Lessons From the Grave: Here's Why These 3 Early Crypto Projects Failed

Lessons From the Grave: Here’s Why These 3 Early Crypto Projects Failed

Key highlights:

  • What is there to learn from failed crypto ventures such as iXcoin?
  • What lessons can we take from the fall of i0coin?
  • Lastly, what can we learn from the failure of SolidCoin?

A large number of alternative currencies quickly emerged after the 2009 launch of the Bitcoin network, but a significant portion of them did not survive. Certain coins from this era, such as Litecoin, found success. However, a long list of alternative currency experiments did not stand the test of time.

This series will explore the graveyard of failed cryptocurrency ventures, why each of them failed, and what we can learn from their unfortunate demise.

Was iXcoin a pump and dump?

The crypto market is no stranger to scams. Beyond the world of cryptocurrency, the pump and dump is very low on the ladder of shady business practices. Not always illegal, but always greasy. IXC may have not been an intentional pump and dump scheme, it may have been an entirely honest and legitimate attempt at one of the earliest alt-coins ever invented.

The starting structure was solid, iXcoin was a fork of Bitcoin with a doubled inflation rate and an identical limit. Merge mined with Bitcoin, iXcoin was actually the second oldest alt-coin. However, the founder happened to disappear after the initial opening, conveniently after a number of investors had made a pretty penny’s worth of BTC from its short lifespan.

The premise is simple: Spur investment and/or mining with a convincing business model and persuasive marketing material. Once the hype hits its apotheosis, the founders and controlling interests dump their share and ride off into the sunset with a hefty profit of BTC. The honest initial investors are left with worthless coins and a bad taste in their mouth. The story of iXcoin is more a lesson to investors than founders: Don’t always trust the hype.

The lacking support that doomed i0coin

While IXC was designed to fail, i0coin simply faded on its own merit. Alternative currency projects require dedicated developers and careful maintenance to succeed. This coin was also merge mined with Bitcoin, but the inflation rate was significantly lower due to heavy premining. It did not really on gimmicks, offered much faster block times, and had a low starting price.

It was not poor marketing or shady business that doomed i0coin, it was neglect. When Bitcoin was updated to protect against DDOS attacks, i0coin was not updated to stay functional. The lack of updating meant constant shutdowns due to DNS errors. These errors led to users needing to carry out constant restarts to maintain merge mining.

The high block rate touted as a feature became a drawback. A high block rate meant memory usage would grow faster, and this made it less practical for mining. The large size of transaction data required for the more obscure P2Pool contributed to bulky memory usage. Combined with the daily crashes and restarts, users gradually moved away from i0coin as a viable currency to mine and invest in.

What can we learn from the slow death of i0coin? A good cryptocurrency does not rest entirely upon good planning and initial openings. A successful crypto project requires good planning and constant maintenance to facilitate growth. Like a vibrant sapling left to wither, constant focus and dedication are necessary to carry a coin through the crucial developmental stage.

Ego and security flaws behind SolidCoin’s fall

Moving past suspicious dealings and broken coins, the story of SolidCoin’s demise is a bit more karmic and entertaining. The tragic hero of SolidCoin was a Bitcointalk user known by the name of CoinHunter. CoinHunter has been described by other users as egomaniacal, generally disagreeable, and other colorful descriptors that are too profane to mention here.

Whether or not he is truly deserving of such derision, CoinHunter’s rejection of helpful advice and vice-like grip on code licensing led to the downfall of SolidCoin. CoinHunter stole code from other users, changed the licensing and copyright that credited the original authors (the inventors of Bitcoin), and refused to admit a simple programming error. These actions created an untrustworthy reputation and dysfunctional product that eventually outweighed its initially attractive and innovative quick transaction times.

Bitcointalk user wolftaur (this is an internet forum) approached CoinHunter privately with issues in the code base that had been highlighted by user ArtForz. While the post does not elaborate on the details of the bug, apparently it was incredibly common and not difficult to fix. CoinHunter took personal offense to anyone having the gall to point out a flaw in his (stolen) code and refused any help.

Most programmers, especially those involved with open source software, know that community is an important aspect of writing good code. SolidCoin’s eventual death was a product of CoinHunter’s refusal of help from his community, refusal to correct an error that made SolidCoin insecure, and refusal to go open source with his code. The bulk of the project was poised for success, but it was the ego of the developer that kept it from succeeding.

What can we learn from SolidCoin? Many enthusiasts, as the name implies, are actually glad to help others out of passion for their craft. It does not help your project to steal code and modify licenses to benefit yourself and discredit the original programmers. It does not help your project to let your ego get in the way of correcting simple yet system-breaking errors. Lastly, it does not help your project to refuse the spirit of community that has driven the history of hacking and cryptographic software from its inception. No one is perfect, but refusing to acknowledge your own mistakes will only amplify them.

The bottom line

While iXcoin, i0coin, and SolidCoin were all failed cryptocurrencies, we can still gleam useful information by looking at what went wrong. Easy wins may breed hubris, and mistakes are opportunities for learning and future success. These coins may not be worth much in terms of money, but they are worth lessons in what not to do.

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