4 Cryptos to Avoid

4 Cryptos to Avoid
Here’s why you shouldn’t touch ’em with a ten-foot pole

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Cryptocurrency technology is advancing at an accelerating pace. And with each step in its evolution, landmark innovations are introduced.

Ethereum gave us Smart Contracts. NEO, EOS and Cardano have added greater speed and better governance. Hedera promises to do all of that plus much more.

At the same time, however, we see a slew of supposedly “new and innovative” cryptocurrencies that are little more than copycat regurgitations of prior projects.

That’s what makes the Weiss Cryptocurrency Ratings so critically important for investors. They provide an objective measure that distinguishes good projects with promise for the future from mediocre projects that will likely be discarded.

Today, we name four examples of cryptocurrencies that we have recently begun rating and that merit a grade of “D” (weak) or lower. The four are summarized in the table below.

Please be aware that these represent strictly a sampling of the 48 cryptocurrencies meriting our Weiss Ratings of “D+” or lower.

Overall, among the 111 currently we rate, the distribution of grades is as follows:

For each cryptocurrency, we review thousands of data points and dozens of indexes we have created to measure each key aspect of a coin’s technology, adoption, investment risk and investment reward.

Although several cryptocurrencies merit “A” grades for their technology or adoption, none get A’s when also considering the risk/reward trade-off that investors currently face. (This aspect is expected to improve, however, as prices resume their ascent and the cryptocurrency markets mature.)

Bitcoin, for example, gets an “excellent” score for adoption, but only a “fair” score for technology. Its investment risk is “fair,” while the investment reward is “weak.” Its overall Weiss Rating remains “C+.”

In contrast, EOS merits an “excellent” technology score and an adoption level pegged at “good.” Although its risk and reward are still “weak,” the strong combination of technology and adoption help elevate its overall score to a “B.”

Why do we give Aurora Chain, Bitcoin Diamond, Credits and Mixin such low grades? Here are some excepts of the commentary we have recently provided to subscribers of our Weiss Cryptocurrency Ratings service.

Aurora Chain (AOA)
Weiss Rating: ‘D-‘

This crypto ranks a respectable 75th in market capitalization among the 2,000-plus cryptos in the Weiss Ratings database, indicating some interest from investors.

But we believe it’s more a testament to hype and misinformation than any real substance. At the same time, we see a series of red flags:

Red flag #1. Consensus algorithm. Aurora trumpets Delegated Proof-of-Stake (DPoS) plus Byzantine Fault Tolerance (BFT) as if it were some kind of unique combination. It isn’t.

Red flag #2. Smart contracts. What the Aurora whitepaper has to say about this key topic seems to have been lifted straightaway from Wikipedia. Either the authors don’t know what to write or they think readers don’t know how to use Google.

Red flag #3. Where are the programmers and developers? They are not identified by name. There are no bios. And on its website, Aurora gives only a list of “community managers on social media.” So, who’s in charge and who’s building what? It seems nobody knows.

Red flag #4. No visible computer code. Crypto without code is like smoke and mirrors.

Red flag #5. Sparse adoption metrics. With no visible project, the only adoption metrics we could find relate to Aurora’s ERC-20 token, which lives on the Ethereum network. But it has no functionality.

Red flag #6. Very weak trading volume. In fact, the coin is only listed on a single crypto exchange, making it very hard to trade.

Bitcoin Diamond (BCD)
Weiss Rating: ‘D’

BCD is a Bitcoin clone that dates from the heady days of late 2017, when cryptocurrency prices were roaring and cloning Bitcoin was a favorite get-rich-quick scheme.

Developers downloaded the open-source Bitcoin code. They made some minor changes. They hyped up the coin as “the next big thing” in crypto, enticing investors to jump in. They awarded themselves generous chunks of their new crypto. And then they cashed out by selling their Bitcoin Diamond holdings in exchange for the original Bitcoin.

What improvements did they make in the code? Virtually none.

First, they increased the coin’s maximum supply from Bitcoin’s 21 million to 210 million, arguing that a higher token supply is more likely to be used in ordinary transactions than Bitcoin.

Not true! The reason people don’t spend Bitcoin is because it’s a deflationary asset and they expect prices to go up over time. That’s true whether the total circulation is 21 million or 210 million.

