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Real-time self-government in the cryptocurrency frontier: From "Klutzerella" To Miss America

By Daniel M. Ryan
web posted August 28, 104

Scam, Scam, Scam, Scam, Scam, Scam, Clone, Scam, Scam, Scam and Scam

Most of 2013 really wasn't very bad, but to a scarred, burned and consequently embittered crypto veteran, the year certainly seems like a blur of not-so-wonderful scams in a long grinding stay in the Scam Café. Some of them more-or-less bitterly cry out for "regulation," but most are the source of advice that sounds almost cruel to our sheltered ears. Advice that some of our grandparents would consider a little rough-hewn – and all of our great-grandparents would have considered just plain prudent. Believe it not, the hard-bitten type are actually more prone than most crypto cowpokes to raise a hue and cry when they've found something fishy (and to give reasons why they smell a stink.) If you find this paradoxical, you haven't spent much time in a frontier.

The "clone" that first set off the Altcoin Boom Town was not Quark. As mentioned in the third part, Quark was not the first Boom-Town hottie to end the dry spell of 2012; the alt that brought forth the monsoon was Feathercoin. It was launched in mid-April of 2013. Like Quark, it was a get-rich-suddenly bonanza; unlike Quark, it was more-or-less a straight Litecoin clone. Like Dogecoin more than half a year later, the sudden bonanza brought a flood of Litecoin-clone altcoins. The majority of cryptos in a long, long list of defunct alts, the Necronomicon Thread, were clonecoins of Litecoin or Quark and were launched in 2013. It's a safe bet that a large majority of the ones with no info for them were clonecoins from the spring, summer, or fall season of ‘13.

Although the altcoin scene before Quark was more-or-less scam free, and still somewhat of a let's-go-for-it hangout for hobbyists, the huge failure rate of post-Feathercoin offerings gave rise to dark suspicions: there had arrived a new carpet-bagging crop of scammer developers whose new alts were little more than pump-and-dump operations. Those suspicions were actually ahead of their time with respect to altcoins specifically, and well-grounded in common sense generally. It wasn't just robber hackers that plagued the Bitcoin world starting in '11.  A whole gaggle of scammers and con men came in. Given the fact that Bitcoin plays off against PayPal, there's an ironic similarity between the crypto Wild West and the early idealistic days of PayPal itself. As the 2004 book The PayPal Wars shows, Paypal was scammer heaven for a time. In fact, PayPal's current arbitrary algo-centered interventions were put in place to stop the scammers who had a field day in 2000.

The first iteration of its no-appeal slam-down system was put in place to reassure investment analysts that PayPal execs were slated to meet in a planned road show for an IPO. That IPO was only called off because PayPal was taken over by eBay, which many in PayPal saw as a real relief. After all, it would have been embarrassing to put a "Risk Factor" note in the 10K about reputational risk arising from cyberspace con artists taking advantage of victims through the company's flagship service. Unlike a sentence in Detroit Edison (DTE)'s 10K about revenue loss caused by electricity thieves, it would not have been seen as charming.

Before Feathercoin and Quark, the scams were largely small-scale and often arose in one-to-one transactions. It wasn't until the get-rich-suddenly boom was on that scammers saw a way to rob a lot of BTC from a lot of people at once. Like many successful cons, the altcoin devolution in post-Quark 2013 worked by taking advantage of naïfs' excitement and greed. Enter the scam "IPO."

Gen2 Thermidor aux internal exchange with a blockchain sauce, garnished with gambling pâté, whitepaper and a decentralized marketplace on top, and Scam

If you hang around the Announcements sub-board of Bitcointalk's Alternate Cryptocurrencies, you'll see an indicative abbreviation: [IPO]. It refers to a pre-sale of a coin that often doesn't exist at the time the pre-sale starts. It's referred to as an "IPO" to jibe with the fact that so many alts are traded on exchanges. Some of the more bullheaded folks who like to play lawyer on the Internet will insist – very seriously – that a pre-sale of a crypto is a real IPO with the exact same legal character of a company's initial public offering of its common equity on a stock exchange. (Legally, at least according to the tax authorities, a cryptocurrency is neither currency nor equity: it's property.) As is the case in any Boom Town, the level of sophistication is somewhat spotty.

