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 :
“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.”
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.
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:
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.
- 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.
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.
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.
Congratulations on a completely successful IPO sale !
Here is the effect:
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 !?
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.
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.