A Scale for Categorizing Irresponsibility in Token Projects
Lately, I’ve been musing over the irony of the growing ethical disconnect within the cryptocurrency investment community, even though it owes its very existence to an ethical response to a financial crisis that grew from an ethical disconnect in both government and private industry. Hopefully, this categorization model can bring some clarity to the discussion of “scamcoins”. Let me know what you think!
Type 0: The Unicorn with a Heart of Gold. The immaculate conception. The One. Unfortunately, this is the description of a mythical token because code and the people who write it aren’t perfect. And this technology is as new as it’s revolutionary. If anyone describes a token this way, you may as well assume that they’re referring to a Type I token. Make sure you find critical, third-party assessments from people in the inner-circle of cryptocurrency whose claim to fame aren’t for throwing shade at other projects!
Type I: All hype/“Meh” code. This is what your normal amateur cryptocurrency trader is talking about when they accuse a token of being a scamcoin. Regardless of what they promise in the use value of the token, it is the incessant and obvious promotion (“pumping”) from the creators of the tokens and/or the early holders. Every token created has been accused of being a Type I Unethical Token at one point or another; it remains to be seen which is which. If you’re a token holder, you have to keep up with the progress of the project! If you plan to make an overnight fortune, it is quite literally the least you can do!
Type II: Buggy Code/Sloppy Coders. At the end of the day, everyone, including Vitalik, is a test-pilot for this technology. The blockchain code is new and experimental, the development environment is new and experimental, and therefore, so are the apps and functionality of their coins. If you’re going to follow a crowd into owning any cryptocurrency, it had better be a smart one. Don’t just follow guys making videos in their basement who taught themselves how to trade during the last US election cycle!
Type III: Purposefully-Malevolent Code. You can take this with a grain of salt (or not), but I recently read the post of a programmer who had examined the code of a project that was listed in the Top 100 of cryptocurrency market caps. They had discovered that the code allowed the creator the ability to create more tokens at any time! Here’s the scary issue with this: Almost no one knows how to read code and there aren’t enough volunteer blockchain developers to audit every token project. Unless an Underwriters Laboratories-style auditing organization is created to protect investors and developers from their own mistakes, this problem will continue to get worse. Anonymous developers? Strike one. ICO announcement out-of-the-blue? Strike two. Zero third-party assessment by a engineer? Strike three! I’m out!
Type IV: Purposefully Malevolent Architecture/Business Model. We know that you can fool some of the people all of the time, but this is ridiculous! I’m not going to join the finger-pointing game, but there are some Top 20 market cap cryptocurrencies that are simply unethical. If you’re lucky, you’ll pick up on some of the bad vibes they give off: A “too good to be true” claim about scalability (are those nodes centralized?); artificially-engineered scarcity from a central for-profit organization (is that a real market price?); a whisper campaign about some special relationship with industry or government insiders (are they really their customers?); and my favorite, no central visionary behind the project (so this high-concept crypto project was cooked up by business people?).
Regardless of the wonderful ROI one can receive trading these Type IV tokens, it’s not worth it. Here’s why: The unrestricted access to a decentralized trustless value network is the only legitimate reason for cryptocurrency to exist at all. The whole ethos of “that’s not my problem” is the reason why Bitcoin and blockchain technology was created in the first place. And that’s because, ultimately, it’s everyone’s problem. In short, anyone investing in technology that isn’t promoting this minimum viable functionality is complicit in the promotion of the unethical architecture and/or business model of their investment. You may think that this is free money, but where you send your money draws value away from other legitimate projects. And if that doesn’t dissuade you, think about this: There’s no telling when the central authority of your investment could turn on you and take the assets that you hold in their system! Think you can trade faster than a Type IV token price can collapse? So did the poor souls who bought into BitConnect!