NXT Myths Debunked

Nxt Myths
What should we know about Nxt generation PoS Cryptocurrency

Mgr. Salsacz
Content
1. Nxt is not a scam, it wasn’t created by anonymous developers 2
2. The very fair Distribution of Nxt 6
3. Original Stakeholders 8
4. Source code 11
5. Unsafe password 15
6. Worthless coin without mining 17
7. Rich get richer 25
8. Innovations over Bitcoin 30

NXT Donations: 15003961341330858247

1. Nxt is not a scam, it wasn’t created by anonymous developers
• Nxt was invented by anonymous programmer
• Nxt’s source code is being reviewed by known developers
• New code implementations will be approved by democratic voting

Nxt was invented by BCNext, who is a programmer at the age of 35+, who lives in Europe. He is a veteran member of Bitcointalk forum, but he stays anonymous like Satoshi Nakamoto. He can still reveal his identity, as he promised. He is watching the Bitcointalk forum from his real account, he supports the Nxt helpers by donations/rewards. BCNext prefers to work on creating the project alone. He paid a team of core developers to help him with the client and create some functionalities like decentralized exchanges. One member of the core development team Come-from-Beyond was paid by BCNext to work on Nxt from October 2013 till April 2014. Come-from-Beyond is a 34 years old programmer from Minsk in Belarus.
On January 2014 joined Jean-Luc a core team as a non-paid programmer. He has a Phd, probably comes from Switzerland (or France) and already celebrated his 30th birthday. Jean-Luc’s duty is to work on the code. Jean owns nice amount of NXT, that’s why he is programming for free, for the benefit of his own investment. BCNext was only an inventor, others will continue on his legacy and rewrite his ideas into a better looking Java codes.
After the release of the source code started many developers with code corrections (like Ricot, who found some implemented flaws). A few Greek IT experts from Thessaloniki and Athens are being paid for reviewing the code by the original stakeholder Klee who is managing them. Klee spent a huge part of his Nxt on donations, bounties and giveaways. He doesn’t hide his real identity. The names of his team were also revealed. There were only 8 original stakeholders who paid 1 Bitcoin during open IPO. Each of them got 50 million NXT, Klee is one of them. In January 2014 only 4 of these 8 original stakeholders own more than 30 million NXT.
There are at least six developers who are working on the Nxt’s applications fulltime: Abuelau, ferment, nexern, NxtChg and Graviton with his assistant, who helps him with the biggest Nxt exchange. This list isn’t finite, there are many new Nxt developers, like Marcus03 or wesleyh with their fantastic apps. There are tenths of helpers, translators, authors of articles, but people who said that they “work” for Nxt fulltime or at least halftime are: Joefox, Opticalcarrier, Pinarello and Salsacz.
500 different people had already been discussing at the main Nxt thread in Bitcointalk. Once there were 93 active nicks in last 3 days. In the middle of January they reached 20.000 posts at the page of 1000. The statistic from the end of 2013 shows the biggest spammers of the Bitcointalk topic: Come-from-Beyond (2005), laowai80 (460), klee (324), smaragda (304) and opticalcarrier (211). 15.000 people own Nxt account, this number rises by 200-400 every day. 500 users own more than 100.000 NXT, 2.000 stakeholders own more than 1000 NXT.
Nxt network of peers has got members from all over the world. Most people come from the United States, but there is also a big community in Germany, Hong Kong, Russia, United Kingdom, Japan and Netherlands. There is one user from Iceland, Jamaica, Panama, Ethiopia or Israel. Some of the Nxt Wiki pages have already been translated into 11 languages.
Nxt is still a small group of individuals who have no centralized place. Nxt is a decentralized currency, that’s why there are more Nxt forums, exchanges, sites, social media profiles and also marketing groups. There will never be any main leader. All decisions in Nxt will be based on democratic voting.
Nxt isn’t just some other cryptocurrency. We are a movement. We are a community who help each other out. We are here to change the world for the better.

About BCNext, inventor of Nxt
Questions for BCNext
January 2014:
Q: Why was the initial funding cancelled suddenly with few people?
A: I wanted Nxt to be launched by the community, not by a single person. Success of Nxt is supposed to be achieved by work of a LOT of PEOPLE.
Q: How would you solve problem with scam accusations according to “unfair” distribution Nxt to 73 big stakeholders?
A: This problem can not be solved. Even if we had a million stakeholders the rest seven billion people would call this unfair. A world with the money can not be perfect.
Q: What are the most important 5 things the community should do, in order to properly support Nxt in the next 6 months?
A: Review all my ideas, they might be flawed. Avoid centralization. Do not pay much attention to the price of 1 NXT measured in fiat money. Remember that half-measures is a way to nowhere. Do not trust strangers on the Internet, especially if their nickname is “BCNext”.
November 2013:
Q: how many bitcoins are you going to contribute? (Are you going to keep the coins you contributed yourself? Or you will take a creator cut (certain %)
A: I don’t know how much I will contribute. This depends on the price of Bitcoin and some other factors. These bitcoins, like the others, will be used to pay bounties for development. No creator cut.

BCNext’s citations:
A lot of time was spent on talking, the outcome did not satisfied me. That is why now I am working alone. The things are implemented much faster this way.

What others said about BCNext:
Come-from-Beyond:
„I don’t think BCNext is interested in money. He spent more than he raised funds.“
„With all my respect to BCNext, he is too paranoic about FBI/aliens/illuminati, they r not interested in kidnapping of yet-another-cryptocoin creator. I believe that was (unsuccessful) PR attempt. Fortunatelly, we don’t need him after the launch.“
Salsacz:
I don’t care about BCNext. Nxt was and is being released by 70 guys. And this number is every day bigger and bigger (now 15.000). They have 5 months for the initial IPO before Nxt launches. Now we are still in alfa. Nxt was released by a community of 70 people. I cannot even send a Nxt message with the stupid client that was created by the dinosaur inventor BCNext. Now months after the release I will finally get a client that was created by a non-original stakeholder and funded by original stakeholders… The code won’t look like it was written by my grandpa – again – thanks to the community effort, Jean-Luc, Ricot and other users, often non original stakeholders, who even don’t know who BCNext is. This is Nxt.

What is BCNext?
Next is next/Nxt. Salsa also thinks that „BC“ comes from the Proof of Stake article and refers to „Beyond Cryptocurrency“.

