, then Dogecoin isn’t a shitcoin. If the potential to take hashing power away from other coins that introduced some kind of innovation is a factor in being a shitcoin, then Dogecoin is a shitcoin as that hashing power could secure the Litecoin network. If introducing new people to crypto is a good thing, then Dogecoin isn’t a shitcoin.
The major factor that I see in what makes a shitcoin a “true shitcoin” is whether or not it is just another clone with only a few graphics and settings changed. Even Geist Geld, a dead coin, had some value as it was used for testing speed limits in crypto.
Most clones are cloned for the sole purpose of the cloners making money. This adds nothing to the broader effort to take crypto currencies mainstream.
We will see many more shitcoins in the future. The real question is, how many of them will introduce new innovations that offer potential real benefits?