Real-time self-government in the cryptocurrency frontier: The altcoin jungle and its pathways By Daniel M. Ryan

…We Got Fun And Games Some time ago, I happened upon a Bitcointalk altcoin thread – since retitled – whose original poster introduced himself as your friendly neighbourhood pumper. It also contained the previous pumps he claimed credit for. If you're reasonably familiar with the world of investments, yes – "pumper" means what you think it means. The odd thing about this fellow was that he was almost childlike in his guilelessness. He seemed absolutely oblivious to the fact that, to someone familiar with securities law, he came across as a ‘Hood denizen who announced himself to his Project neighbours as the friendly neighbourhood burglar. "Glad to know you! And since we're friends, the first heist's on me. Any time you need a new TV, just knock on my door." As the thread grew, Mr. Pumper got mostly supportive and gimme-a-tip comments - until an indignant fellow posted with a complaint. It started off with the demand that Mr. Pumper should refund the losses endured by his miniscule band of followers. Lest you think that this outraged complaint was a normalcy break, the rest of the thread revealed that…Mr. Outraged felt that Mr. Pumper owed his fans a "refund" because Mr. Pumper was too incompetent to run a proper pump-and-dump operation! I am not kidding. The rest of that same post was a stiffly-worded guideline of how a proper pump-and-dump operation should be run. It's as if Mr. Burglar were accosted by an indignant neighbour yelling, "I don't care if the cops were on to you! You, sir, owe me a free TV! And being arrested is not a valid excuse!" Welcome to the convoluted, topsy-turvy fringe word of alternate cryptocurrencies. Enjoy your guided tour of the altcoin jungle. Altcoin A,B,C,D,…,XXXs Altcoins entered the Bitcoin world in 2011. Some of the class of ‘11 went to crypto oblivion, but most are still around today. The most successful, value-wise, has been Litecoin. If you've encountered the name, you've probably seen its current branding: the silver to Bitcoin's gold. But that's not how it got its start. Originally, Litecoin was a populist altcoin – one aimed squarely at the constituency of "miners" – specifically, lone operators mining with their single rigs. At the time, Bitcoin mining was on its way to becoming big business. ASICs had not arrived at that point, but they were on their way. Litecoin was introduced as the small miner's friend: the coin that you could mine with your own desktop's CPU. Just like you could with Bitcoin itself, back in the good old days. To ensure this, the Litecoin developer added a new "proof of work" hashing algorithm – scrypt – which confounded the increasingly optimized mining programs that Bitcoin miners were adopting to stay ahead of the game. ASICs for Litecoin didn't arrive until less than a year ago. In large part, that's because Litecoin's value ranged from sub-pennies to pennies until Bitcoin was securely in three-digit territory. Even when Bitcoin itself rocketed up to $1,000, Litecoin was a laggard price-wise. That pretty much suited the old boys of the Litecoin world. Other still-successful coins were more experimental. One unveiled a then-exotic network-securing method called "proof of stake," where the rewards were dished out to people who left their clients-and-wallets running. Essentially, they were rewarded for helping make the network robust by running a live Internet-connected node. The rewards had a chance element built in, as does the standard proof-of-work mining system, but the chances were weighed more-or-less in proportion to the amount of the altcoin in one's wallet. At the time, this system was exotic but it was destined to be a sub-genre pathbreaker two years down the road. Of course, any technically astute Bitcoiner know full well that even the most "innovative" altcoin consisted of relatively minor modifications to Bitcoin's own source code. Since open source is standard practice, Bitcoin became the base. Some C++-fluent Bitcoiners probably had a merry old time opening up the source code files of various altcoins, opening the "Find" function, entering "Bitcoin" into the box and counting the number of times the doughty but hasty cloner had inadvertently left the word "Bitcoin" still lurking in the source code's comments. Stage two was to look for the comments that still referenced Bitcoin's basic parameters, like the time between one block and the next or the number of coins that a lucky miner gets rewarded. The parameters that were changed by the altcoin devs in an effort to brand their new creation - except in the source-code comments. Some Bitcoiners saw the underlying sameness of the code as good reason to be mocking, suspicious, cynical, or just plain haughty. But many of them were more-or-less genial back in the day. Some advocated for altcoins as a useful experimental-lab circuit that could, if need be, produce new goodies for Bitcoin itself. The best, these people argued, would have their at-the-margin advances adapted into Bitcoin's own source code and Bitcoin would be better off for it. There were good, solid reasons to live and let live. Others were supportive because they were live-and-let live types in their hearts. More than a few actively kept their hand in both worlds. 