What else do we know about BCNext?
He often uses special phrase „can not”. He is a genius who doesn’t care about money or glory.

BCNexts likes symbols:
Now we know about 2 symbolic numbers hidden in the world of Nxt:
• 3 January: the release of Nxt happened 5 years after the release of Bitcoin.
• 21 Bitcoins: The IPO was stopped in the time when were gathered 21 Bitcoins, i tis 1/1000.000 of the all existing Bitcoins from now on.
• Anonymous BCNext: BCNext plays the same role as Satoshi Nakamoto. We don’t know who they are.
Funny descendants of Nxt:
• GetVisaCoin::Sibling of NXT::Born for retribution & deterrent
• [NEX] Nxt Reimagined
• NEX :: descendant of NXT – Imagine Fairness!
• NOX extends the dark side of NXT –
• ME.TOO :: descendant of NXT – 4 billion coins
• NEXX :: descendant of NEX :: descendant of NXT :: descendant of Bitcoin
• NEM :: descendant of NXT – 4 billion coins
• KLONE :: descendant of NXT – 1 Million Coins – VERY RARE!
2. The very fair Distribution of Nxt

Q: „Do you think the unequal distribution of bitcoin / big gains of early adopters / will be a deterrent in a more widespread adoption of bitcoins?“
A: „No. Early adopters get bigger gains (as they should) because they take on bigger risk. A bitcoin can be divided into 100 million pieces, so I don’t see divisibility or distribution as a problem.“
Cameron Winklevoss
The distribution of Nxt has many phases:
• Original IPO: (1 NXT = 2 Satoshi) = (September 28 – November 18 = 61 days!)
• First week (1 NXT = 100 Satoshi)
• Second week (1 NXT = 400-2.000 Satoshi)
• Next month (1 NXT = 3.000-6.000 Satoshi) – aliases
• Second half of January (1 NXT = 8.000-16.000 Satoshi) – bter.com exchange added Nxt
• February (?) – new client, distributed exchanges, stock exchanges (?)
• March (?) – transparent forging (?)
• April (?) – colored coins (?)
The original Nxt IPO was 61 days long. People had two months to invest in Nxt. Is this unfair? Should BCNext wait 90 days? Or 450 days? What number would be fair? 61 days long original IPO, when you had 1 Nxt for 2 Satoshi is fantastic! It was unfair only for people who invested early during 66 days and they had to wait 67 days until they got their deserved millions of NXT. Everyone could join them during those 61 days.

The distribution of NXT is very fair because it still continues. Now it isn’t in hand of one man, but it is a community effort. BCNext gave us a long time to get on the train.

If all coins are in existence already, doesn’t this make the original holders of Nxt very wealthy?
Potentially. The original stakeholders of Nxt all made an investment of Bitcoin to seed their holdings, however, with no promise of any kind of success or return on investment. In order to get more users they started to sell their stakes in undervalued prices and also they spent tenths of millions on bounties or giveaways. There are many types of original stakeholders: those who paid 2 Satoshi during 61 days long IPO 1, those from IPO 2 (100 Satoshi for 1 NXT) or early owners from IPO 4 who bought NXT for 3100 Satoshi before Nxt expanded to the BTER exchange.
Q: How would you solve problem with scam accusations according to “unfair” distribution Nxt to 73 big stakeholders?
BCNext: “This problem can not be solved. Even if we had a million stakeholders the rest seven billion people would call this unfair. A world with the money can not be perfect.”

Why was the launch of Nxt speeded?
Come-from-Beyond: „BCNext explained why he speeded up the launch. He wants the stake holders to make all important decisions“.
BCNext: “I wanted Nxt to be launched by the community, not by a single person. Success of Nxt is supposed to be achieved by work of a LOT of PEOPLE.”
When did Nxt really launch? Was it really in the day when the Billion NXT was transferred from the Genesis account to the original stakeholders? The IPO had been running for weeks in November 2013. In first days NXT cost 100 Satoshi. In first weeks of the December the price of Nxt was still about 400 Satoshi. Then 1500, 2000, 4000 before Christmas and if we don’t count the first bubble, we came back to the original 4000 in the middle of the January. But still – we have really bad client. Nxt is not yet traded in any of the big exchanges. There are many features – already programmed and tested – but they still weren’t implemented why?
We are still in a Beta. The launch wasn’t in November 24, it didn’t happen in January 3, even in April Nxt won’t have 100% of all functions. We all (15.000 Nxt users) are beta original stakeholders. The distribution of NXT is extremely fair. The IPO still continues. We haven’t launched yet. We can forget about some 73 stakeholders… Now everyone has an opportunity to jump on the train… and also to drive him! Why Nxt doesn’t use all features now? Because CBNext’s plan is to bring as many as possible users before the real Nxt will be released. Then we will have – more users, more features, all source code, but most important – this launch will be leaded by all Nxt community. This will be made by decisions of stakeholders. The success of Nxt is now supposed to be achieved by Nxt community, not BCNext.
There has been a hell of a lot development and implementation since the initial creation of the block. It’s called “capital appreciation,” or “sweat equity,” and it means that the value of the product is increasing because it is becoming a more robust product through the efforts of developers, who are augmenting the functionality, as well as marketers, and various other support people and mechanisms.
What happened with the 21 Bitcoins?
Bitcoins were required to determine how to split the stake among founders. That’s why BCNext asked for tiny amounts. These bitcoins were used to fund development but they covered only part of expenses. When people talk about Nxt IPO they forget about this important detail. 21 Bitcoins were used as a token amount. They didn’t represent any real world development costs. BCNext did everything only for the people, not for the money.
The original funding period was open for two months. That was more than enough time for everyone who wanted to invest to invest. The only reason he only collected 21 BTC was because there was very little interest. No matter when the IPO period ends there will always be people who are “left out”. You could conduct the IPO over a period of a thousand years and there would still be people “left out”.
3. Original Stakeholders

Q: “927 people own half of the bitcoins. Do you consider this a hindrance to its future market cap?”
A: “No. Bitcoins can be divided into 100 million pieces so its not important whether half of the bitcoins are held by 927 people or 9,270,000 people, etc.”
Cameron Winklevoss