Some "IPO" pre-sales are of coins that are only partially built; others are pure vapourware. Since clone coins are more-or-less straightforward to create from an open-source parent if you're an astute programmer, although generating the initial "genesis block" is complicated and tricky, there's an unconscious expectation that an IPO-worthy coin has to be more than a plain clone coin. The only exception is for the clone of a coin that has sneaky traps put in its source code to deter would-be cloners. Some genuinely innovative programmers of new alts resent cloners to the point where they withhold the source code of their new alt and keep it closed-source, albeit for only a temporary lead time. Even this compromise is somewhat of a breach of open-source norms. Devs who insist on making their alt closed-source in toto do attract a lot of criticism for their breach, however sensible their rationale.

But for plain clones, a pre-sale IPO is pretty much out of bounds. There's a customary expectation for at least some innovation in exchange for the Bitcoin, plus use of the proceeds of the pre-sale to develop the coin's ecosystem. That's what the pre-buyers, or "IPO investors," expect in return for forking over their BTC. Formally, all that's required of the dev is to produce the new alt in accordance with the promised specifications and to send the coins to each pre-buyer in quantities specified by the pre-sale price list. In cases of IPOs that are escrowed, which are becoming more frequent, that formal criterion commonly suffices for discharge of the funds to the dev. However, there is a heavy moral obligation for the dev to spend the pre-sale proceeds to make the coin stand out from the slew of newbies. Common spends are for basic side services like block explorers, Android wallets and professionally-done Websites. It's usually taboo for a dev to treat the collected BTC as a temporary salary, unless the coin is very innovative and coded from scratch. And even then, most of those devs voluntarily refrain from doing so.

When an "IPO" goes well, as did the popular one for the second-generation crypto Qora, a new crypto is born that pushes the technical standards up a notch or two. Granted that many "innovations," like the currently fashionable drive for anonymous transactions, are essentially bells-and-whistles. They're introduced with an eye to the hot-house fads that make altcoin speculation a parlous mix of bonanza and bagholding. The hope of creating a genuinely improved cryptocurrency for real transactions – well, that's what everyone says they're doing, but the ones that go the distance are scarce exceptions.

Unfortunately, an exception of the opposite kind is not rare. That's the scam IPO, where the scammer ‘dev' makes engaging promises about the ‘innovations' that his scamcoin will feature. Then, as with all scams, when the due date arrives the scammer vanishes in an Internet-anonymizing spaceship while the horse-and-buggy good guys scratch their head and wonder what happened. By the time they figure out they've been cheated, the scammer has long vanished into the outer space of the Internet.

In 2013, all that was required to run a scam, apart from callous amorality, was a silver tongue and an engaging personality. As people slowly began to catch on, the bar was raised. Scammers found out that thy actually had to put some work into running their scams. You'll meet one of them in the final part of this series. He's a fellow who may have set a record in scam-land for provably running two IPO robberies. He may not be the only one, but he's the only crook whose postings unambiguously identify him as the con artist behind two different scams.

In fact, skepticism is rising to the point where Bitcointalk is beginning to see edge cases where it's unclear whether a scammer is a crook or merely in over his head. Shortly after doing my duty to NFD, which you';; find out about in the final part, I was shocked to see a known scamdev offer to return the BTC that had been sent him. Some hours later, I was even more shocked when I saw my 0.5 BTC refunded to my wallet!

Yep, the seamy side of IPOs is so bad that's it's an almost rattling surprise to see one's BTC actually returned after an IPOed crypto falls through.     

The Miss America Of Alternate Cryptocurrencies: Nxt

The seamy side of the IPO market was already in place on September 27th, 2013. That was the day when a mysterious fellow with the username "BCNext" signed up for Bitcointalk. The next day, he posted an announcement that would change the direction of cryptocurrencies forever.

The announcement was for a cryptocurrency which he called Nxt. Not only was it to be coded in scratch but also it was to be coded in a language that was completely different from the standard C++. Nxt was to be programmed in Java.