2011 was the year the altcoin river began flowing. 2012 was a drought year, where the former river turned into along-the-dry-riverbed ponds. And 2013 was the year the river started flowing again. It was also the year that changed the altcoin scene from a more-or-less Bitcoin-back-in-tha-day circuit to an outright boom town. As 2013 turned into 2014, the steady flow of the river became the torrent it still is today. As of late July 2014, there are hundreds of altcoins still viable and who-know-how many altcoins that exist only in crypto Hades. Passed to the beyond, with the gravestone epitaph appearing in the lower right corner of the alt's wallet client: "No Block Source Available." The Gusher Behind The Rapids: The Rise Of The Altcoin Exchanges If you remember from part 1, the first and biggest exchange for Bitcoin was Mt. Gox – and it proved to be little more than a pilot plant, the operation where mistakes are found the hard way. It actually did serve as a pilot plant for the later and still-running others, like the current market leader Bitstamp, the runner-up BTC-e, and even Canadian offerings like CaVirtex and Vault of Satoshi. They have not had the troubles that Mt. Gox had suffered. It's as if Mt. Gox had been the point man of the Bitcoin part of Crypto County, with the others adapting as soon as Gox had been attacked by the unfriendlies. In this way, only Gox got unfriendlied into bankruptcy. One exchange, Vault of Satoshi, publicly bragged at the time Gox went down that it never had to stop trading for any technical or security reason. The stability of the other Bitcoin exchanges helps explain why Bitcoin's value has been so stable recently. Although the vision of Bitcoin as a new money has been put on the back burner, the robustness of the other exchanges have led to Bitcoin's new role in real-life commerce. It's now the hub currency of a thriving payment gateway. One that's faster than Western Union, less restrictive on the seller than Paypal and credit cards, much faster than wire transfer, and much, much cheaper than all of the above. For a regular business, this – not Bitcoin's promise as a new kind of money – is the selling point. With a Bitcoin payment gateway, the seller pays zero fees: I repeat, zero fees. The buyer pays a flat fee of 0.0001 Bitcoin, which goes to the lucky miner that validates the enveloping 10-minute block of transactions. The fee's the same, whether you send one thousandth of a Bitcoin or one thousand. If you wanted to, and you had the Bitcoin, you could send your relative $620,000 in Bitcoin and pay six point two cents for the privilege. That's right: six cents. Of course, if you do so, you'd have to make very, very sure that you have the right Bitcoin address. Once you've sent them, they're gone. Bitcoin transactions, by design, are irreversible. So the six cents comes with an added cost: checking every detail with an eye like a proverbial hawk's. But if you're up to that, you can send as much as you please to anyone with a Bitcoin wallet for six cents. The time to fully validate the transaction: one hour, or six formal confirmations. If you're in retail yourself, you can see why Bitcoin as a payment processor is a "killer app." There's already a third-party payment service that takes care of the vital details and automatically dumps your Bitcoin into the highest bid on a reliable big Bitcoin exchange. Then, it fronts you the proceeds in good ol' greenbacks. This service, Bitpay, does so in exchange for a 1% cut plus a monthly flat fee. Since the standard cut is between 2 and 3% of the transaction, you can see why Bitcoin is spreading as a payment-processing vehicle. Just ask yourself how better off you'd be if you could save 2% costs on every sale, particularly if you have a high inventory turnover. Of course, there's a chicken-and-egg problem here. Of what use is a new payment protocol, even if it provably saves you 2% on every sale, if no-one's around to buy with it? Believe it or not, the catch-22 has been resolved in a way that a theoretical economist would love and a true-blue Adam Smith type would deeply appreciate. The catch-22 was broken by speculation. Yes: that huge 100,000% gain; that purportedly Ponzi-like rocket flight; the legion of Amwayish Bitcoin