How is NXT distributed?
– If I don’t count Genesis transfers, in 52 days were transferred: 2.25 Billion NXT

NXT: Bitcoin: USD:
28.9% of NXT is owned by 0.07% 28.9% of BTC is owned by: 0.005% 30% USD : 0.001%
21.5%: 0.14% : 2x 21.5%: 0.087% : 17x 19% USD – 0.01% (10x)
24.8%: 0.55% : 8x 24.8%: 0.98% : 200x 32% USD – 0.1% (10x)
20.7%: 99.76% : 1.500x 20.7%: 98.928% : 20.000x 19% USD – 99.9% (1000x)


http://www.businessinsider.com/927-people-own-half-of-the-bitcoins-2013-12
https://bitcointalk.org/index.php?topic=316297.msg3873222#msg3873222

In this table you can see that NXT distribution is much better than Bitcoin or US Dollar. Nxt has got more fair distribution than Bitcoin. In Nxt 30% is owned by 0.07% of users, in Bitcoin 30% is owned by 0.005% of users.

By these metrics Nxt’s distribution is already fairer than Bitcoin’s. This is after roughly 1.5 months of distribution, and it’ll probably improve even more in the coming months. There is a simple rule about Nxt distribution. Big stakeholders will lose more value, if they hold a lot of NXT. So it is in their interest to share their stakes.
The same thing applies to 51% attack: in PoS coins like NXT 51% is more expensive and less logical, because:
• You need to pay and acquire 51% of the stakes to be able to attack
• Even if you succeed, after your attack the PoS coin loses value because of the attack and insecurity. Again the attacker himself loses more, as he owns 51% of coins and they lost value.
Litecoin
– Top 10 LTC addresses own 7 million of LTC = 27%.
– Top 74 Litecoin addresses own 10 million of Litecoins = 40%.
– Other 3 million addresses own 15 million Litecoins.
Bitcoin owners/accounts Nxt accounts
$1 1 200 000 1-10 NXT 7 352
1 BTC 280 000 11-100 NXT 827
10 BTC 63 000 101-1000 NXT 1 236
100 BTC 10 000 1001-10.000 NXT 869
1000 BTC 880 10.001-100.000 NXT 718
10,000 BTC 47 100k – 1 Million NXT 312
1 – 10 Million NXT 122
10 – 30 Million NXT 21
30-50 Million NXT 6
Doesn’t this centralize the Nxt since most coins are in the hands of about 75 individuals?
Some stakeholders are still holding on to their original pools of Nxt, but many have begun to distribute them to others as donations, bounties for development and promotion, exchanges, etc. Bitcoin is five years old, and half of the total supply of Bitcoin is held by a little over 900 people. 1.18% of all non-trivial bitcoin accounts hold 68.89% of all bitcoins.
22 of the richest original stakeholders received more than 10 million. There are only 8 Stakeholders who received 50 million for their Bitcoin. If I look only at top 8, they started with 400 million, now they own 250 million.
If I look at other 14 Stakeholders, they owned 350 million. Now they have 90-150 million! There were some big trades so I wasn’t sure if it was a trade or only a transfer to the new account, but I am sure about max number!
If I look at all richest 23 stakeholders, it’s: 750 million on 24 November 2013. And now: 345-450 million on 10 January 2014. If I look at 23 richest original stakeholders, they owned 75% of all Nxt in the first day, but now they own only 34-45%. 300-400 Millions had already been sold to the new users in 6 weeks.
42 richest original stakeholders

24.11.2013 10.1.2014 24.11.2013 10.1.2014
1 49 985 380 50 004 185 24 9 975 150 8 901 894
2 49 875 751 49 874 767 25 9 476 393 1 599 999
3 49 875 751 0 26 8 644 631 49
4 49 875 751 51 170 795 27 6 668 388 6 575 345
5 49 875 751 25 925 690 28 5 486 333 5 399 971
6 49 875 758 9 500 626 ? 29 5 264 386 0
7 49 876 257 46 781 257 30 5 033 128 2 427 700
8 49 875 751 30 776 494 31 4 987 575 4 980 418
9 34 913 026 2600 ? 32 4 987 575 2 558 217
10 49 875 651 1000 ? 33 4 962 637 100 001
11 30 922 966 27 071 647 34 2 916 900 1 000 000
12 29 856 290 0 35 2 867 856 500 039
13 29 437 998 25 849 742 36 2 724 712 224 622
14 24 912 938 1 986 246 37 2 690 963 489
15 24 880 020 15 669 333 ? 38 2 684 479 3 058 444
16 22 166 945 10 + 15 mega ? 39 2 468 850 219
17 19 925 363 9 895 683 40 1 970 092 1 469 943
18 16 625 250 800 41 1 845 403 2 100 606
19 15 487 585 12 600 371 42 1 476 156 9 476 896
20 14 962 725 0
21 14 887 912 0
22 11 083 556 4 502 427
23 9 975 150 875 135

All original accounts: NXT
24.11.2013 1,000,000,000
1.12.2013 622,209,864
8.12.2013 406,016,313
15.12.2013 305,742,843
22.12.2013 265,220,001
29.12.2013 248,241,416
5.1.2014 148,913,050
6.1.2014 139,681,005

4. Source code
Why isn’t Nxt open-source?
Eventually, it will be. At the moment, some of the code is still private because it is still being hammered out. The development community released all of the base source code on January 3, 2014, and source code for additional features (the “secret sauce”) will be released in the spring of 2014. The developers have introduced three security flaws into the source code to prevent people from creating copies of Nxt by simply taking the source code and re-using it. People who discover the security holes claimed rewards for finding them. Two of three implemented security flaws had already been found.
As Bcnext said, anyone could join the development after the release of the source code. So the Klee’s crew and Jean-Luc joined the dev team and started with refactoring the java binaries.
What did experts say about Nxt’s source code and about inventor BCNext?