Moreover, Nxt had a new wallet system called a "brain wallet." The typical cryptocurrency has a file in the user's computer, typically named "wallet.dat." Therein is the complete information needed to spend the cryptocoins the owner has. As obliquely discussed in the first part of this series, this part of the infrastructure leaves the cryptonaut vulnerable to having his or her coins stolen simply by a hacker finding and copying the wallet.dat file. Encryption with password access is widely available, but keylogger and clipboard-sniffer malware defeats even the most elaborate encryption or airgap scheme. Even the cold-wallet techniques that are otherwise bulletproof have to access the Internet at some point, because the crypto's peer-to-peer network can't exist off the Internet. At that point of vulnerability, they're at risk of password swiping - or simple wallet-file swiping if the password was entered while the cold wallet was still airgapped. Even using the blockchain itself as a cold wallet, which carefully-generated paper wallets essentially do, is only invulnerable until the coins are accessed. The only ease of mind, for someone like me, came with buying the Perfect Guard anti-keylogger-malware solution.

The brainwallet system, in contradistinction, has no definite file in which the Nxt holder's coins are stored. They're essentially stored in the databases of all the peers. So, there's no explicit file target for a hacker to copy. In addition to this security model, the brainwallet emulates Java's "write once, run anywhere" philosophy. With a Nxt brainwallet, you can "deposit once, access anywhere."

Unfortunately, the brainwallet system also made possible "deposit once, hack anywhere." It wasn't that long before hackers cruised in with password cracking scripts: they started with brute-force sniffing for short passwords and continued with crack tables for dictionary attacks, keyboard-pattern attacks and other shortcuts that your humble and somewhat naïve writer has no idea about. The Nxt world was to find out about this vulnerability in early March when at least one robber notched up an all-out crime wave. It has been estimated that about 3% of Nxt stakeholders used crackable passwords: they found out the hard way by having their accounts cleaned out. Unfortunately, the brainwallet system derived the account number through a hashing of the password or "passphrase." So, changing your passphrase gives you an entirely new account. To change your passphrase to something more secure, you have to register a new account with your new passphrase, either log out after noting your new account ID or open a new client, log in to your old account, and then send all your Nxt from your old account to your new. The same thing goes for any Nxt clone or offshoot with a brainwallet, including the Nxt clone NFD that I happen to be the (somewhat titular) lead dev for. As you'll find out several weeks hence, I know this vulnerability very well.

But back in late September of 2013, those robberies were far in the future; Nxt itself had not even been developed. But some Bitcointalk members, seeing or suffering from the scams already afoot in the IPO circuit, decided that there would only be one robbery. That robbery would be of the naïfs who sent BCNext some Bitcoin, and the robber would be none other than BCNext.

Yes: during the presale phase, which actually lasted until November 18th, there were more than a few Bitcointalk members who decided that Nxt was a plain scam. Joining them were more than a few scoffers, and some rather clever people who opined that BCNext would send the Bitcoin he collected on a ‘round-trip' so as to make his pre-sale seem more popular than it was and to get a big stake in Nxt for himself. But some believed in BCNext and his vision for a completely new cryptocurrency with proof-of-stake "forging" to secure the network, registrable aliases, instant messages, a completely new infrastructure…and an inbuilt asset exchange. That asset exchange would capture the holy grail of the crypto world: so-called "colored coins" that could be used to represent an outside asset. Seventy-one of those believers became the initial stakeholders of Nxt: BCNext raised 21 Bitcoins from them. The genesis block that would create all the Nxt was to contain one billion new coins. So, one bitcoin – the maximum pre-buy allowed by BCNext – would end up buying almost 50 million Nxt. Using the standard satoshi unit, one Nxt was originally 2.1 satoshis; because the stakeholder-account list had to be pruned to get rid of accounts that were not confirmed or were unconfirmable, the implied price would later drop to only a tad above 2.

When the presale was closed a few hours after midnight Eastern time on November 18th, only ninety-nine accounts were entitled to receive Nxt from the presale. One BTT member, arguably, had had the presale window slammed shut on his fingers. His complaints, plus a simmering under-the-surface hostility in Bitcointalk thqt had been aggravated by the sudden riches and steaminess of Boom Town, would prove to be a fateful course changer in the entire alternate cryptocurrency world.

It didn't help that BCNext decided to vanish and communicate to his stakeholders via a spokesman named Come-From-Beyond. The last time BCNext had visited Bitcointalk, under that username, was November the 8th 2013. Since then, he had communicated indirectly. The immediate reason, so he said, was because he was afraid of being tracked down by the CIA or suchlike because they would believe that he had developed a new Silk Road. He later revealed indirectly that he was involved in crypto under another name and he hinted that he might be back some day under yet another username with a completely different project.