Second, they came up with an algorithm that supposedly prevents big mining companies from developing specialized mining hardware that drives small-time miners out of business.

But it’s just a temporary patch! Deep-pocketed crypto-miners will always be able to come up with new hardware to optimize any algorithm under the sun.

Meanwhile, Bitcoin Diamond inherits all the technological weaknesses of the original Bitcoin. But it enjoys only limited support for the Lightning Network, which Bitcoin is adopting to speed up transaction processing.

It has only a tiny community of users. Developer support is virtually nonexistent. And very few transactions are actually being performed on its network.

Credits (CS)
Weiss Rating: ‘D’

This crypto’s developers boldy proclaim they can do a million transactions per second.

Sound familiar? It should, because multiple wannabe Ethereum-killers make similar claims.

But for evidence, all they have are tests conducted in a highly controlled environment with a small number of machines. That’s far from an accurate representation of what happens in a live, real-world environment.

Nowhere can we find a credible explanation of precisely how the platform will achieve its lofty speed goals.

Other issues are also glaring:

Busted encryption: Early on, the Credits development team decided to use the MD5 hashing algorithm in the design of their platform. We believe this was a sophomoric mistake.

Without delving into the technical details, one thing is abundantly clear: MD5 is famously vulnerable to security breaches.

Nor is this a new discovery. Back in 2008, for example, America’s Department of Homeland Security warned:

“Users should avoid using the MD5 algorithm in any capacity. As previous research has demonstrated, it should be considered cryptographically broken and unsuitable for further use.”

Why didn’t Credits developers know about this last year — when they were designing their platform? And why didn’t they acknowledge MD5’s security flaws or switch to a different algorithm until earlier this year?

Why didn’t they choose a secure algorithm to begin with? Is the question. Their response: We were in a rush.

Really? Since when is it shopping for hashing algorithm especially time-consuming? You could probably choose between regular and high-octane gasoline in pretty much the same amount of time.

So for us, this whole MD5 episode is another red flag.

False claims: Credits claims it uses a “groundbreaking new consensus algorithm.” Baloney! Many other third-generation crypto platforms — like EOS, Steem, BitShares, Ark, Cardano, NEO and Lisk — use the same one or very similar.

While there are some differences that could make Credits’ consensus algorithm unique, we have yet to see solid evidence on how their ‘Credits specific dPoS and BFT’ will be any faster than any of these other projects. So we remain skeptical that this new consensus algorithm can deliver on their promise of 1,000,000 transactions per second.

More hype: Marketing materials dazzle with hot-button, crypto buzzwords. So much so that they raised a hefty $20 million at their Initial Coin Offering (ICO) earlier this year.

Likewise, the Credits whitepaper waxes eloquently on DLT-related topics, while still shedding very little light on specifically how it will accomplish its ambitious goals.

This is shady at best. And it explains why some analysts suspect this project may be nothing more than an elaborate scheme to separate first-time crypto investors from their money.

Mixin (XIN)
Weiss Rating: ‘E-‘

The folks behind Mixin claim to have a fix for just about every problem that has plagued cryptocurrencies from the very beginning.

They say they intend to build a decentralized exchange that can trade any crypto asset for another, using state-of-the-art technology that’s

resistant to attacks, that guarantees finality and nearly infinite scalability.

But digging deeper, we find that …

  • There’s suspicion the developers’ LinkedIn profiles may be faked, and their Reddit page has barely a dozen subscribers.
  • The dApp that’s supposed to connect with the Mixin network doesn’t work.
  • The Mixin whitepaper contains no technical details on how this amazing, never-before-seen Swiss Army knife of crypto will be built. What it contains instead is a lot of hand-waving: “We know this appears to be centralized, but it’s actually very decentralized.” Sheesh!
  • GitHub, where most crypto developers converge to publish and upgrade code, contains no reference we know of to any of the code that the Mixin whitepaper describes.

With a non-functional app and no programming code to analyze, all we have is their XIN coin, just one of thousands of tokens on the Ethereum network.

Moreover, with virtually no social media presence, almost no end-user awareness, no code being built and no transactions taking place, adoption and usage metrics are abysmal across the spectrum.