Come-from-Beyond:
BCNext knew that Java binaries could be easily decompiled, everything in Nxt is made on purpose. U’ll get most of the answers in the last part of BCNext’s plan…
I noticed the same things, the code is written in back-to-90s style. The author definitely used to code in Assembler. But I wouldn’t say that this is bad. U can buy “Java for dummies” book and in 3 weeks u’ll be writing code full of comments like “// Now we set A to B plus C”, declarations like “static final int ONE = 1;”, Optional from Guava that requires 3rd party libraries, methods that r called once… the list goes on. I’d rather trust to code written in assembler style. Script kiddies shouldn’t write financial software.
Xibeijan:
NXT’s beauty is in the algorithms and maths that have brought forward the state-of-the-art. I seriously doubt the creator cares about keeping tidy with the code. In fact, I know quite a few genius computer scientists who produce really ugly, stupid code. However, that doesn’t matter one iota when the algorithms are groundbreakingly better than anything that’s come before.
Our investment is in the extremely clever people behind the NXT project. Computer science and software engineering, though related, are different things. I am glad the NXT has a computer scientist like BCNext behind it who actually has new ideas and can bring them to life, no matter how messy the code may be. New capabilities are something that has been missing from every other alt coin that has come before NXT.
As I said, some really great computer scientists do not follow great software engineering principles, but their code does things no one else’s can. And that, my friend, is the point.
Bcnext is a freaking genius. I worked so hard to try to figure something out like this myself to no avail. What i proposed in my thread is a far cry from this much better solution.”
That we are not investing in source code, we are investing in the algorithms, the big ideas (BCNext) and the huge community supporting NXT.
Computer science and software engineering, though related, are different things. I am glad the NXT has a computer scientist like BCNext behind it who actually has new ideas and can bring them to life, no matter how messy the code may be. New capabilities are something that has been missing from every other alt coin that has come before NXT.
Rlh:
I know that this is about fees and not generating currency, but the concept of adjusting system metrics, based off daily transactional statistics is something I’ve looked at and thought about for a loooooong time. I think we could do the same type of thing here.
tk808:
This is the real-world dude, not an algorithm found in a textbook.
bitcool
You have to give the creator credit for implementing the first version bitcoin-era crytocurrency in Java. I am sure a lot of time and effort were invested in this.
achimsmile
I am amazed how motivated, innovative, and intelligent (sometimes I only understand half of the tech talk in the main thread the community behind NXT is!
AdamaBit
If you’d read all of BCNext’s posts (which I did) you’d see that lots of people wanted to give him more coins, and not just one at the most, which he put the cap on. But he wasn’t motivated by that he just wanted to get the coin out there, he could have taken a lot more of people’s money, hell if I hadn’t have come late to the party I would have jumped on in there and taken a punt on him. But he actually only wanted 21 BTC’s so that it mirrored satoshi’s 21 million BTC’s! He’s kinda of kooky and probably a bit of a genius (used lightly). But I liked his enthusiasm and paranoid personality. (He got a call on Skype from someone saying that they were the police and then stopped posting).
Jl777:
Source code appears to be the work of a super-genius with a strange formatting style.
Asian Prepper:
I can totally see the words “genius” & “masterpiece” being used to describe Satoshi but lets wait for some solid proof & evidence first before we use those words to describe BCnext. Right now we have lots of hype n “sizzle” but I dont see any solid “steak” yet to show for the Nxt hype yet. Right now, from an early adopter & Nxt investor perspective, all I see is another copy cat programmer attempting to copy satoshi’s shroud of anonymity, idea of a public ledger, etc.
Being “original” is genius. Being “different” is NOT genius.
Keep in mind that Satoshi created BTC to take power away from the 1% on wall street n give it back to the 99% on Main Street while BCnext created Nxt for personal financial gains. Keep in mind that there is nothing wrong with doing some thing for personal financial gains but I would hesitate to compare or place an unproven coder on the genius level of Satoshi.
I invested in Nxt because it was the first copy cat coin to make an attempt to come up with its own source code instead of being lazy n copying Satoshi’s code. Is it possible that BCnext is another genius like Satoshi? Of course its possible… I hope BCnext is able to produce the code that he claims n provide proof of his genius. .. Until there is proof… BCnext is just another wanna be copy cat… once proof is clearly available. .. I will be the first to promote the genius of BCnext’s.
Utopianfuture:
It takes a historical perspective to know what kind of contributions BCNext would make so I agree that at this point over-hype is premature. But in my personal observations, he has shown some signs of a genius in the making in some levels. There are technical innovations such as POS, transparent forging, however what I see the most valuable in his works is a coherent vision of what a decentralized network could be. It’s similar to the way Steve Job designs the first Iphone. There are technical improvements compared to earlier smartphones in the first Iphone, but much more important innovation is the way everything is brought together to define what a smartphone should be. NXT decentralized network could be the same. It will succeed not on a specific feature but on the way all the different features are bought together in a coherent framework; plus all that hi-techs are accompanied with strong message of decentralization and community involvement. That the whole package together imho is the novel contribution.
Satoshi has paved the way with his blockchain original idea. But without a written evidences, I doubt Satoshi has such a strong vision of how a decentralized network based on blockchain technology could be. So in a sense, BCNext extends Satoshi’s original idea.
We still need to wait for the actual implementation of NXT decentralized network and there are still much uncertainty ahead. But the only reason I has devoted so much my time to this venture is because I has a conviction in my above judgement. I believe in NXT success and the validation of BCNext’s ideas.