Despite his conspiratorial-minded exit statement, the parallel with Bitcoin's original developer Satoshi Nakamoto was quite evident. His supporters and fans found it easy to believe that he was in the same rank as Satoshi Nakamoto. Some even wondered if he was Satoshi Nakamoto.

The unimpressed, naturally, didn't think anything of the sort. They were inclined to make far less flattering comparisons.

Many of those were skeptical or even mocking while BCNext was still around and posting under that username. One skeptic, Fuserleer, had a more competitive reason to be openly dubious. He headed up a project called eMunie, which he still leads today. In a post on BCNext's Nxt announcement thread, in the early morn of November 13th, Fuserleer claimed to have spent $80,000 over the prior six months in which he had been working on his eMunie. He made that claim after a few prior posts in which he suggested that Nxt was being done in a slapdash fashion without adequate testing – unlike eMunie, which he averred had been "through 6 months of HEAVY testing."

On June 7th, 2014, Fuserleer made a more shocking post: he claimed that some hacker had robbed him of more than 600 BTC from his personal accounts "as well as a sizable amount from of our pre-launch fundraising activities." He also said that some backup copies of the eMunie source code – which he had not released in an open-source manner – were ripped off too. He further stated that he had refunded about 300 BTC to eMunie investors "out of my own pocket," implying that he had to dip into his reserves of fiat money to do so. Before announcing a 40 BTC bounty for anyone who could track down that thief, he hinted that he had been somewhat martyred by a suspicious and calumnious part of the Bitcointalk community. All he was, he said, was a guy on the side of the angels who spent lots of money and time to realize his dream of an entirely new coded-from-scratch second-generation cryptocurrency. Needless to say, his announcement won him a lot of sympathy – but a few questions about why this great man couldn't protect himself from having a huge amount of Bitcoin stolen. After a diversionary side discussion about the Bible, one person openly claimed that Fuserleer was simply lying.

Yes, it's that kind of a hard-bitten place. Although the standard meme compares crypto land to the Wild West, another comparison come to mind.  

According to his post on November 8th, 2013, Fuserleer had "overseen and spent a year now developing eMunie, and so far it's been through 6 months of HEAVY testing." According to this timeline, he began development of eMunie in November of 2012 and has started his "HEAVY testing" in May of 2013. As of June 7th, 2014, there was a vouched-for open beta but no release. That's exactly where eMunie is as of the time of this writing. Nxt, in contrast, has been fully operational for more than eight months.

But Fuserleer did have a point, as you'll find out soon.    

In BCNext's last message, he had said that Nxt would be released in early January. In actuality, he generated the blockchain-starting genesis block less than thirty-six hours after he halted the pre-sale. A little later, on November 20th, Come-from-Beyond unveiled the web address of a "bootstrap node" that stakeholders could use to access their allocations of Nxt. By this dating, Nxt was ready and transferrable on the 20th.

The unveiling proceeded to be a little more complicated because some stakeholders did not supply valid identification or even identify themselves at all. So the earlier genesis block was voided and a new one was regenerated. In the meantime, that same Come-From-Beyond offered to sell 1 million Nxt for 1 BTC, or 100 satoshis per Nxt. That offer was posted as of the early afternoon of November 20th. Someone else quoted a price ten times higher. That got two complaints, one somewhat easygoing, about Come-From-Beyond quoting a price that was (in actuality) almost fifty times what he paid. In response, Come-From-Beyond said that 100 satoshis would prove to be a real bargain by late January of 2014. Another early adopter 2Kool4Skewl, averred the same thing. 2Kool4Skewl was evidently quite convincing: thirty-five minutes after his endorsement, Come-From-Beyond rescinded the offer.

No-one complained heatedly, but that "genesis offer" did show (perhaps unintentionally) a somewhat mercenary attitude. On the other hand, there were seeds of generosity sprouting too. Once IPO stakeholder said he was going to give away 1000 Nxt to his friends, and Come-From-Beyond pledged to set up a "faucet:" a Website where a visitor could get a small allocation of free coins. Faucets were nothing new – Bitcoin had had them for a long time – but it did show a side in the earliest-adopter community that was the opposite of rapacious. Within a day, another first adopter – neer.g – pledged to donate 4 million of his Nxt to a giveaway fund.