Evangelists; the three-bubble ascent from 10 cents to $600 in four years. This – precisely this grubby and suspicious-looking speculation – provided the critical mass to make Bitcoin a viable payment processor. The item that broke the inertia, of course, was the excited stories about Bitcoin hitting $1000 in the wake of the Cyprus bail-in. Retailers became aware that there were a bunch of Bitcoin "instant millionaires." Some, in the usual business-savvy way, decided that there was new trade to be had from those "instant" millionaires. One seller, now legendarily, was Tesla. They made a huge splash in the mainstream press by offering a new Model S for Bitcoin. Soon afterwards, Overstock joined in. The latest joiner is none other than Dell. The neat part of the story – one that an economist will love – is that the rise of Bitcoin as a cheaper, cost-saving payment processor is a classic example of speculation not only adding but creating value. Had it not been for the Wild-West-type speculation, Bitcoin payment processing would have been a no-go. Only the purportedly Ponzi-like rise of Bitcoin's price could have pre-added enough "market cap" to make Bitcoiner trade big enough to be worth going after. Only the frenetic day-trading, scalping and automated-bot-systeming of speculators near and far could have provided the liquidity needed to make the transfer from Bitcoin to greenbacks viable. It was speculation – yes speculation – that turned Bitcoin's value from hope-and-dream to something real. In fact, on December 5th of 2013, Bank of America analyst David Woo treated Bitcoin as if it were a standard investment vehicle and gave it a look-over using standard analyst methodologies Granted that his report is more analogy-dependent and more reliant on "this is the best we've got" metaphorization than the standard research report, something like using a slot screwdriver on a Phillips screw because a slot is all you got, but it does say that Bitcoin has a real, fundamental value as a lower-cost competitor to Western Union. The figure Mr. Woo came up with was $1,300. Had it not been for the wild-and-woolly swarm of Bitcoin evangelists and speculators, its fundamental value would be effectively zero. Its value would be solely confined to blue-sky speculative anticipation. If you're an Econ Ph. D. candidate reading the recountings of your ‘umble middle-aged batted-around scribe, the above speculator-as-value-creator story is a dream thesis that's right in front of your nose. If you know of one, the best favour you can do for him or her is to pass this inside tip along. With the proviso that your ‘umble author won't being doing any of the ‘eavy lifting. This necessary side trip on the rise of Bitcoin from blue sky to an asset with a roughly pin-downable fundamental value is a crucial detour in understanding the boom-town hothouse of altcoin speculation. It provides the fact-based backdrop for the Great Altcoin Narrative. To wit, or "tl;dr" for you youngsters, the Great Altcoin Narrative is bootstrapping via speculation. Like Bitcoin itself, an altcoin will rocket up in value, attract attention from real merchants, and evolve into a viable online payment processor. Later comes an "ecosystem" for the altcoin which consists of stalwarts using it to sell and buy various goods and services. Once this ecosystem is bootstrapped to full viability, the altcoin will be at the centre of a real gosh-wow micro-level cybereconomy. Complete with peer-to-peer micropayments in the Third World, for those more idealistic cryptonauts. Or the cryptonauts who are apparent idealists. But in order for the Great Altcoin Narrative to be even plausible, there needs to be at least one exchange with enough speculative volume to sustain the supply needed for a regular merchant to use the altcoin as a payment processor. The first altcoin exchanges were actually side boards of Bitcoin exchanges, run as a sideline to their Bitcoin trading. A current example is Vault of Satoshi, which currently lists 20 altcoins in terms of Canadian and U.S. dollars. A cursory examination of the order books for each will show that the price of an altcoin, even the silvery Litecoin, is way, way below Bitcoin's. Also, the markets for each are much thinner than Bitcoin's. Consequently, the depths are much thinner and the spreads are much wider. If you investigate further, you'll see something that flowed from the open-source nature of Bitcoin and the inner innocence of even the greediest cybernauts – yes, even the inner innocence of the above-discussed Mr. Pumper. The most striking feature of all exchanges, for an old stock-market punter hound like me, is the fact that there are no minimum commissions. It's flat-percentage all the way. In other words, you could start today as an altcoin speculator with