5. Unsafe password
Since all Nxt accounts are stored on the network, isn’t it possible for someone to guess my “secret phrase” and get easy access to my coins?
This is a very important question. See our Account Security page for an in-depth answer. In brief: This question emphasizes the importance of using a strong, secure password to create your Nxt account.
If you enter a passphrase less than 30 characters long in the Nxt client, you will be warned that you are creating a security risk. A truly random string of 50 to 60 characters is a far better choice for a passphrase, and will significantly reduce the risk of someone “brute-forcing” your account or accidentally using the same passphrase.
Nxt supports 10^77 different account numbers (that’s 100 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 accounts), so the range of possible passphrases is significant. You can use a site like https://howsecureismypassword.net/ to test the strength of your passphrase, and get an estimate of how long it would take a standard computer to crack it.
Your password will be safe, if you use 30 characters long password that looks like this: a6f-5g46§s5g16s5dg16s5df1g6s,51gů§6a54ůfv6\,96d76E5D4.
Brainwallet
Come-from-Beyond: “Aye, we r going to follow the same way as Bitcoin 5 years ago. I still think that brainwallet is much more secure than files on a disk.”
A brainwallet refers to the concept of storing Bitcoins in one’s own mind by memorization of a passphrase. As long as the passphrase is not recorded anywhere, the Nxts can be thought of as existing nowhere except in the mind of the holder. If a brainwallet is forgotten or the person dies or is permanently incapacitated, the Nxts are lost forever.
A brainwallet is created simply by starting with a unique phrase. The phrase must be sufficiently long to prevent brute-force guessing – a short password, a simple phrase, or a phrase taken from published literature is likely to be stolen by hackers who use computers to quickly try combinations. A suggestion is to take a memorable phrase and change it in a silly way that is difficult to predict.
The phrase is turned into a 256-bit private key with a hashing or key derivation algorithm (example: SHA256). That private key is then used to compute a Nxt address, or a deterministic sequence of addresses.
Nxts are sent to the address. In order to recover the Nxts, one must recompute the private key with the same phrase. The private key is imported into a wallet. It is very important when creating a brainwallet to use a passphrase that has a very high level of entropy. If this is not done, theft of the brainwallet is an eventual certainty.
This is not a simple suggestion. This is a requirement. Most people when asked to create a secure password, with everything they’ve heard about creating a password, will still create a password that if used for a brainwallet, will result in the eventual theft of their funds. The simple fact of the matter is that hacking a brainwallet password is a mathematical exercise that requires no internet access, no communication, and leaves no trace, so hackers can collectively try multiple trillions of passwords every second in the privacy of their own homes. Your bank might tell you that a 10 character password with uppercase, lowercase, numbers and symbols is a strong password, but it is not strong enough to secure a brainwallet. A password that might be strong enough for traditional banking or a social website is typically unacceptable for a brainwallet.
A brainwallet passphrase, at a minimum, needs to be an entire original sentence that does not appear in any song or literature. Security is enhanced simply by including some sort of memorable personal information, which doesn’t necessarily even have to be secret (e.g. an e-mail address, or phone number). A good brainwallet passphrase will have dozens of characters.
6. Worthless coin without mining

“Any other distribution would be unfair.”
Come-from-Beyond
You do not need to invest in bitcoin in order to make advantage of it. As an example, if I buy some bitcoin to send to my family “back home” and then they sell the bitcoin to buy food, we have all used bitcoin but none of us have “invested” in it per say.
The proof of work is more secured than proof of stake in other crypto currencies. Nxt finally solved this problem. Nxt’s true original invention – Transparent forging – brings the revolution in the world of Proof of Stake currencies. It solves the problem of forked chains in other altcoins like Peercoin, Namecoin, Mastercoin or Ethereum. Nxt doesn’t have to use centrally inserted checkpoints.
If there are no new Nxt to be mined, how do you validate the blockchain and secure the network?
Nxt is a pure Proof-of-Stake (PoS) currency. Users validate the blockchain and secure the network by running a light weight client on any computing device (even one that used to run Windows XP). For doing this users are rewarded with Nxt coin that is collected from transaction fees. In addition, the “transparent forging” feature of Nxt will penalize accounts that do not participate in the mining process by temporarily preventing them from earning transaction fees.
Nxt is a scam because all Nxt coins are pre-mined
First, it’s important to note that Nxt is a pure 100% Proof-of-Stake (PoS) coin. The only way to implement this form of currency is to issue all available coins in the genesis block. To do otherwise would force the implementation of some form of Proof-of-Work scheme in order to prevent attacks on the network that “fake” stake. Since the creator of Nxt wanted a 100% PoS platform, this was not a desirable course of action.
Second, the term “pre-mined” is a misnomer because Nxt coins are not being mined at all. The original stakeholders in Nxt contributed Bitcoin in order to seed the creation of the 1 billion coins represented in the genesis block, and these coins were distributed among the original stakeholders. The stakeholders are expected to distribute coins by donating them, using them as “bounties” to pay for work on the coin (software, documentation, translations, support, etc.) that is done by the community. Even the creator of Nxt (BCNxt) made an investment. The coins were not generated from nothing! Third, the creation of the genesis block was fully public, and all of the original account numbers and their assigned amounts of Nxt are visible.
Why is it called forging instead of mining?
With Bitcoin and many other cryptocurrencies, the act of securing and verifying the blockchain results in new coins being created. With Nxt, however, all possible coins already exist, and accounts earn coins from transaction fees alone. As a result, it was felt that a new word – “forge” – was needed to describe the manner in which coins are earned.
What is “transparent forging”?
Nxt has implemented “transparent forging”, which allows Nxt software to predict which accounts will forge upcoming blocks. This is basically done by iterating through all active accounts and seeing which one has the highest “hit”. Transparent forging rapidly increases transaction processing, since the account that will forge the next block is known. Another benefit of this feature is that accounts that are due to forge, but do not, will be penalized by having their forging power temporarily reduced to zero.
Why do I have to buy Nxt coins in order to forge them?
If you´d like to own some Bitcoin, or any of the other altcoins, you have to invest in mining hardware to be able to mine some coins. With Nxt, you buy an actual amount of coins in order to start to start forging. There are no additional costs, and no expensive mining hardware is needed.
Every 24 hours, there should be 1440 blocks added to the chain. Your probability of forging a block depends on your share of the total number of coins that are active on the network. If all available coins (1 billion) were used for active mining, then an account balance of 694,444 NXT (1 billion divided by 1440) would mine 1 block per day. However: coins moved to a brand new account must wait for 1440 blocks to mature some owners don’t bother with mining, don’t leave their Nxt software running, or their Nxt software crashes, so only portion of all coins are actively mining at any point in time. For example, if you have 50,000 Nxt coins, you could forge 0.288 Nxt blocks per day, which translates to one block every 3 or 4 days.
The number of coins you earn from finishing a block depends on the number of “fee coins” in the block. The minimum fee per trade is 1 coin, and the number of trades in a block will vary. A block can contain a maximum of 255 transactions. It is also possible for blocks to be empty.
Can I forge Nxt more quickly by running multiple servers and multiple accounts?
No. Your ability to forge Nxt depends solely on your total account balance as a percentage of all available coins. This is what sets Nxt apart as a pure “Proof-of-Stake” cryptocurrency. CPU power, GPU (graphics processor unit) power, and the number of servers you run have no effect – in fact, you could even forge Nxt on a very old, low-power computer!
A new coin has to be distributed in some way. Mining is one such way, where people are rewarded for helping to secure the network.
Nxt uses a new way of securing the network, where you need 3000x less power. It is only a waste of energy to race by CPU/GPU mining. At the end only the richest and the biggest corporations with huge mining systems get most profits.
Bitcoin had over 4 years of profitable mining by everyday CPUs and GPUs. Investment-coins have a few weeks to months where you have to spot the coin, be convinced it’s not a scam and send over your money.
Not true at all. Dogecoin was mined for 3 days very easy, for another 5 days quite easy and after that time it was much harder to get those millions. Who was mining dogecoins in first week, earned up to 100.000$, if he sold his Dogecoins after price of DOGE was raised 250x.
Mining keeps the entire system honest. You can’t game the system with mining, you can just add hashing power if you want more coins. It’s usually much cheaper to buy coins than mine them, so I want to be rewarded for mining.
True. It is cheaper to buy coins. That’s why if you want to mine Nxt, all you need is to buy NXT. You can’t game the system too by Nxt mining. Buying Nxt is as same as buying more GPUs. But you still pay same low electricity.

