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A Look At BlackCoin

BlackCoin is one of the latest alternative crypto currencies that we have seen. It is a hybrid Proof of Stake and Proof of Work coin, but it works a bit different than the others. Along with this, the marketing concept behind the coin is far different from any other coin we have seen in the past. Through this article, we are going to be taking a look at this coin, how it works, and why it may or may not be a great deal in terms of being an investment vehicle.

The Hybrid Model

A big selling point behind BlackCoin is that it had a fair release and was available for mining for a while. After all of the coins were completely mined, it then transferred over to a Proof of Stake coin, where the only way to obtain new ones now is by holding them in your wallet. It is not possible to mine them any more, although there is a trick around this that we are going to be looking at a little later (and it is also part of the marketing aspect behind the coin).

The general idea behind it being a Proof of Stake coin is that instead of having a constant influx of new coins ready to be dumped by miners, there is a much slower trickle. This helps curb deflation by a little, while at the same time keeping massive inflation from happening (or at least that is what the theory behind it is). Essentially, it is rewarding the people that obtain and hold on to the coins, rather than dumping them on the market hoping for a quick profit.

Another great benefit of the Proof of Stake model is that it helps keep the network secure. Unlike the Proof of Work model that requires miners to constantly be hashing away, attempting to fill in and resolve blocks, this method just requires people to keep their clients open and unlocked. This makes it pretty efficient, in that it can easily be run on older computers or even run along side coins that are being mined. The CPU intensity of having the client open is almost non existent.

Pushing the Value Up

To help give coins value, there has to be money coming in to them. As the money slows down, the prices will either become stagnate or will completely crash as people decide to pull out of the coin. To help keep this from happening, BlackCoin came up with their own idea: run a mining pool that mines the most profitable coins at the time and then puts them on an exchange and trades them for the BlackCoins. What this does is help create a constant buying pressure, which in theory means that the price should continue going upwards. What this can not account for, however, is dumps that are greater than the amount of money that the pool is bringing in. If the pool is able to mine 100 BTC a day, for example, but someone is dumping 200 BTC in their BlackCoins in a day, the price is still going to go down. With that said, the concept is built more for the long term than the short one. When looking at it, what happens today or tomorrow is not very important. Instead, what happens over the period of weeks or months is. Each time a major holder dumps their coins, that wealth is being spread out across more and more people and it decreases the chances that another dump like that will happen in the future. So while we can sit around and complain when someone does a big dump, the simple fact is that it is not as detrimental as it seems (at least not for those that believe in the coin and plan to hold until they can make a real profit).

It is hard to tell how long the push up in value is going to last, but the concept behind the coin is great. With that said, it has also been facing a bit of criticism. In order to mine the most profitable coins to trade off for BlackCoins, what the system is effectively doing is dumping the other alternative currencies. In essence, it is doing damage to each of the other coins in order to benefit itself. It is hard to really fault it for doing so, being that it is really just a method of trading and people could be doing that on their own by trading Bitcoin for BlackCoin, but the criticism has been becoming somewhat wide spread. Because the system is also still fairly new, it is hard to tell how much of, if any, of a toll it is going to take on the other coins that it uses to push its way to the top.

Major Holders

When looking at the big picture here, there are multiple people with over a million BlackCoins. Some of these people had significantly more before the recent dumps that were done on the market, and this has brought some skepticism from people that were once using the pool. Some believe now that the pool was actually just a cover for a major pump and dump scheme, where the goal was to push the prices up through community buying so that the people that jumped in first and gained a lot of coins would be able to dump them off for the maximum amount of profit. Whether this is true or not is still not known, and the simple fact is that anyone who holds coins is free to do with them as they please. If the concept of the mining pool proves to be successful, the recent dumps will be meaningless anyways, being that the prices are just going to bounce back up to where they once were. Only time will tell for sure what is going to happen with this, but I think that it is safe to say that with such a great idea, it is well worth holding out to see what is going to happen before just making assumptions. Any time I deal with new currencies I follow the idea that if I believe in them, I should be willing to give them time. BlackCoin is no exception.

Update: Marketing Pushes

BlackCoin has decided to go above and beyond using its pool to handle all of its value addition. Whereas most of us figured this is all that the developers had in store for it (in the hopes that through the constant buying pressure, the price would continue to rise instead of fall), BlackCoin has been working on finding other angles to help add even more value. All of this is still in the planning stages, though, so there is not enough information to share at this point. More will be added as it is known.

BlackCoin


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