Why Major Cryptocurrencies Have Failed and How to Avoid Betting Failures
Cryptocurrecies like Bitcoin worth thousands of dollars apiece are exciting, and leave people sitting up late into the night thinking about how they could make it rich by investing into one of the many alternative cryptocurrencies being introduced to the market. Unfortunately the vast majority of those coins fail. Some from security breaches, some from outright scams and others because they just aren’t well-designed. We’re going to dig into some popular cryptocurrencies that failed and also cover how to avoid becoming part of this failure in the future. First let’s look at some example coins to die, or come close to dying, and then we’ll get into some investment guidelines to get you the coins needed for these sweet bets.
DAO Coin or just DAO is a prime example of one of the biggest crypto currency failures so far. DAO stands for Decentralized Autonomous Organization, and was a tool to merge crypto currencies and then vote for projects using the DAO coins purchased. This major currency was picked up with great enthusiasm at first, but quickly spiraled downward. The currency brought in more than $168 million USD when it was brought to market, and the coin value rose up to about $0.19 USD before everything crumbled to pieces. An attacker managed to figure out how to exploit the DAO coin market and get more than $50 million worth of coins from it. This of course caused the investors with shares of the coin to panic and begin selling off their coins as fast as they possibly could. The value plummeted and the DAO coin was no more.
This currency got its start at the end of 2014 an was created by Coinomat, a for-profit company. It was built over top of NXT, another cryptocurrency, and managed to climb up to about 2.7 million in overall value at the beginning of 2016. That’s when a major problem occurred. The system had a glitch that paid out all the customers using it with free CoinoUSD coins. The coin value dropped down to virtually nothing and it collapsed. All the investors lost their money.
Even though Doge Coin technically isn’t a failed cryptocurrency, investors lost a good amount of money from the coin early on due to a serious scam that occurred that almost killed the coin forever. Dogecoin got its start as a fun little currency that was worth next to nothing. People used the coin to tip others on the internet and to donate money to charities and all sorts of different causes. The coin had a lighthearted feel to it from the very beginning, but it wasn’t very sophisticated. A guy going by the name of Alex Green came to the community with his idea for an easier exchange he dubbed Moolah. The idea was to use technology to make trading Dogecoin between other cryptocurrencies much easier. After some initial investing and fundraising for Dogecoin the community got on board with his idea, put a bunch of money into Moolah and the guy behind it all ran away with it.
All the money lost in the Moolah exchange caused Dogecoin to drop down in value dramatically and cost a lot of people their money in the process. Dogecoin didn’t collapse completely from this scam, but it came very close to failing entirely.
The most important lesson to take away from these major coin failures is that security is the most important attribute of any new crypto currency venture. Do your research to make sure the coin is built over top of a secure blockchain technology and that there are no security vulnerabilities in the system. This can be difficult to research if you aren’t an expert in cryptocurrency and how it works, which is why it’s so important to avoid investing in brand-new coin offerings that haven’t been investigated at all by experts. Wait a bit longer to find out if a coin is secure, and then make your investments to give yourself a bit less risk.
It’s also very important to avoid investing in cryptocurrency that’s largely owned by a single person. If one person or organization has complete control over a coin, they can easily run away with the money after investors pour their money in. It’s vital to have failsafes in place that keep the initial investors from just walking away with the money. In this very unregulated industry there are many scammers that are taking millions from investors and just walking away with the money.
Cryptocurrency is a fun investment vehicle, it can be highly profitable when pursued carefully, and it’s a useful tool for doing things like making online purchases, betting on sports with bitcoin, and transferring money across borders, but the technology must be used with care or you could lose your money to a failing coin.