In the present an everyday GPU will most likely never generate a profit mining bitcoin. They are either mining alt-coins to recoup or gain free profits or sold on e-bay to others looking to mine alt-coins.
So basically, you have a large number of miners that get very cross when they are told they cannot mine a particular coin, because they already invested in the hardware. Even if another non-mining distribution scheme is legitimate, they won’t like it because they already invested into the mining distribution scheme. (Unless that scheme involves giving out “free stuff”)
The only reason mining has gotten so big (and survived) is because of basically useless copy-cat coins. If you could only mine Bitcoin + Litecoin, the mining scene would die very quickly because of escalating difficulty. We are in a “copy-cat coin” bubble. This won’t be a permanent thing. Once people realize that 99% of altcoins are just mine and dump schemes, no one will invest in those PoW coins.

The early Bitcoin adopters had no problem accepting the PoW system, but they can’t accept the new generation of crypto-currencies with PoS

Suppose a blockchain is forked and there are two competing forks. In a PoW-system, miners can add blocks to either of these forks, but can only commit fully to a single fork, since they need to expend resources to mine. Consequently, one fork will win out in the end as it becomes the longest, while the other chain is orphaned as miners abandon it.
With PoS forging, there is nothing stopping a user to forge on both competing chains. In fact, it is economical to do so. Why bet on what you think will be the winning chain when you can back both. This can cause a situation where two competing chains coexist for a long time, damaging the credibility of the coin.
– Nxt came with transparent forging idea that solves the problem of competing chains. This invention is really very important for PoS currency. A Nxt node forging two chains at once will find their mining power reduced to zero.
What about power heating houses by Bitcoin mining?
In the USA alone 3 million homes use electric heat. Using a pc with two hd7950’s at Litecoin will provide heat and make money. You will have 60gh at BTC and about 1200kh at LTC and it will use about 700 watts of power. You can use this energy for electric heated home.
This is true, but there is a problem with ROI – return of investment. The difficulty of Bitcoin mining is always rising. Big corporations and very rich people are using more superstrong miners. What you mined in 2013 during 1 day, you will mine in 2014 during a month with the same gear. Mining by using hd7950 will be over very soon. You can buy a Raspberri Pi, it is cheap and uses almost no energy. You can use Raspberri for Nxt mining and also as a radio, media streamer… Or for arcade games.
Why is Nxt mining so cheap?
Well think about it, bitcoin is a decentralized currency. Instead of the banks buying paper and printing money with their machines, we “print” (mine) “money” (Bitcoins/altcoins) with our “machines” (CPU/GPU/FPGA/ASIC). So PoW use their system, but it is unnecessary.
A rising amount of energy is “wasted” in mining the coins. As more computers become engaged in mining them, the equations which need solving become more complex – And more and more energy is engaged in a useless “mining activity”. In effect, Bitcoins are created through wasting energy in useless mathematical equations. There must be a better way to distribute the new coins than giving them away to people who waste energy to gain the potential of “earning” free coins.
Too many big players invested a lot in mining/ASIC related business. They will try to stop PoS currencies. They were the bosses of Bitcoin in the end of 2013. They are and will be trying to spread FUD about how bad is PoS. Fortunately in decentralized community people can have their own opinions. People in the past also mined a coal and now they use solar energy. And yes, you can mine Nxt on small widgets only by using solar energy!
If you use Raspberry Pi for securing the network, it costs you $100 per year + $100 original investment. If whole network can be secured by 10.000 Raspberry Pi, then it costs $1.000.000 per year. Someone says Bitcoin mining costs $15 million per day. Even if he is wrong and it is $1 million per day, raspberry pi’s are still 365x cheaper (if you use 10.000 of them).

You can play Call of Duty during Nxt mining
This is true, Nxt needs only a little RAM from your PC. You can finally use your graphic card only for playing 3D games. With more PoS currencies and after all PoW coins die all gamers will finally be able to buy cheaper graphic cards. And they won’t be all sold out like today!
Nxt requires 10 times less bandwidth and storage than Bitcoin. It uses signing algorithm which is faster than Bitcoin’s one. Thus it can scale to a higher degree than Bitcoin can. There is no an implemented decentralized solution of the VISA volume problem yet. Should we sit and do nothing waiting for it? No, we can use Nxt.
Why shouldn’t we use PoW mining?
The proof of work model is unsustainable in terms of the energy requirements to secure it: http://www.bitcarbon.org/introduction.html The above isn’t an issue now as not enough people around the world have adopted PoW coins. But if they did, this would be at the front of most political arguments. Also, the vast majority of bitcoins is also held by a minority – not just in BTC but also in hashing power. In many respects, Bitcoin is a ponzi/pyramid scheme too. Hell, so is FIAT. Such is the nature of currencies in general. Bitcoin was also considered a huge scam back in its infancy.
POW is such a waste of resources, we are spending millions on resources to mine BTC, it doesn’t seem like the direction we should continue heading as the world struggles with limited resources. The amount of power wasted mining BTC is absolutely atrocious. Regarding your concerns with POS, read up on Transparent Forging. POW is completely susceptible to corporate control, look at the mining pools, you are close to 51% with Ghash.io alone. Meanwhile Nxters are forging NXT right now on their RasPi.
Isn’t late to start with Nxt?
You can get into the Proof of Stake system at almost any point, which definitely drives adoption. You have to pay for NXT, but then you can mine NXT and thus get into the system without investing more fiat money. This is also the reason why Nxt has a rather fast adaption compared to Bitcoin.

