The cryptosphere has of late become a quagmire of scams, empty promises, FUD and broken dreams into which only the very brave or very foolish dare to venture.
Not entirely true. Those who do their due diligence through research, critical thinking and logic may navigate the swamp relatively unscathed.
There has been some controversy surrounding Skycoin of late, notably this article and this video. (The latter is basically an inelegant synopsis of the previous article), which left me as a Skycoin holder with an uneasy feeling.
I was a fairly early investor in Skycoin and I have already made very good returns so I can happily sell now and walk away smiling but... I know I probably got lucky on this one as I bought Skycoin on a trusted friend's say so and I decided to practice some delayed due diligence to decide whether to HODL my Sky or cash out.
First, I decided to list the concerns which I was able to extrapolate from the article which led the author to lable Skycoin a scam;
- The whitepapers are questionable
- Skycoin has a "Ghost Community"
- Skycoin's code is cloned from elsewhere
- Skycoin's business plan is not sound
- Skycoin's miners are overpriced and serve no clear function as sky was "pre-mined"
- Trashy, get rich quick type advertising
I then examined each concern in detail, researched facts, applied logic and came to a conclusion on each.
The Skycoin whitepapers
Being a wordsmith and decidedly non-mathematically inclined, this was the most arduous task on my task list. I am not qualified to comment on the validity and technical details of the whitepapers which I downloaded directly from the web site but what I did learn is the following;
- There are 5 downloadable whitepapers on the site with a 6'th one listed as "coming soon"
- 4 of these papers were authored by Houwu Chen and Jiwu Shu. Jiwu Shu is listed on theTsinghua university's faculty page as an associated professor of computer science. I couldn't find Houwu Chen on the University faculty listing so I Googled around and found him listed on researchgate as a PHD candidate at the university currently working at the computer sciences department .
- The same Google search revealed something even more interesting. This blogpost on the official Ethereum blog from 2014 by Vitalik Butterin himself names Chen as a lead developer on the Ethereum project!
- The whitepapers are peer reviewed, published scientific papers.
Conclusion: While I am certainly not qualified to comment on the actual content of the whitepapers, the credentials of the authors swayed me in Skycoins favor. Having read a bit more on Skycoin's energy efficient Obelisk consensus algorithm and the "web of trust" model which it uses to secure the network, I was able to correlate this with my lay understanding of the highly technical white paper and am convinced that the white papers are in fact legit.
The Skycoin community
I agree with the author of the article that it is really easy to fake a user community, or even purchase followers and likes on platforms such as Reddit, Facebook and Twitter so I opted to evaluate the Skycoin community on Telegram and Slack where it is not easy to maintain multiple fake user accounts or buy a following.
I started out with the Skycoin slack channel. Following the link from the web site, I was redirected to Slack and prompted to enter my email to receive an invite. Upon committing though, I received an error stating "Failed, Invite limit reached". Hmmm....
OK well on to Telegram then. Here things looked a tad more positive. The website clearly states that the team is most active on Telegram and lists 4 active channels namely the main channel, a news channel, a BBS channel (I later learned here that the BBS is built on Sky's own distributed object storage platform and is an actual working application) and the bounty program channel.
I joined the main channel and found an active community with more than 6000 members. I spent a couple of days hanging out here and the first thing that struck me was the quality of the conversation. Contrary to the norm in most crypto chat channels, there was virtually no moon or lambo talk. Valid questions were asked and quickly answered in detail by either the community or one of the developers. One particularly eloquent and knowledgeable chap stood out from the rest so I decided to PM him. Turns out that Synth, as he is known, is actually the lead developer of the project. He is active in the chat and answers many of the questions posed personally.
Conclusion: If the Skycoin user community is in fact a ghost community, it is a very large (and growing) ghost with an unusually mature(for crypto) and knowledgeable user base . According to Synth the channel grew from 300 to 6000 users in the last 6 months.
Skycoin's code
When I first started playing the due diligence game, I was surprised to discover how few crypto projects actually have any code. Some of the most prominent projects with record ICO's literally exist as a whitepaper and a marketing department so I headed over to the Skycoin Git on Github.
This is what I found;
- The Skycoin project has 30 active repos.
- The Skycoin core repo has 39 contributors with regular commits.
- I was able to trace the commit history of the Skycoin core repo back to January 2014.
- The Skycoin core repo has more than 3918 commits at the time of writing.
Conclusion: Skycoin has a large and active Github repo with multiple contributors going back 4 years in the Skycoin core repo. This is ancient by crypto standards and coupled with the high number of commits, indicates active development. It is illogical to devote such profuse development resources to a scamcoin. As the author of the article pointed out, most scams don't run very deep and to fake this level of activity around actual code would require a very deep scam indeed.
Skycoin's business plan
All the Cryptocurrencies I have researched up to now derive their value from speculation on exchanges. If the currency is hyped enough, demand increases and the price goes up. Scamcoins typically have a business plan based on a pump and dump dynamic.
By wading through the Skycoin blog and Readme files on their Github, I realized that Skycoin opted for driving the value of it's currency with an actual commodity. The new Internet. They created a truly distributed, anonymous Internet called Skywire which they claim will be 100% censorship free and community owned.