a total grubstake of ten dollars' worth of Bitcoin. You'd face the same commission load, percentage-wise, as someone who starts today with a grubstake of ten thousand dollars. The exchanges are quite happy to take a 1.5-cent, 2.5-cent, or 10-cent clip off each of your trades. In fact, you could start today with a single dollar's worth of Bitcoin if you could find someone to sell you a dollar's worth. Because of the proliferation of scammer buyers, Paypal is not an option. If you're an old punter hound who hasn't got around to getting a life, like me, you'll find something that's even more striking. Real-time ticker data, real-time order-book data, and real-time trade records: all of them are available through APIs. And all of them, in striking contrast to regular exchange data, are 100% free for the downloading. If you have enough programming acumen to parse JSON object data, and if you have an Internet service that grants unlimited bandwidth, you can get a full suite of real-time market data at a marginal cost of effectively zero. This no-minimum-commissions market-data-as-a-free-service model is standard practice in the world of crypto exchanges. Yay for open source. If you know of the real monthly cost of getting fresh-from-the-exchange data via direct feed from regular exchanges, this standard practice in crypto land is one helluva #MorningWin. As is the no-minimum commission model. As noted above, the altcoin-board-as-a-sideline model has volume that is piddling. Spreads are wide, order depth is thin. That's because that side-board model is actually dated, or perhaps dormant, at this point in time. The real action is found in the all-altcoin exchanges, which have made the sensible decision to trade altcoins in terms of Bitcoin. So, in the part of the trading environment where the action is, Bitcoin serves as a kind of reserve currency or unit of account. Except for the somewhat sad cases of altcoins that fell into a kind of micro-penny-stock limbo after not living up to their promise. Those sad specimens are traded in terms of Litecoin. There are even some exchanges that offer a kind of rehab-room trading for the bottom of the barrel. For those, the unit of account is the altcoin you've most likely heard of already: Dogecoin. Alts at that bottom of the crypto barrel are truly pathetic, although there's some face-saving by those exchanges through offering popular altcoins on the Litecoin and Dogecoin boards too. But, buying the "coma coins" is like buying shares of a hollowed-out shell company whose last price was well below five cents and whose last trade was who-known-when. Even there hope still lingers, but the large majority of altcoin punters see those coma coins as all-but dead. They're hip enough to know that the "real" altcoins all trade in terms of Bitcoin. But even there, the bulk of them trade listlessly. One of the sadder phenomena is watching a once-white-hot altcoin slowly dribble down in a grinding bear trend unfolding over a veritable eternity in crypto time. One of them at the moment is that same Dogecoin. As of the time of writing, it's ground down to less than 15% below its peak. The Dogecoin "shibes" at "Dogecon Central" seem doughtily and sprightily undeterred, but the number of nodes in the Dogecoin network have shrunk along with its price. The all-altcoin exchanges first gained traction in 2013. That's the year the top-tier exchange, Cryptsy, first started. At Cryptsy, at least for the most popular altcoins, the volume and depth are far, far from flaccid. As you might expect, Dogecoin is the one that's often #1 in volume. There were times when DOGE's volume was well over 100 Bitcoins per day: from time to time, its dollar-equivalent volume was well into the six figures per diem. In altcoin land, this volume is Apple-huge. One of the other striking aspects of the altcoin exchanges, although reflective of the nano-size of the altcoin ecosystem, is the fact that even the biggest of them have the personnel count of a medium-sized grocery store. Even to this day, there are lesser exchanges that are one-man bands. I myself had the opportunity to buy a small exchange – a complete, working altcoin exchange – for 10 Bitcoins in January of 2014. Had I taken up the seller on his offer, I would be Governor, CEO, COO, Managing Director and everything else – including ‘umble staffer – of my very own altcoin exchange. Because of the currently regulation-free environment of the all-crypto part of the crypto ecosystem, the barriers to entry for a new exchange proprietor(s) are shockingly low. As I indicated, I could be the owner-operator of an already broken-in working exchange for several thousand dollars plus server hosting fees. The consequences, as you may have already guessed, is that the tiers below the top in the altcoin