But before that pledge, another IPOer offered 1 million of his own for that same 1 BTC. Showing that he was serious, 2Kool4Skewl quickly offered to buy them all. "Nxt @ 0.000001 btc [100 satoshis] is an investment I can't afford to miss." He meant what he said. On November 21st, mid-afternoon Eastern Time, yet another first adopter named Noitev posted, "I'm selling 15 Million NXT to 2Kool4Skewl for 15 BTC….Since there is no client yet, I will need an escrow..."

Soon after that, 2Kool4Skewl confirmed that he would be sending his 15 BTC to an escrower. The "genesis exchange" had taken place only a half a week after the pre-sale had been closed. And the buyer considered himself very lucky to get them at that price.

On late afternoon on the 21st, Come-From-Beyond explained the reason for the hurry-up: BCNext wanted the core group of Nxters to run things in his stead. But because of the advance in schedule, the first version of Nxt would be only basic. The entrancing features in his original proposals would be disabled for a long time.

Anyone lurking in the thread, wondering if something was fishy with Nxt, had another item to add to the fishiness list. But at that moment, no-one piped up.

In retrospect, even though the most likely motive was BCNext deciding to scamper from the authorities that he thought were watching him, his decision was a stroke of managerial genius. By being the Leader who Refused to Lead, by being the Sleeping King, BCNext left a vacuum that was soon filled by a whole crew of really solid programmer talent. One of them, Jean-Luc at Bitcointalk and Jean-Luc-Picard in the Nxt neighbourhood, became the official chief developer for Nxt and the maintainer of the official Nxt repository on Bitbucket. As of the time of this writing, there is a whole confederacy of developers for Nxt. They're all hard at work extending its functionality and/or providing third-party services overlaying Nxt itself Some have gone beyond even BCNext's vision.

Of course, with respect to that masterstroke, there was some luck involved. The Leader who Refuses To Lead can create a vacuum that's filled by indecision and infighting, as seems to be the case with Gentoo Linux. But BCNext's vision provided a rallying touchstone, and – to be frank – he was lucky that he had captivated top-notch talent. Crucial to this luck, but only for a time, was a non-technical early adopter who took upon himself to be the cheerleader, an organizer in his way, one of the goal-setters in the spontaneously-formed steering group, and even somewhat of a mother hen. In his time as a Nxter, he was one of Nxt's better bulldogs. You'll meet him in the next three installments.

The total talent in play for Nxt rivals only Bitcoin's. In fact, Nxt is the only alternate cryptocurrency with a collection of core programming talent that rivals a high-tech start-up. Etherium, the latest hot offering in the coded-from-scratch second-generation cryptocurrency sector, claims to have a comparable suite of genius, but it's not scheduled to launch until January of 2015. Unlike Nxt, Etherium has generated a lot of publicity and its pre-sale has called forth tens of thousands of bitcoin for its Ethers. Their haul has been three orders of magnitude greater than Nxt's 21. Etherium does claim to be far more innovative then Nxt, but the time between its first announcement and its scheduled release will be more than eleven months. Some of that delay was prompted by the Etherium team having to lawyer up. As you will see in the next part, the need for Etherium to cover its collective hiney was indirectly sparked by Nxt itself.

After the new genesis block was pruned of unidentified or unidentifiable stakeholders, Come-From Beyond announced late morning Eastern Time November 22nd that it was time for the remaining stakeholders to claim their coins. The pruned genesis block allocated 49,875,751 NXT for the maximum 1 BTC investment for an implied price of about 2.005 satoshis per Nxt. Remember, there already was a formal commitment by two parties – both the seller and the buyer - to exchange 15 million Nxt at almost fifty times the pre-sale price.

Without anyone quite knowing it at the time, a real fuse had been lit – even though the buyer, the aforementioned 2Kool4Skewl, was an openly eager demander (of fifteen million more than his initial IPO stake) at that price. Only a slight hint of the fuse now inaudibly hissing came from the seller, Noitev, who suggested to his committed buyer: "Be sure not to hog them all, they'll go up more and be better if you distribute them to a lot of people."

Just a cautionary note, expressed in a casual and even friendly tone. A cautionary note, posted at suppertime Eastern Time on November 22, 2013. Any newbie lurking at that time would see nothing more than a reminder about the need for wider distribution. Nothing more than that.

