The Simple guide to how Crypto < to > Crypto IPO deceptions work:
Goal and objectives of the deception:
Cryptocurrency IPO’s deception designed to achieve two primary goals:
1. Manipulate price and create a perception of value.
2. Manipulate Market Cap and create a perception of wealth accrued.
I will explain how both are achieved.
Pseudo anonymous sale ; the shell game. (NXT as an example)
An IPO in which one crypto currency is used to “pay for” another cryptocurrency through and IPO is sadly just little more than a “gypsy scam” because of two key factors:
1. The pseudo Anonymous nature of crypto.
2. The lack of meaningful PoW for the creation of the Sale item. (this is an exclusive cryptocurrency effect) (this allows for the deception to occur at nearly zero cost)
I will use NXT as an example:
Step One (1) The creation of the Units to sell.
Here is where the NXT “developers” created 1 Billion units in under one second on the block-chain :
http://wiki.nxtcrypto.org/wiki/Nxt_History
“Nxt is created, and the genesis block reveals that 1,000,000,000 coins were distributed to 73 stakeholders, with the proportion of coins received dependent upon the each stakeholder’s portion of the original funcraising total. Nxt’s original market capitalization was $800,000USD.”
http://87.230.14.1/nxt/nxt.cgi?action=1000&blk=2680262203532249785
BLOCK : 2680262203532249785
Timestamp : 24.11.2013 13:00:00
Height : 0
Next Block : 6556228577102711328
Previous Block : 0
Pay Load Length : 9344 B
Num. Transactions : 73
Total Fee : 0
Base Target : 100.00 %
Total Amount : 1,000,000,000 NXT
Generator Account : 1739068987193023818
Generator RS : NXT-MRCC-2YLS-8M54-3CMAJ
Version : -1
Perma Link : Show
Block SIgnature : 69d426c498b70ac6d1678180356527c1fee030ad732fbf7672c2266d166a4c08cf8fdeb4524fd1b496bbcaab03fa6e67760f6da452251402249015486c487211
Generation Signature : 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
Previous Block Hash : n/a
Payload Hash : 72c8a92efffbd8695a866eabb13ca460a2f7cdf3283b82efb163360d6eec9469
Above shows the Block-chain where 1 Billion NXT units where created in under one second.
Now in its self there is absolutely no problem here, in a completely free market anyone can create any crypto they like, this in itself is not a deception, although I will say that if you go to the official NXT site; there will not be a large focus on this fact for obvious reasons that i will come back to.
Summary
So now the NXT cryptocurrency exists and there is 1 billion units of it, they key point to highlight is that this was done at zero cost except for the coding that went into creating the genesis block (mostly borrowed from the bitcoin protocol)
The 1 Billion units were created in under one second in one single block (as shown above)
Step Two (2) The glorious Sale; an amazing success !
So Now the next step is to Sell the IPO.
Often Crypto currency IPO “developers” now offer up the units they produced at zero cost for sale into the market:
This will require a picture:
Figure 1 – selling pseudo anonymous units to yourself.
With the help of the above picture i’m going to try to help the reader understand how the IPO units are effectively sold to the developers that created them.
Step /a
- The developers create 73 anonymous Bitcoin addresses with Bitcoin they already own.
- They then send Bitcoin to these addresses or have Bitcoin already in these addresses.
- They then send this small amount of Bitcoin to the IPO Payment address.
Fig 2 – Sending your own Bitcoin to yourself.
The developers have in effect sent Bitcoin from 73 address they own to the IPO payment address (which they also own) so they basically just sent Bitcoin to themselves, this is as simple as sending Bitcoin from your home Wallet to your Wallet at work.
Step /b
Now the IPO is effectively “Fully sold” the only steps are to send the NXT units to your own addresses.
- Simply make 73 Anonymous NXT addresses.
- Simply send the NXT to those addresses.
Fig 3 Sending NXT Units to yourself.
Congratulations on a completely successful IPO sale !
Here is the effect:
fig 4 successful IPO of NXT to yourself
Hopefully it has become painfully obvious to even people with a mild disinterest in Crypto economics that the Developers own the Bitcoin they used to “Buy” the NXT and they now own 1 Billion low valued NXT units.
(which they also created at zero cost in under one second.)
Now that is a pretty good deception, but now as developers you hold 1 Billion units of something that are essentially worth only the small amount of Bitcoin that you transfered to yourself. (in theory)
Step Three (3) Price manipulation at zero cost and creating the illusion of value.
So now you own 1 Billion freshly minted NXT units and you have (fairly successfully) created the perception that you sold them all, how do you create value? and Buzz?
that’s the next problem….
Well now you have to get them listed on an exchange and trade them back and forth between yourself to “bid up” the price, however that would incur cost because exchanges charge transaction fees and exits fees.