exchange sector are where Amateur Hour lives. There was one exchange put together by a character, well-liked and popular at Bitcointalk, who basically coded on the fly – and much of his coding came from scrounging. Even more professional-level exchanges like Cryptsy started off without an ABC-obvious feature in their trade engines: implementing the "best-price" rule. Back in 2013, if you had wanted to sell your Litecoin at a hundredth of the prevailing high bid, Cryptsy's trade engine would have let you. In the second-tier exchanges, even today, Amateur Hour is still prevalent. Although the lone owner-operator phase has yielded to teamwork, the new and second-tier exchanges still have their rickety side. If you read Part 1, you already know what form that ricketiness revealed itself. For altcoin exchanges, the winter of 2014 was as tragic and crime-ridden as 2011 was for Bitcoin. Several exchanges, including one that's now in the ranks of the top-tier exchanges, were hacked and robbed of a lot of Bitcoin. For most of them, the attack vector resulted from a fatal security flaw in the then-stylish and otherwise-commendable database program called MongoDB. It was written to be much faster than regular stalwarts like MySQL or Oracle, but that speed came with a cost. MongoDB does not support transactions that, to use database-geek lingo, are "atomic." There's no way to sequester a single transaction from the flood of others. For the intended use of Mongo, that drawback is okay because Mongo was not designed for commerce. That proviso, unfortunately, was forgotten by the exchanges that hopped on board the Mongo bandwagon. Hence the Great Altcoin Exchange Crime Wave of early 2014. Several exchanges were victimized, and all but one was felled. It got so bad, that the one exchange still left standing actually won a huge outpouring of support from customers who had to have their balances clipped by 12%! The exchange owner makes for a perfect role model on how to do reputation management in altcoin land. As soon as he found out about the robbery, he told everyone about it on a dedicated thread at Bitcointalk. He also presented a plan on how the exchange would handle the loss: everyone who held Bitcoin in the exchange as of the time of the robbery would have their balances clipped by that 12%, with repayment coming slowly through future exchange earnings. What was crucial in this reputation-management coup was the way the owner dealt with the loss. He was honest, fully disclosive and he acted quickly. Those three virtues sufficed to make him an outright folk hero in the altcoin world. I saw this in real time, and most of me agreed that his many plaudits and kudos were earned. But a small part of me wondered why people were praising him to the skies for clipping their balances by 12%. That crime wave also provided a case study of how not to conduct reputation management. The exchange in question is now aught but a bad memory. But in its day, as of the cold-winter days that opened 2014, it was the hottest second-tier exchange and on its way to joining the ranks of the top. Its brag was "blazingly fast speed" – and, as you probably have already guessed, its trade engine was powered by Mongo DB. The hack occurred in February of 2014. Unlike the above-discussed exchange owner, this one – who ran the show as a one-man band – was at first uncommunicative. As the news spread, fearful customers frantically tried to withdraw their coins – especially their precious Bitcoin. The result was a bunch of anxious customers collectively hitting F5-F5-F5 at such a rapid rate that the exchange looked as if it had been subject to a DDOS attack. I myself had two Bitcoins there because I was in the midst of adding to my haunch of a still-minor altcoin. As my bad luck would have it, the hack took place while I had a lowball buy order for that altcoin outstanding. Although I only checked in from time to time, having decided that monkeyhammering the F5 key was futile, I was watching the drama unfold very closely. In fact, I was so worried that I dropped the outside work I was doing to concentrate on the fate of the exchange and my two Bitcoins. In the midst of the turmoil, having gotten a brief window in which the exchange was online, I made a mistake that I thought was prudent but which proved to cost me well over a thousand dollars. At this time, I simply did not trust the exchange's withdrawal script anymore. So, instead of hurriedly withdrawing the entire two Bitcoin, I made a test withdrawal of only 0.01. I had heard enough stories about other withdrawers having their coins stuck in some sort of botched-transaction limbo, so a test withdrawal seemed indicated. Luckily for me, in a way, the window remained open long enough for me to click the Email confirmation link