The jubilation on late November 22nd was mixed with confusion and some fright. Come-From-Beyond reminded everyone that BCNext had posted a link to a desktop Nxt client on October 29th, although it was recommended that the IPO recipients register their accounts at the bootstrap Web client set up by Come-From-Beyond. That registration was part of a procedure for each stakeholder to claim his or her coins: in the final iteration, the step-by-step instruction comprised twelve full steps. At least one person who downloaded the desktop client wondered what was up: why there were only Java .class files. Come-From-Beyond had to explain the now-standard procedure for running a Nxt, Nxt clone or Nxt offshoot wallet: fire up the client - then necessitating opening up a command prompt window, changing its directory to the Nxt files' folder and typing in" java -cp Nxt.zip Nxt" – and then opening up a new browser window.  Once the command-prompt part of the wallet had fully booted up and signalled that Nxt was running, the user had to put the address http://localhost:7875 in the opened browser. The browser, after getting the user's passphrase, would open up the interactive Javascript wallet.

Or at least, that's the way it should have worked. After one eager IPOer started up the command-line client and got the message "Nxt 0.1.5 started", his client started throwing exception errors. Come-From-Beyond had to advise, "Ur version is not compatible with mine. Use it just to generate an account id. Later we all get the most recent version."

It's not hard to imagine curious altcoin-vet lurkers in the thread starting to snicker. Yet another launch. Yet another messy launch. Yet another launch where the "groundbreaking" tech goes haywire. But this mess included something new: having to straighten out clashes between different and network-incompatible versions of the clients.

BCNext expressed a real distaste for cloners, heartily seconded by his growing circle of core Nxters, so he announced through Come-From-Beyond that Nxt's source code would remain secret until early January: more-or-less the same date as his originally-promised release. The Nxt version that entered crypto history as the first with source code proved to be 0.4.7. Jean-Luc Picard, for historical reasons, still offers it for download here. But the code, now open source, was not exactly cloneable for real.

Again through Come-From-Beyond, BCNext explained that he deliberately introduced three subtle but serious security flaws in the source code for 0.4.7. Those flaws would be revealed in three months' time if no-one had found them by them. Come-From-Beyond, shrewdly, made a contest out of it. The discoverer of flaw #1 would win 1,000 Nxt. For the discoverer of flaw #2, 10,000 Nxt. For the diligent and insightful discoverer of flaw #3, 100,000 Nxt. This announcement spawned a Bitcointalk thread that ended up growing to 69 pages. And got a lot of Bitcointalk members poking through the source code, and getting a disguised self-education on how Nxt's innards worked. Some of these people would take their learnings and join the high-powered developer community, now comprised of well over twenty developers. As noted above, only Bitcoin itself boasts more talent.

As for the rewards, they were all claimed before the contest was over – and in order. More than a month passed when the only one still open was the frustratingly subtle flaw #3. The winner, Evil-Knievel, got awarded the bounty on March 22nd - twelve days before the contest was to end and the flaws revealed. 

Despite Nxt being both open-source and flaw-defanged since early April 2014, Jean-Luc Picard had slipped in some booby traps that would make any "real" Nxt clone shut down some features down the road of its life. As a result, and because Nxt was actually trickier to clone, the first "real" clone of Nxt didn't show up until March 31st.  It was publicly denounced by that same Jean-Luc Picard for being a scammy cut-and-paste coin. Evidently, that pioneer clone's dev had missed the booby traps.

But that minor uproar, which proved to be only a minor block in the way of that resilient clone, was long in the future. After fielding a fair bit of questions and help requests, Come-From-Beyond announced that the Nxt network would be fully operational as of noon GMT November 24th.  And then, he went back to fielding questions and help requests - and noting that Nxt required more than 256 megabytes of memory allocated to the Java runtime environment else it had a habit of crashing. He also included a pre-warning with a list of account numbers that would be sent Nxt come go-time. He told those first adopters to check their details carefully, because once Nxt was a go the sends would be irreversible.

Less than an hour and a half, the first hint of the hissing fuse surfaced in a somewhat angry complaint from one of the IPO stakeholders. Unlike most of the others, he had not followed the progress of Nxt. He said that claiming what was his had become a lot more complicated than what BCNext had originally promised. "That's pretty much work for a investment <100$" Little did he know, not having followed the thread, that at the first-trade price of 100 satoshis his "<100$" already had an implied value of four figures.