We want to do this at zero cost, this is a problem…….. Wait! what if we
Make our own exchange !?
Presenting
https://dgex.com/
fig5 – your own exchange, no cost to trade – free to bid up the price, its a party !
What is the aim?
- To Bid up your worthless 1 Billion Nxt units until your “Market Cap” is gaining you Buzz and attention
- To get real buyers to come into the market so you can sell out to them and make real wealth.
- The high market cap and the fake trade volume can cause this “buzz” and make naive people feel like its the “next” big thing.
- This is also similar to how very fast mining (7 day mining) cryptos work with “Proof of Stake”, but i might cover that at a later stage.
Summary:
Congratulations now you know how to effectively rig a market cap and issue a Crypto to Crypto IPO to yourself .
they key part of the Exchange is that you use the A Crypto (for example Bitcoin) and the B Crypto ( in this example NXT ) and you trade them up on your own exchange at zero cost:
Summary of a costless deception:
- The NXT units cost the “developers” nothing to make (there was under one second proof of work at zero difficulty)
- The Bitcoin was transferred from the owners wallets to the IPO Buy wallet – (cost of the Bitcoin fees ) Near Zero.
- Trading on your own fake exchange cost zero – even if you display fees you pay them back to yourself, simple. (you own the Exchange duh)
- you can now at zero cost bid up the price of your fake IPO – this will increase the “Market Cap” and cause a “Buzz”
- you then use normal social engineering “skills” (Skillz) to make numerous fake accounts on forums to spam your “Love for NXT” the “NXT big thing” (this can be done at near zero cost)
- Twitter – other social media and you start to have a pretty nice deception, a complete gypsy scam, and essentially theft.
LC_Atar_etc 
Briliant analysis. I have very little doubt NXT and few similar “megadeals” were run the exact same way as you described. For example, Mintcoin and the birth of MintPal exchange.
Hey thanks , yes there are many many slimy little creatures like this out there, there is (of course) zero regulation in the Crypto sphere (and never needs to be) as we can call these systems out.
I may add to the “make your own exchange” part to explain this to people that have no understanding of how exchanges work.
I’m not sure what’s more surprising, that you spent time writing this garbage, or that anyone reads it (guilty). Here’s a scam. Buy Quark at any market cap above $5mil, watch money disappear because devs spend more time trying to discredit successful Cryptos rather than improve their own. Yawn.
Sorry you feel that way or that you got sucked into this scam, Crypto is here to stay http://cryptmarketcap.com/ when we take the obvious market cap manipulators out Quark is mid top ten and stable there for months. lets see what the future holds.
I enjoyed reading this thank you
Thank you, hope I have helped.
what is bitshare X
such a small question that is going to require a long answer, perhaps i will cover this in a blog?
great question?
Bitshares or BTS are more complex, and confusing as there is not much info.
They started as something called “Protoshares” PTS but I think a company had copyrighted the name (and they cared) and thus they change it to “Bitshares”
Summary:
Bitshares BTS was issued and is still apparently being issued via a “Random proof of work” so it was not an IPO in that sense, but becasue of the small market exposure, it does not have the spread of distribution of something like Quark, but by all means it is not an IPO, so if you asses that it is a good investment be diligent.
so there is a market there, but it could be small.
it gets a little complex as Quark has moved to what is called “base money” twice that just basically means it has gone right down so that the price is at a level where literally anyone can gain access.
The first time Quark hit “base money” it only had the market distribution that say Bitshares has now, then recently it moved to “base money” with a higher base.
each time the distribution gets bigger and wider.
think of a sine wave with a blob on it but every-time the wave goes down the blob gets spread out more.
eventually and probably fairly quickly it will smooth out and trend to debt paper that trend will likely be upwards. all things being equal.
I hope that makes sense?
There are a couple glaring omissions here:
1) A beta software of NXT was released that was written from scratch. This is not a Bitcoin clone with tweaking a few parameters and a replacement of the logo and hashing algorithm. I am certain this took more than 1 second.
2) The IPO was open to investors for about 2 months. What is the evidence is there that the 73 accounts belonged to the developers and not distributed among investors and developers?
1- For core code no one trusts Java – i wouldn’t install Java to use as core code, there is a reason C++ is used the only thing i’d trust also is maybe machine code and / perhaps Python – but Java for core code? good luck getting any Peer to trust that.
2- Even if you are suggesting that of the 73 that got 1 Billion units were investors then an easy way to test that is to run the IPO again, recreate exactly the same software run it for say 6 months (or better still) distribute with PoW similar to Quark.
And lets see the result.
