Warning Signs of a Cryptocurrency to Avoid
There are so many cryptocurrencies out in the wild after Bitcoin paved way with it’s innovation to the world. take at look at Pandacoin’s Crypto Crash Course guide what type of crypto to stay away from.
Some coins, such as Bitcoin (BTC), Litecoin (LTC), Pandacoin (PND), and Dogecoin (DOGE), are clearly secure coins that are moderated by developers that have no intention of harming their community members. These coins are defined by highly active developers and/or a highly active community; a fair distribution period, and a good history.
However, there are many coins out there that were developed for the sole purpose of making the developers of the coin lots of money. These coins are usually quite new, or have a very poor history. They usually have a very unfavorable distribution period, either with what they call a premine, or a fastmine period, where the developers and/or a select group of individuals take a large bunch for themselves unfairly before they allow the public to get their hands on any. Usually Proof of Stake (POS) coins have a very short Proof of Work (POW) period during which the coins are distributed. They usually don’t call this a fastmine period, but in general it is a distribution of 100% of the coin in a very short period of time. Pandacoin is a POS coin that had the longest POW period of all others, making it the POS coin with the fairest distribution. This means that instead of only a few people getting all the coins, thousands were able to mine it for a long period of time, making sure that the coin was distributed fairly, even among those that didn’t hear about it right away!
Additional to the unfair distribution, scam coins will have a large hype very early on with lots of social media posts on various internet services about the coin, boasting big, new features within the first day or so. This is usually for the purpose of forcing a lot of early demand, so that the developers can sell their coins quickly and then disappear with all the cash, leaving folks with a lot of useless coins.
If you want to be able to tell the difference between these two different types of coins, there are a few pieces of advice to follow. The first is, do your research. Find the communities of the coin you’re interested in, and talk to people within those communities. Find out information on your own via google, about price and the amount of coins there are in the market, how the coins were distributed, and how active the developers and members of the community are. Don’t simply ask the community members what they think, because they are of course a biased source. If you do want to ask them, request that they provide you unbiased sources that provide objective information, numbers, and statistics about the coin in question.
If you see that the coins were distributed fairly with a gradual distribution period and the community and developers are active and strive to improve the coin, you can feel confident that the coin is not a scam coin. Further, if the overall number of coins is reasonable, neither too high nor too low (below 10 Million is quite low, and above 100 Billion is quite high), there are a decent amount of people talking about the coin, and you see that the price is reasonably stable in general, you can feel that in addition to not being a scam, the coin is likely a safe investment.
Obviously these are just basics, and these are in no way meant to act as 100% complete examinations of whether coins are good or bad investments, so please do not take these pieces of advice as law when purchasing coin. Just understand that usually, if a coin satisfies the description of a bad coin, it probably is, and if a coin satisfies the description of a good coin, it might be. After all, a good coin is harder to make than a bad coin, and even a well-designed coin can fail.
Always keep in mind that investments can fail, even when they seemed like the most secure when you first invested. Never invest more money than you can afford to lose, and it is usually a bad idea to attempt to depend on profits from trading or investing, especially in markets as volatile as those for most Digital Currencies.
If you keep all of this in mind, you will be far more prepared to make your foray into digital currencies a profitable and enjoyable one.