As launch time approached, Come-From-Beyond was still busy fielding help request after help request. Some of the lurkers in the thread were obviously less than charmed by this seeming donkey derby. Shortly after the go-time, the first criticism threads appeared, claiming that Nxt was flawed, rickety and with unplanned security vulnerabilities. Ironically, that stroke-of-genius Sleeping King talent drive was already on the job: by early January, five different wallet clients were available.

But those complaints, numerous as they were, were truly weak sauce to the fury that exploded over a completely different issue. Nxt was not just the pioneer of completely Bitcoin-independent second-generation cryptocurrencies. It was also the pioneer, through being the #1 punching bag, for an outpouring of economic populism that shot through the ostensibly libertarian altcoin world. Completely unintentionally, and only as the #1 ‘plutocrat' villain, Nxt also induced a serious flirtation with cryptocurrency socialism.

The first one-shot trading price of 100 satoshis served as a precedent for the first phase of price discovery in Nxt's official trading thread. That precedent price was also close to the starting price of trading on the first day Nxt was listed on its first "real" exchange, Dgex: that day being November 29th 2013. It was at that point that the lit fuse entered the dynamite sticks.

But the explosion didn't come until November had turned into December, the month where Dgex's price discovery revealed that Nxt had become another get-rich-quick-suddenly altcoin.  December 25th, 2013, was a holly-jolly Christmas for the original still-holding stakeholders who had paid an implied price of only 2.005 satoshis for their Nxt. On December 25th at 12 AM, Nxt traded at 7,884 satoshis for more than a 393,000% gain in Bitcoin terms in three months or less. A hypothetical punter who bought 1 BTC for two hundred and fifty dollars on Hallowe'en 2013, and threw it into Nxt shortly afterwards, could (only conceivably) have sold his stake on the beginning of Christmas morn for more than 3900 Bitcoins. And then, turn and (more realistically) unload that 3900 BTC for US$ for more than US$700 per Bitcoin. Had this impossibly lucky person done precisely that, said luck-struck fellow would have turned that $250 into approximately two point seven three million dollars. For the first time in crypto history, a hot alt had made at least one lucky holder an outright millionaire on one single starter Bitcoin.

For the first time in cryptocurrency history, an alt posted a percentage gain that was in the range of Bitcoin's itself – but in a jarringly compressed time frame. What took Bitcoin three full years to rack up, Nxt raked up in three months.

Even more strikingly, Nxt' subsequent performance was more-or-less a wide-ranging side channel. Unlike the three alts featured in part three, all of which later endured grinding bear markets as ardour increasingly turned into coldness, Nxt has more-or-less held its value after its Boom Town stampede ended. A buyer of Nxt on December 25th had lots of chance to exit with either a teeny profit or greater. The canny developer-recruitment tactics and the check-out-the-innards publicity stunt, has secured enough top-notch talent to keep Nxt innovations churning out more-or-less continually. BCNext's original vision has mostly been realized, and there are side services like automated transactions in the development pipe that hadn't even been dreamed of. Because of that top-notch talent, Nxters have a serious shot at beating the Etherium "dream team" by implementing all of Etherium's future features before Etherium's launch. The only exceptions would be Etherium features downchecked by Nxt's Jean-Luc Picard as being too risky, too ill-thought-through, for Nxt.  

Yes, it is admittedly true that there were a few days in later November when Nxt could have dubbed "Klutzerella." But as the subsequent eight months have demonstrated, particularly the months where Nxt has held most of its value, Nxt is the altcoin world's answer to Miss America.

Indeed: for the original stakeholders who held, and even for the early buyers who relieved the selling stakeholders of their Nxt at an almost 50-bagger in Bitcoin terms, Christmas 2013 was a very merry Christmas. 2Kool4Skewl, that eager IPO participant who bought 15 million more at 50X his IPO price, had been bang-on right in his forecast.

But for the ones who had missed out - there she was, Miss Nxterica. By her mere presence, she unintentionally elicited a very unhappy and soon-to-be-rancorous New Year… ESR

Daniel M. Ryan is a long-time contributor to Enter Stage Right and has returned to the fold. © 2014 Daniel M. Ryan.

 

 

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