and get 0.01 of my Bitcoin back. That gave me enough confidence to try for an escape with the rest of my Bitcoin – 1.989's worth after the 0.001 BTC exchange withdrawal fee had been deducted – when the next window opened. I had to wait about three days for my next chance. This time, I ordered the withdrawal of my entire balance and got the confirmation Email like before. But, my luck had changed. When I clicked the confirm link, I got a Cloudflare page that said the exchange was back in the land of HTTP 503. The brief window of online had slammed shut right on my fingers. I kept trying to click that link, seeing Cloudflare's 503 page again and again, but I got lucky a couple of days later – or so I had hoped. The confirm went through…but with no transaction ID. Like others', my 1.989 Bitcoin were stranded in botched-transaction limbo. By this time, the uncommunicative and truculent owner-operator of the exchange had left an informational vacuum that was filled with increasingly angry surmise. Soon, the consensus was that the exchange had not been hacked at all. Instead, the thief was none other than the exchange owner himself. He was just covering his tracks with a fake "we-were-hacked" excuse. The exchange owner protested, saying that it was a mysterious Russian hacker, but the coalescing mob of angry customers was not buying it. Not in the least. It was at that point that I saw, in real time, a truly rare and very serious event in crypto land. I saw, in slow motion, a group of angry victims undertake an all-out doxing. For those of you who don't know, "doxing" means stripping a pseudonymous Internaut of his anonymity. Literally, the term means publishing and sharing any documentation found on the hapless doxee. Since this is done in anger, much like clogging someone's Email account with an automated send script back in the early and hairy mid-‘90s, the doxing includes publishing any documents that put the doxee in a bad light. Since pseudonymity and even true anonymity are standard in crypto land – many cryptonauts prize both – doxing is the crypto world's answer to Danny Deavering. The doxing in this case had to be a two-stage operation. For reasons of his own, the exchange owner – who proved to be an Estonian – had arranged for the domain name to be owned by another fellow from Scandinavia. This fellow had a straight job, a wife, a baby and a huge reputational-management nightmare once his name was fleshed out by the self-appointed doxers. He actually signed up with Bitcointalk solely for the purpose of posting a message to the exchange's official customer-relations thread, which by this time was full of angry customers seething and threatening. His first post was largely factual, explaining that he only owned the domain name but not the exchange. His second post was a plaintive plea to please leave him and his family alone. He later coughed up the name of the owner in a private message. Yes, I had a ringside seat to an all-out posse operation. For once, the term you're thinking of was neither rhetorical nor allegorical. I had a real-time inside view of the operation of an all-out, operational, anger-fueled lynch mob. Being a Conservative in more or less good standing, I wasn't a member of the posse: in fact, I was a somewhat shocked bystander. I know full well that the consensus that the exchange-owner himself was the thief, was based on nothing but surmise. But since I had some skin in the game, and because I had long ago read The Crowd, I kept my own counsel about this – as any prudent would-be anti-lynch-mob hero should. Gustave le Bon himself advised that facing down an angry mob like a mythical Texas Ranger is just plain stupid. With the easy-to-understand exception of you facing the mob in a location where there's only one loaded gun, and that same gun is in your hand. I got another surprise as the drama continued to unfold. Unlike the genuinely scared Scandinavian, the Estonian who owned-operated the exchange was a pretty laconic respondent. Earlier in the drama, he had made another fatal mistake. For the claimed sake of protecting others as well as himself, he froze all withdrawals as well as all trading. By the time the lynch mob was approaching peak aggressiveness, he grudgingly agreed to allow withdrawals for some of the lesser altcoins – but none for Bitcoin. That Bitcoin, he said at this point, was robbed by that mysterious hacker in Russia. Whether this mysterious hacker had relieved the exchange of some of the Bitcoin or all of it, he didn't specify. Most of the altcoins he agreed to release had been coins that had been hot in the hot-house speculative atmosphere of the alt world. By then, though, they had fallen victim to one fad being discarded for another. Consequently, their exchange value had been gutted. Needless