So I mean for today, you could have, some Bitcoin business have a tab, so you pay them and then you work your tab there and presumably you cash your tab out if you don’t use it.
If you have repeat custom… or maybe the shops in the local area could make a shared tab or something in anticipation of… you know somebody in the local area … technology expert could make a local Bitcoin tab that’s interoperable between the shops and some sort of app to do it.
A snake oil salesperson sells, or promotes, a valueless or fraudulent solution. The cryptocurrency space is full of such people and broken solutions.
Not really cryptocurrencies
There are many projects in the cryptocurrency space that, curiously enough, aren’t actually cryptocurrencies. Some even go so far as to call them cryptocurrencies even though they don’t fulfil the criteria. For example, I don’t consider these real cryptocurrencies:
- OneCoin and Bitconnect—they’re simple pyramid schemes1
- Stablecoins like Tether3 or JP Morgan’s JPM coin
- “Second layer solutions” like the Lightning Network
- Smart tokens like the ERC20 tokens running on top of Ethereum4
- Facebook’s Diem (renamed from Libra due to bad publicity)
Some might be useful, but they don’t have the same properties as cryptocurrencies like Bitcoin, and they don’t work the same way.
For example, stablecoins depend on a third-party issuer and redeemer—the very thing cryptocurrencies are meant to remove. Second layer solutions have fundamentally different security trade-offs and they work differently; they’re built on top of—but they are not—cryptocurrencies.
Be very skeptical of sites like CoinMarketCap that says it lists the “Top 100 Cryptocurrencies by Market Capitalization” because most of the coins listed aren’t real cryptocurrencies. Like how Tether is currently #3 on the list (2020-09-21), but that’s meaningless since they can be printed out of thin air, significantly warping the market cap.
The blockchain hype
There’s the phenomena where a technology gets hyped up and businesses all over rush to adopt it in any way they can, even if it’s totally the wrong solution for their problems.
Removing the consensus mechanism from a cryptocurrency, so they can just use the blockchain, removes what makes cryptocurrencies useful. The blockchain data-structure by itself is neither new nor interesting, yet that’s all people seem to focus on.
Be aware of “the blockchain” being used only as a buzzword.
Warning signs to look out for
When evaluating cryptocurrencies, here are some red flags to look out for:
Heavily slanted initial coin supply
Like only creating 21 million coins, but keeping 20 million for yourself.
A “centralized cryptocurrency” is an oxymoron because it’s not trustless or permissionless and it doesn’t prevent a single entity from manipulating the supply, the very things that define a cryptocurrency. A “private blockchain” has the same fatal flaws.
If someone can freeze your coins, prevent them from being used in a particular country or generate them from thin air then it’s not a cryptocurrency.
Bad consensus algorithms or centralized governance protocols
If a cryptocurrency isn’t working as I describe in How do cryptocurrencies work?, then chances are it’s not actually decentralized and calling it a cryptocurrency might be a stretch.
Promises that sound too good to be true
For example promising instant transactions and infinite scalability, while compromising the decentralization and security of the network. Proof-of-stake coins are usually guilty of this.
Social media is chock-full of users who try to sell snake oil to you. Slander, lies, and censorship is a daily occurrence.
Like having expensive and unreliable transactions or having to be online to receive payments.
Problems are hand-waved away
“We’ll figure it out” or “It’ll be ready in 18 months” (forever).
There are many traps to fall into in this space. I think the best antidote is to try and learn as much as possible, and never be afraid to question everything.