What Happened at the Altcoin Party?

2014: The Bear Growls, Part 2

Perhaps the most interesting thing about 2014 wasn’t bitcoin’s fall from euphoria or the bull market that caused all cryptocurrencies to tumble. Rather, it was the advent of new cryptocurrencies altogether and the ushering in of the wild digital west.

On January 5, there was one new addition to the top 10. Nxt (NXT), Quark, and Megacoin all entered the top 10 for the first time in December 2013, Quark and Megacoin at the beginning of the month, and Nxt at the end. This resulted in a nearly 50 percent turnover of the leading cryptocurrencies and signifies the beginning of a new era. But what were these new coins?

Source: Unsplash

What’s Nxt?

An anonymous inventor by the name of BCNext planted Nxt in November 2013. It quickly took root.

Nxt was launched as a proof-of-stake cryptocurrency with a 1-million-coin limit. From the beginning, Nxt was seen as a flexible blockchain that would support applications built on top of it, unlike bitcoin, and deliver financial services. It was a unique application for the time. Another difference between NXT and bitcoin is that NXT can’t be mined.

Nxt was a pioneer in one other aspect, as well.

The Nxt Digital Asset Exchange was the first fully decentralized digital asset exchange. This feature allowed anyone to trade cryptocurrencies with other parties without an intermediary. With 67 cryptocurrencies on the market, that was a big deal. After all, if someone wanted to unload some bitcoin and buy up some litecoin instead, there were few legitimate and secure options. Nxt made those kinds of transactions simple. A user who wanted bitcoin without having to buy it with U.S. dollars could trade some litecoin with another user and receive bitcoin in exchange. This was a necessary development for the future of cryptocurrencies.

Nxt also has a voting system and a marketplace. Anyone can set up a poll and allow voting based on a few different voting models. The marketplace supports the selling of digital and physical goods. Users list their items with a Nxt price, including descriptions and photos, and customers can leave reviews after the transaction has been completed. Again, the marketplace is decentralized allowing traders to interact with each other with no need for mediation.

On January 5, 2014, NXT was listed at 6 cents with a market cap of $63.3 million. That put it at sixth in the market cap listings. Today, NXT is ranked around the 1,000 mark with a market cap just north of $4 million. Its price is below the one penny range.

Ride That Quark to … Where?

Quark (QRK) launched in 2013 and debuted in the top 10 by market cap in early December. It landed in the sixth position. On January 5, 2014, QRK was the ninth ranking cryptocurrency by market cap.

Quark was an ambitious project from the start. Like bitcoin, it is a peer-to-peer cryptocurrency, however, Quark founders set out to build a super-fast and secure cryptocurrency. Their ambition was to process 1 million transactions per second using a technology called sharding. Those familiar with Ethereum today have likely seen the discussions on sharding as it relates to the leading altcoin blockchain.

Sharding is the process of breaking up data into smaller chunks called shards. These shards are distributed among different nodes. This speeds up transaction and data processing times on a network.

Another way Quark differs from Bitcoin is in its hashing process. Bitcoin uses the SHA-256 hash function in a single round. Quark goes nine rounds using six different hash functions. Quark developers created SHA-3 to account for future technology advances that might make SHA-2 less secure. That kind of forward thinking pushed cryptocurrency development well ahead of its time.

Bitcoin block creation, through the mining process, takes 10 minutes. Quark blocks are created in 30-second time frames. Bitcoin halving takes place every 210,000 blocks. That equates to approximately four years. Quark halving is done every 60,480 blocks, or about every three weeks. These differences are significant in the way each blockchain works. While Quark’s transaction speed gives it an advantage for users who want to send money through its network, the halving process for bitcoin is more rewarding for miners. On the other hand, Quark was designed to be mined by personal computers whereas bitcoin mining requires expensive and specialized equipment. The economics of mining means Bitcoin will increasingly veer toward centralization as the network grows.

Another difference between Quark and Bitcoin is that bitcoin is limited to 21 million coins. That’s all that will ever be mined. Quark has no limit, but after the first 247 million coins are mined an inflation rate of .5 percent per year kicks in.

On January 5, 2014, QRK’s market cap was $21.6 million. Its price was 9 cents per coin. Today, the market cap is just over $635,000 and the price is well less than 1 cent. Quark proves that big ambitions don’t always translate into success. Still, despite its decline, it ranks among the top 1,700 coins.

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Megacoin—Just Another Bitcoin Alternative?

Megacoin (MEC), like a lot of other new crypto projects around this time, is another “bitcoin alternative.” Regardless of whatever other great innovations were going on in crypto at in 2014, altcoin developers couldn’t get past the “we’re not bitcoin” refrain and thinking it was a selling point. It wasn’t. Nevertheless, Megacoin launched with this tagline “A Peer-to-Peer Electronic Cash System.” Those who have read the bitcoin white paper will recognize that as the bitcoin tagline. Nothing unique.

Developers thought to distinguish MEC from BTC by doubling the maximum supply of coins from 21 million to 42 million. While the block creation time was cut down to 2.5 minutes, there just wasn’t enough of a difference to make MEC a standout. The fact that it entered the top 10 at all is a major feat considering this fact. Nevertheless, in January 2014, MEC was the tenth ranked cryptocurrency with a market cap of $18.9 million. Its price was 88 cents. Today, MEC’s market data isn’t even tracked. That means it’s not in the running for Bunny of the Year.

While QRK and MEC launched as bitcoin alternatives, Omni (OMNI) took a different approach. Designed as a protocol layer on top of the Bitcoin network, The Omni layer facilitates peer-to-peer crowdfunding and trading, and it allows users the ability to create their own tokens that can be traded on the Bitcoin blockchain. Launched in December 2013, it hit the market cap listings on January 5, 2014 with its afterburners on. Off the bat, the project had a market cap of $110 million—only one of five cryptocurrencies over $100 million at the time—and a price of $178.90. This distinction put it in the same club as bitcoin, litecoin, XRP, and Peercoin. Today, OMNI’s price is in the $1.00 range. Its market cap is a cool half million.

Omni Wasn’t So Universal

Omni was the first blockchain network to support Tether. In July 2014, Tether launched as Realcoin. Starting in October, Omni users began passing the stablecoin around like it was candy. By the middle of 2018, the Tether supply on Omni peaked at $3 million. Since then, Omni has been in steady decline.

What happened is Ethereum began to support Tether when an ERC-20 token launched on the Ethereum blockchain in November 2017. In the cryptocurrency space, one development can change the entire ecosystem in just a few weeks. Omni is the case study that proves it.

Rounding out the top 10 in market cap on January 5, 2014 were Namecoin and Bitshares PTS in the seventh and eighth positions, respectively. Moving forward, the rest of the month looks like a stagnant pond.

If you like the “Diamonds and Pearls” series, check out Allen Taylor’s books:

• Web3 Social: How Creators Are Changing the World Wide Web (And You Can Too!)

• Cryptosocial: How Cryptocurrencies Are Changing Social Media

I am not giving financial advice. Everything in the “Diamonds and Pearls” series is for information purposes only.

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