While searching around for non partisan information on Skywire, I came across this forum where people are sharing information about Skywire and the hardware required to partake in the meshnet. The forum is very active with groups set up for specific countries ranging from Canada to Romania, Slovenia and Switzerland. I found tutorials on setting up Skywire nodes on various operating systems with active user comments and success stories.
Conclusion: Skycoin seem to have devised a novel business model whereby their coin's long term value is driven by a commodity with a very real demand in these times of increasing threat to net neutrality. The technology required to bring this about seems to be under active development and is supported by an active user community who freely share information.
Skyminers and pre-mined Skycoin
Traditionally pre-mining raises a big red flag for me and this one would definitely be the deal breaker if there was no valid explanation for the pre-mining.
The answer did eventually reveal itself buried in this interview and was subsequently confirmed in chats on the telegram group. The reason for the creation of all Skycoin on the Genesis block is the following: The Sky developers very early back in 2012 identified the issues which plague Bitcoin today. The biggest issue they saw was centralization tendencies driven by mining fees. This has proven to be accurate as the Bitcoin network is today controlled by 3 mining pools. They realised that incentivized mining would always result in centralization and the decision was made to banish mining from the SKycoin landscape.
The total supply of coins was thus created and stored in time locked, multisig wallets to be released on a pre-determined release schedule.
Skyminers seem to be an unfortunate choice of wording as the miners are in actual fact routers and not energy hungry number crunching machines. Skyminers will create the backbone of the Skywire meshnet. Hosting a skyminer affords you a passive income as you will be paid in Skycoin for routing data across your node.
I was a bit taken aback by the hefty price tag of 1BTC per miner but upon closer inspection it actually seemed like a fair deal as you received Skycoin to the value of 1BTC minus the hardware and manufacturing cost when you purchased a miner. This is set at $600 which seems fair considering the components include 8 Pi boards, a custom OpenWRT router and a PSU housed in a sexy aluminum chasis. There is also the option of building your own miner and the Skywug forum mentioned above contains numerous component lists and assembly discussions.
Conclusion: While many scam coin devs pre-mined their coins only to dump them on an unsuspecting public, Skycoin has a valid reason for their pre-mining which ties in with their long term business strategy. The price of the miners are offset with the Skycoin rebate and the first batch of miners has been received and rebates paid out.
Trashy marketing
This one didn't require any research. The JJ videos are nothing if not trashy and I have to concur with the author that it does reek of scam. However, after asking around on the Telegram chanel I learned that this was not an official Skycoin initiative and that it was compiled by Sky community members with tongue in cheek as a troll on the Bitconnect scam.
In final conclusion then, Of the 6 concerns raised, I checked the all clear box on 5 of them upon completion of a steep learning curve and I will be HODLING Sky for quite a while to come. Oh and I am shopping for Rasberi Pi's to build a miner.
Thanks for this post!
The lazy FUD is getting a little crazy lately and has gotten annoying pretty fast.
May this post turn out to be a good guide on how to do proper research on a project. (For people's own good, unless they want to stay poor and behind the curve)
The light cannot be covered by darkness
It always shines out
Hi, I'd like to add some value to debunking the claims on Skycoin being a scam. Written a steemit post to address this
https://steemit.com/cryptocurrency/@abohlund/skycoin-addressing-the-scam-concerns
3 months after this post, would you care to update the community on your progress building a skyminer?
Hey Fritz. I actually got myself an official miner which turned out to be quite challenging in it's own right as it ships unassembled and without software loaded but the Telegram channel dedicated to supporting assembly of official miners proved invaluable and it is now up and running on Skywire testnet. There are lots of DIY miner success stories on the Skywug forum though.
So if you follow the link on the above skywire forum, you will find a forum that looks good at first glance. But after you spend an hour looking at the "who's online" page you will realize all 13 people are fake, it is a script that every minute updates with fake data to -make it look busy. The pages people are looking at, are not worth looking at. For example... a Guest is viewing diordna's reputation. So when you go that page... you see it states it has 0 positives 0 negatives and 0 nuetrals... And yes the script changes the name every few minutes and yes, the who's online looks cool and looks busy. Don't take the time to look at real activity on the board either. Like when were posts made, how many posts made per day, or how many comments on the posts. Some of it looks real. There may have been a bounty to go register at some point, and there was a giveaway of skycoins that required like 500 people to comment on a thread. But this is not real fundamental value building activity. There are only a couple of forum threads that pass the smell test. (Like the Raspberry pi thread). Now I know bots can crawl all over the web, but also logged onto the page with another computer. It did not properly report that computer as viewing the thread it was looking at. So by red flag detector kept going off wherever I looked. So reader beware, the above mentioned forum as proof of an active community, at very least has bots -not real people crawling creating fake activity. I just spent an hour of my life, -I can never get back. watching a website fake "who's online." This brings me to questions the fundamental values of Skycoin.
hey Laurie great to find you to be a fellow crypto enthusiast. What do think of Neo? Also pre mined I think, or proof of stake as opposed to proof of work, so get paid in Gas to Hodl Neo.
Good to see you are mining Skycoin. Is it also on Binance, if i remember correctly.
Check out my blog if you like. i am teaching myself as i go along and writing about it. Hoping to generate some Steem dollars.