to say, this grudging semi-acquiescence to the demands of the mob did absolutely nothing to pacify them. He also said that he was negotiating via Email with this mysterious hacker to get said hacker to send some of the loot back. At this point, the anger of the mob reached peak intensity. One victim, after revealing that he was feeling suicidal, threatened to visit the exchange owner physically – now feasible thanks to the doxing – and push vigilante justice to pretty much its outer limit. But right around that point, a very serious posse collapsed into the usual Internet-commando show. The exchange owner vanished, along with the exchange and the Bitcoin. For all I know, he's still living an ordinary life in Estonia. I'll never see that Bitcoin again. Nor will any of the other victims who couldn't get theirs out. Some of you might be asking in your head, or even saying to your monitor, "why the ---- isn't this jungle regulated!?" The answer, although counterintuitive to some, is brutally simple. Imagine, if you will, that you're a mid-level bureaucrat who gets an Email one day. You're offered the opportunity of becoming the founder and first chair of a brand-new regulatory body devoted to taming the cryptocurrency Wild West. At first, you preen a little as you imagine yourself going down in history as the crypto world's answer to Joe Kennedy. Then, at first happily, you begin to look into how the Wild West really operates. If you're diligent and thorough enough, you eventually compile a preliminary finding that makes your preeny pride vanish. Instead, your stomach has now turned into a butterfly colony. You realize the dark secret of the cryptocurrency jungle. Because of the excellence of anonymizing technology, the ancient laws against simple theft of cryptocurrency property are all-but-impossible to enforce. The recovery rate of stolen crypto property is either zero or might as well be. Now, your dream is a nightmare – a nightmare of you in public-spotlight charge of an agency whose enforcement division makes the Keystone Kops look like Jack Bauer. You grimly realize that the framework you began to sketch out – an SEC-type suite of registration requirements, licensing requirements, competency and skill exams, exchange-operation requirements, etc. - are little more than fripperies. As long as your guys can't do something as ostensibly simple as prosecute a plain, common thief, those accoutrements on paper will be nothing else. And then, you respond to that cheery Email with something like this: "That proposed regulatory agency is completely unfeasible at this point in time. As long as it is very difficult for law enforcement to merely track down a common thief, that regulatory agency will not only be fatally compromised in terms of prestige but will also risk an avalanche effect of public mockery that could impugn the prestige of the entire regulatory apparatus of the government." Your actual response is laced with some rather salty language. Recently, an intrepid and pathbreaking top bureaucrat in New York State unveiled a draft proposal for a new regulatory regime for the entire cryptocurrency scene - including the altcoin jungle. It would cover any business or individual that happens to transact with any resident, whether real or artificial, in the State of New York. In addition to the usual media blitz, first-ever Superintendent of Financial Services at the New York State Department of Financial Services Ben Lawsky also unveiled it in the Bitcoin subreddt. Despite his cheery thread title, it didn't go over that well. Now that you have the inside dope on the real state of the altcoin jungle, you have enough to decide for yourself whether Superintendent Lawsky is the guy who'll drain the swamp or the guy who posts a "Rules For Safe Swimming" sign on the edge of a gator-infested bayou. You decide whether he's a history-making regulation pioneer or a bloody fool. We'll find out in due course. But there's no arguing with the bloody fact that the altcoin jungle is a lot like a real jungle in Africa. The kind of jungle where you either follow the jungle rules or you step on a venomous snake. No wonder that "never leave your coins on an exchange", for veterans of this scene, is Captain-Obvious-level common sense. And the weirdest part of this recurrent chain of underground scandals is the fact that there's nonetheless a thriving altcoin ecosystem where most of the denizens are genuinely trustworthy. It's actually a striking affirmation of the Lockean-libertarian view of human nature, even though Captain-Obvious-level prudence strongly suggests hitching a long ride with Hobbes. Caveat emptor, verissme verum amen. Daniel M. Ryan is a long-time contributor to Enter Stage Right and has returned to the fold. © 2014 Daniel M. Ryan. Home