You sure know a lot about scamming the public with crypto-currencies. You would think that you’ve been doing this all your life! I guess you know enough to stay far away from this crooked business. I bet you wouldn’t be caught dead having anything to do with crypto-currencies, given your extensive expertise. Am I right?
just the opposite – i actually can’t be threatened or coerced in any way which is quite interesting when you think about it?
no, I welcome any challenge and will seek to expose these frauds, i find it amusing , i also find it kind of cute how our “intel agencies” are talking life so seriously ha ha.
particularly the cute attempts to “shut down” crypto currency.
so you know , i’m right here, telling the truth i’m well known i’m a person of the community.
: D
Could these 73 stakeholders work together again to do this then, while eliminating anyone else from being able to do it? “PoS is theoretically vulnerable to attacks, because anyone with a large enough stake can rewrite the blockchain for their own benefit.”
Technology
Nxt was the first exclusively Proof-of-Stake (PoS) cryptocurrency. The advantages this brings over traditional Proof-of-Work models are significant. Moreover, Nxt’s innovative Transparent Forging system eliminates not only the chance of a 51 percent attack, but anything up to a 90 percent attack. It’s an efficient, fast and elegant way to secure the network.
What is Proof-of-Stake?
In a Proof-of-Stake model, transactions can be added to the blockchain or ‘forged’ by any member of the network. The node chosen to forge a block is random, but the odds of forging a block are proportional to their stake in the network (the number of coins they hold).
What is Transparent Forging?
PoS is theoretically vulnerable to attacks, because anyone with a large enough stake can rewrite the blockchain for their own benefit. Transparent forging is an ingenious answer to this problem.
Although the node which forges a block is random in the long term, in the immediate future it is highly predictable. This means the network knows where the next block should be forged. If a node does not forge the block it is expected to (perhaps because it is working to build a fraudulent chain instead), it is excluded from the network for a period of time. The likelihood of that node being chosen is instead redistributed across the remaining members of the network.
http://mapofcoins.com/technologies/nxt
Goog comment –
here is a run down of how wannabe spooks are trying to close down crypto currency:
– here is where i explained about a future index that will appear and gave a run down on the fraud possibilities that PoS can entail – :
http://www.coinspeaker.com/2014/11/06/cryptocurrency-fraud-part-1-identifying-ways-in-which-fraudsters-operate/
most of these same groups create these slimy products its called “poisoning the well” to try to contain Crypto currency. its kinda cute in a way, and hey they need a job.
thanks for the reply, I am familiar with both the links you posted, I thought the reddit link was funny because the Hello_buffdale person says “I’m really interested to see this paper. got a link?” talking about the nsa whitepaper, how is he to be taken seriously in the conversation without having read it? Also still waiting to read crypto fraud part 2.
http://cointelegraph.com/news/113566/mapofcoins-unleashes-technologies-library-for-800-cryptocurrencies-to-facilitate-digital-learning-
this is the article which lead me to this site…http://mapofcoins.com/technologies/nxt which lead me to this statement…
In the NXT section…. PoS is theoretically vulnerable to attacks, because anyone with a large enough stake can rewrite the blockchain for their own benefit.
which reminded me of this article you wrote a while back. where you show the first block where they created 1 billion nxt to themselves.
which lead me to ask if these original 73 holders could consolidate and alter the blockchain. for their own benefit.
also I do notice quark does get a lot of hate. I understand why. no control on coin release as they all exist already. its very simple to understand. Can newly mined coins be monopolized? if so does it matter anymore?
if this is true, then does the pool have an monopoly on newly mined coins? they say 99%, I cant buy that really because my computer is still hitting blocks from time to time.
I appreciate any reply, thank you and keep up the good fight.
p.s. the ufo thing is a little strange, but ive seen strange lights in the night sky before too. they look like satellites that get very bright, and flash a strobe, then dim back to what a satellite looks like. It looks like heat lightning unless your looking directly at it when it happens. it is strange. people told me I was nuts.. until they saw it too. I never claimed little green men were doing it, more likely normal sized humans. lol
yes you got it correct the key is the the fact that the distribution is done, a “low price” actually helps a system like Quark as it proves that there is no manipulation.
monopoly can not occur because they are trying to monopolize a tiny inflation rate.
you likely will never see the 2nd part i might upload these Dan is a great Journalist but i’d say he got a “tap on the shoulder” the “intel” agencies that own/ control Bitcoin are desperate that no real crypto replace that broken monopoly that is “Bitcoin”
I can assure you humans are all though the galaxies and universe – if the light faded then flashed it was a craft leaving earth – a fireball is a craft entering earth with shields on full for precaution they are probably not use to coming here.
Watch NASA make up something about CERES on the 6th – we will be.
awesome…im a little paranoid, will the feds break down my door and steal my stuff? I think they might just because I know about this.
Well if they thought they could get away with it – perhaps , but you know, that would be a pretty big infraction against your free will. and even if you realize it now or not that is always paid in full by the relevant parties in the equation.
and i can guarantee the cost is not worth the act.