The Problem with Cryptocurrencies

Gold barsA couple of days ago, I wrote about cryptocurrencies and how I thought they were the future of money.

Since then, I’ve tried a little experiment with Feathercoins. First, I tried to mine some. Setting up your machine to mine Feathercoins is not particularly difficult. It requires some know-how, but not overly so.

You need to download the Feathercoin client. You then need to download an application called GUIMiner. Then, you need to join a mining collective. I joined d2.

All of that is fine and dandy, but how much can you make out of mining? It turns out, you need a specific type of graphics card for mining. NVidia graphics cards don’t really work for mining. You need an AMD/ATI card to mine effectively.

Not only that, but if you do start mining, your computer performance is seriously impacted. I couldn’t set my mining intensity beyond 10 (The lowest recommended setting). If I did, my screen went blank and I effectively lost use of my computer. It did run at 10, but only did about 2-3 kilohashes per second. As a benchmark, from what I read 180 kilohashes per second is worth about 30-40 cents in terms of actual value after a day.

Not to be detered, I then decided I’d like to buy some Feathercoins. This, it seems, is nearly impossible. From Norway, there are very few websites that allow you to buy Feathercoins at all. Most of them want you to buy Bitcoins and transfer them to Feathercoins.

I then decided to try and buy some Bitcoins. I wanted to make sure I didn’t get ripped off, so I went trying to find a website that took Paypal. It turns out none of them do. Paypal gives you the possibility to reverse a transaction. It’s a great service, because it ensures you can’t get ripped off when you buy something. However, that same service means that you can then get the coins and reverse the cash transaction. Meaning that the seller would have nothing and you would have your money and coins.

I looked for alternatives and they all looked dodgy to me. Other websites want access to your bank account. That just reeks of scam to me.

I tried to find a way to safely transfer money to Bitcoins and found the only way is to go through about three to five different websites. Each of those websites takes a percentage off the top. So you’re losing substantial percentages of money with every step.

I think I’ve run into a fundamental flaw with cryptocurrencies. They can’t be easily obtained or sold. Mining was a little tricky for me, and I’m an IT engineer. Buying is impossible and rife with scam artists.

Without this, a cryptocurrency is doomed to failure, in my opinion. Feathercoins have taken steps to solve the problems of Bitcoins/Litecoins, but no-one so far seems to have made buying cryptocurrencies easy. If someone wanted to see their particular currency flourish, that’s what they should do, in my opinion.

You need to create a simple application, an exchange. A good model would be the Steam marketplace. Someone offers coins for sale at a particular price per coin, someone else buys them using their Paypal or credit card. If the person does a chargeback, then the exchange should be able to mark the transaction invalid somehow.

If this happened, it gives people an entry point into the system. The exchange doesn’t have to be the only place people buy and sell coins, but it would be a safe place for the novice to buy their first coins.

 

Image credit: scanrail / 123RF Stock Photo


 




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3 thoughts on “The Problem with Cryptocurrencies

  1. Pingback: What are Feathercoins? | Simon Cantan

  2. The need to dedicate a machine to a task that can net less than the cost of the electricity to run the machine while doing the task, is what put me off too.

    • Exactly. It’s a huge flaw in the model. Once the mining is done with Bitcoins, then the currency will be done if people can’t use it easily. The same is true eventually for any cryptocurrency.

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