What is Proof of Stake?

Proof of stake does away with the computational waste of proof of work entirely. Rather than requiring the prover to perform a certain amount of computational work, a proof of stake system requires the prover to show ownership of a certain amount of money.
The reason why Satoshi could not have done this himself is very simple: before 2009, there was no kind of digital property which could securely interact with cryptographic protocols. Paypal and online credit card payments have been around for over ten years, but those systems are centralized, so creating a proof of stake system around them would allow Paypal and credit card providers themselves to cheat it by generating fake transactions. IP addresses and domain names are partially decentralized, but there is no way to construct a proof of ownership of either that could be verified in the future. Indeed, the first digital property that could possibly work with an online proof of stake system is Bitcoin (and cryptocurrency in general) itself.
But proof of stake’s real advantage is in decentralized systems like Bitmessage. Currently, Bitmessage uses proof of work because it has no other choice. However, proof of work is wasteful, and makes Bitmessage a somewhat cumbersome and power-consuming system to use for instant messaging. Soon a system like Bitmessage will be integrated into Nxt and use it as proof of stake. Finally much of the difficulty and waste will be alleviated.
Does proof of stake have a future? Bitcoin’s security will become too weak over time as its block reward continues to drop. PPCoin is not fully proof-of-stake; because it is a small cryptocurrency with a highly centralized community. A centralized checkpointing system does exist, allowing developers to create “checkpoints” that are guaranteed to remain part of the transaction history forever.
Eventually, the intent is to move both toward making the checkpointing system more decentralized and reducing its power and PPCoins come to be owned by a larger group of people. As usual, Nxt again came with right solution: Merged mining. Thanks to this feature centralized checkpointing system will never be a problem in Nxt.
“Peercoin and Nxt use an alternative mining mechanism called “proof of stake” where users “mine” with money rather than computing power; although this alternative mechanism is relatively unproven, it is extremely promising because it is essentially impossible to set up a mining pool with it.”
People crying that with PoS you make little money forging don’t realize that your ROI (Return of Investment) as a particular in PoW mining usually is -50%. The main advantage of PoS forging is that you’re guaranteed to not lose anything (also you won’t get high profits). You will get fair profits. Instead in PoW you’re guaranteed to being fooled by the ASIC sellers…
PoS will survive all PoW attacks
A proof-of-stake system might provide increased protection from a malicious attack on the network. Additional protection comes from two sources:
– Executing an attack would be much more expensive.
– Reduced incentives for attack. The attacker would need to own a near majority of all Nxt. Therefore, the attacker suffers severely from his own attack.
Why Proof of Stake would likely decrease long-run txn Fees considerably
Under pure proof-of-stake, opportunity cost can be calculated as the total sum spent on mining labor and the market interest rate for risk-free NXT lending (hardware-related costs will be negligible). The total volume of txn fees under pure proof-of-stake will just need to be just sufficient to compensate labor involved in maintaining bandwidth and storage space. The associated txn fees will be exceptionally low. Despite these exceptionally low fees, a proof-of-stake network will be many times more costly to exploit than the proof-of-work network. Approximately, a proof-of-work network can be exploited using expenditure equal to about one year’s worth of currency generation and txn fees. By contrast, exploitation of a proof-of-stake network requires purchase of a majority or near majority of all extant coins.

7. Rich get richer

I don’t understand the positive associations with proof of stake. Isn´t it a model which increases the power of the rich (owners of the coins) guys, very similar what we have in real life? Doesn´t that lead to power monopols?
There are several problems with PoS “mining” that are not present in PoW-systems. For one, PoS suffers from a rich-get-richer problem, since forging typically requires coins to not move for some time. This isn’t an issue now, as everyone is mostly hoarding anyway, but if such a coin would be widely used as general currency, people with large quantities have relatively large amounts of coins they can save, while people with small amounts will have to spend most or all of their coins. This will cause coin ownership to become more and more centralized.
– In NXT this problem was solved. An account only has to be active for 1440 blocks before it can forge, so it doesn’t matter what the user decides to do with their coins after.
That is a genuine concern especially with a purely POS coin such as Nxt, but significantly less so with a combination POS/POW coin such as Peercoin, since the initial generation and distribution of coins works the same way as for bitcoin. Plus the rich-get-richer, and more powerful, phenomenon is somewhat of an issue also for POW since POW mining is so costly, and those who can afford the computing power generate wealth to then increase their computing power even more, with better and more expensive hardware. POS minting can be done with almost any hardware, and at least with Peercoins, it is not just the amount of coins but also their age that matters (age resets upon successful minting or transfer to another address).
With Nxt’s PoS forging, the ROI is the same percentage whether you invest $100 or $100000. This is as fair as it gets. Both investments will grow at the same rate. PoW mining such as that used in Bitcoin is not this fair. Why? Because the nature of hardware/electricity costs and economy-of-scale gives an advantage to the rich. For instance, they can buy 100 or 1000 miners (or manufacture their own!) for a much better deal than the little guy who can only afford one.
The person with 1 million Nxt has 100x higher chance to get the transaction fees than the person with 100 Nxt. He still pays the same electricity. The person with 1 million GPU miners has 100x higher chance to get Bitcoin block than the person with 100 GPU miners. But he pays 100x more for the electricity.
Economies of scale are a real problem for PoW cryptos. A person who invests 10 billion gets WAY more than 10 times as much hashing power out of that investment as someone who invests 1 billion.