My recommendation: Don’t touch these four coins with a ten-foot pole.

Best,

Juan

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Comments 10

Bryan October 24, 2018

So thankful I never subscribed to your crypto newsletter. Judging by the assessment of Credits you are powerfully incorrect and hopelessly out of date with your facts.

Reply

Dawn P at Weiss Ratings reply_all Bryan October 31, 2018

Hi Bryan, feel free to make the case for Credits. Our crypto team is always eager to hear what people who invest in it like about it. Our ratings, as well as our sentiment, can change at any time.

Reply

G October 24, 2018

Care to comment on npxs Pundi x ?

Reply

Lyric October 25, 2018

What you said about XIN is not true.

– I create some apps on Mixin Network, and all they work well.
– Mixin team has a github page here: https://github.com/mixinnetwork and they also release the core source code of testnet: https://github.com/MixinNetwork/mixin

Reply

Theca October 25, 2018

Below I will give counterarguments to all his statements by Credits team

1. Credits team performed a capacity test of the Credits platform using 32 geographically distributed nodes. Is 32 a small number?? Don’t think so.

2. Peak Number of 1,327,152 Transactions per second. It is more than million.

3. We changed hashing algorithm from MD5 to blake2s a long time ago. And recently we have changed it to blake2b. He could also check it on Credits github.

4. We have unique type of consensus which is going to be patented.

Conclusion:
He didn’t make any research before doing his ratings. So I think it is pointless to pay attention to this person and his ratings

Reply

Dawn P at Weiss Ratings reply_all Theca October 31, 2018

Thanks Theca! We read all of our comments and know that everyone in the crypto universe has their favorites. We will continue our coverage on Credits and its rating can change at any time based on its adoption, technology development and other factors that go into our “secret sauce.” Cheers!

Reply

rudi de klerk October 25, 2018

thank you for a very interesting crypto analyses. what is your rating for bitcoin cash and etherium at present.
regards, rudi

Reply

Gianni October 25, 2018

Very surprised to see credits listed here, i can only assume you are not following this project and so dont have the latest info, with regards to the use of MD5, i appreciate you stated “early on” but then you continued to go in to further detail of MD5 in what feels like an attack on the project, this use of MD5 was a very early model (pre Alpha even) to show the functions of the wallet only, it was never meant to be taken as the final product.

As far as i know it was done in this way after pressure from the cs community and was the quickest easiest way of the team being able to show us an example of the product pre alpha.

From this and a few other incidents the cs team have learned now not to bow to pressure from the inpatient community and to focus on the development of the project rather than trying to please inpatient people, this was their only mistake.

It seems the cs followers are more inpatient than most for some reason.

Regarding your comments about the consensus mechanisms used, i dont beleive any other projects are using the same, please see:
https://youtu.be/0t7lHM1G4yY

Please can you do further research on this project using up to date information before posting reviews in future? This could be pottentially damaging for projects.

I hope this was just a mistake on your behalf and that this isnt the same method you use to rate all other projects? If so then perhaps you need to revisit those ratings too?

Please update this article with your updated findings.

Sorry if i come across a bit cross, im just really surprised and saddened to see cs reviewed in such a bad light given all the amazing things they have acheived so far, i closely follow this project and am invested in to it too, i am currently running a node in their test net in preparation for external load test which will be a very exciting time.

Much appreciated
Gianni.

Reply

Dawn P at Weiss Ratings reply_all Gianni October 31, 2018

Thanks, Gianni. You come across as a passionate investor who cares about the mostly misunderstood crypto universe. And we thank you for being part of the Weiss Crypto Ratings community and furthering the discussion. We look forward to seeing what comes out of the Credits camp in the future, and our ratings should change accordingly when there are new developments.

Reply

JB October 30, 2018

well I am joingning you about the other coins I have to disagree about Bitcoin Diamond, as I am still keeping an eye on this one. at the beginning it was really looking as another scam fork, but like you the previous comment said, more than one year later you have to admit they are still around and with decent trading volume (3 millions $ per day). In comparison bitcoin private was totally wiped out during this time, so… maybe BCD is not that bad.
I even took a bit of time to make researches on them and apparently the community is growing those last months, there is a market place using BCD, and they are hiring to develop their team. So wait n see as we say in this space

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