A person with 5 NXT only forges 5 times as many as someone with 1 NXT. It’s not like there is some advantage to having a lot in that respect, it’s not like someone with 5 NXT gets to forge 6 times as many as someone with 1. It will only lead to stratification if people with smaller amounts of NXT don’t feel that it is worth their time to forge. Ideally we will have clients someday that give no barrier to entry for someone who wants to forge with even a single NXT and so there will be no reason for him not to and so no stratification.
World of Bitcoin:
– If you have 1000$, you can mine X Btc thanks to the GPU
– If you have 100.000$, you can mine 1000X Btc thanks to some super machine you buy
– if you have 100×1000$GPU, you get 100X Btc (+ pay 100x for electrocity)
– if you have 1×100.000$Machine, you get 1000X Btc (+ pay for electrocity)
World of Nxt:
– You have 1000 Nxt, you can mine X Nxt
– You have 100.000 Nxt, you can mine 100X Nxt
So in the world of Bitcoin, it is Rich get richer. In the world of Nxt, it is LINEAR!
Only PoW is unfair and rich gets richer
Those that invest a 6 year old laptop to mine bitcoin are going to be severely disappointed. Yet those that have $20,000 laying around, can afford to buy a top of the line mining rig. And those people will actually turn a profit, but will always have to re-invest in hardware that becomes obsolete because of competition. So with the GPU/CPU world, the rich are going to get richer and the poor get nothing. You cannot expect to invest less than $100 and get anything in return in PoW system.
Many people thing that with PoW, due to economies-of-scale, it will always be easier for the rich to secure an increasingly greater percentage of the profit from mining. For example, the average Joe will have to spend top dollar to buy one miner. But someone (or government/corporation) who has a lot of money can either buy them en-mass and receive a huge discount, or manufacture them directly at an even larger discount. This means that the little guy’s slice of the PoW pie will get increasingly smaller because it will always cost him more to maintain his hash rate, while the rich who are already making a much higher ROI will always be able to maintain their advantage at a discounted cost.
In PoS the ROI is the same regardless of how much money you have.
As a simple example, suppose we have a PoS network of 100 people, and they all have their accounts open for forging 100% of the time. The richest person has 5% of the total wealth, the poorest person has 0.01% of the total wealth, and everyone else has something in between. For simplicity’s sake, let’s assume this is a closed system and no new wealth enters the economy. Let’s also assume the richest person decides to be a “parasite to society and offer NOTHING back”, i.e. he just sits on his 5% and collects fees from forging.
Now, the poorest person doesn’t have this option, so he decides to be industrious and starts a business that provides him a moderate amount of income that allows him to earn more than his cost of living/doing business. After one year in this economy the poorest person will still have no less than 0.01% of the total wealth thanks to the interest he earned on forging, and will in fact have gained extra wealth thanks to his successful business. Let’s say he now owns 0.02% of the total wealth.
Now let’s look at the richest person. After one year of doing nothing except collect transaction fees from forging, he earns no more than 5% of the total interest from forging thanks to the way PoS forging works. However, he had living expenses, so we must subtract these from his earnings. Let’s say he was wise and didn’t exceed the amount that he earned from forging; however, when you subtract his expenses from his forging profits, his net income for the year is obviously less than 5% of all interest earned from forging that year. Since everyone else was also forging 100% of the time, this means his wealth has grown at a slower rate than even the person who earns just enough from his job to pay for his living expenses.
Suppose this continues unchanged for the next 10 years. Each year the parasitic rich person’s wealth grows at a slower rate than the basic forging interest rate, and each year the poorest person is able to increase his wealth at a greater than basic forging interest rate, thanks to his savings.
This is just a little scenario to illustrate that in PoS, while the rich may be able to sustain their lifestyle by doing nothing but forge, their wealth will grow at a slower rate than anyone who has a job that can support their living expenses, so long as everyone is forging. Forging is a trivial task, so there is no reason why everyone shouldn’t be able to forge. Who is rewarded the most in a PoS system? The industrious, just like in every other healthy economy.
PoW economy
Now let’s take a look at a simple PoW economy. Again, let’s suppose this is a network of 100 people, the richest person has 5% of the wealth and the poorest person has 0.01% of the wealth, and no new wealth enters the system. Let’s be optimistic and assume everyone is committed to mining, and they all set aside 10% of their wealth to pay for mining hardware and electricity costs.
The poorest person can only afford one of the newest ASIC miners, and since he is only buying one, he pays the full retail price. The richest person realizes that he can save a lot of money by manufacturing his own ASIC miners, and he can even sell some to the other members. So he sets up a nice little ASIC farm of 1000 miners for himself which he was able to finance for much less than full retail, and he pockets the money the poorest person and many of the other members gave him to buy one of his miners.
So, at the end of the year, the richest person owns a large percentage of the 10% everyone set aside to pay for their mining costs, and he was also able finance and operate his miners much more cheaply, giving him a much higher ROI. So the richest person has earned much more than 5% of all mining profits for the year, and the poorest person has earned much less than 0.01% of all mining profits for the year.
The poorest person is a pretty industrious guy though, so he has his own business which has enabled him to earn a small profit, and he’s doing okay, and he might just be able to justify upgrading to one of the new model of ASICs that the richest person is releasing for next year. His neighbor is not so industrious though, and he is thinking he won’t be able to afford a new mining rig next year.
Obviously, the richest person in this example is also industrious, because he set up an ASIC manufacturing business, but this is an opportunity that is only afforded to the rich. Let’s say his neighbor, who is not quite as rich, and not as industrious, simply bought 800 ASIC miners from him at a 40% discount rate from full retail, and then sat back and did nothing all year except to be a “parasite to society and offer NOTHING back”. Well, he is still receiving a MUCH higher ROI than the poorest person who could only afford one miner at full retail.
The distribution of wealth in a Bitcoin economy can be altered much more easily in comparison to a 100% PoS coin economy
It can be altered much more easily in favor of the rich than a purely PoS economy.

Market Cap: Corporations vs. Cryptocurrencies

Andreas Von Bechtolsheim is one of the two investors in Google. He invested US $100.000 in Google in September 1998. Andreas now at the age of 58 has net worth of US $ 2.8 Billion. If you invested early in very profitable corporation, you became rich. It is very similar in successful cryptocurrencies, as you can compare:

Starbucks 1000% growth in 12 quarters Bitcoin
Market cap in Q3 1992 $111 million Febuary 2010 $ 20.000
Market cap in Q3 1995 $1.26 billion January 2011 $5 Million
Market cap in Q4 2010 $24 billion January 2012 $14 Million
January 2013 $140 Million
Yahoo 1000% growth in 8 quarters January 2014 $12 Billion
Market cap in Q2 1996 $551 million Litecoin
Market cap in Q2 1998 $7.38 billion September 2013 $50 Million
Market cap in Q4 2010 $19.1 billion December 2013 $1.2 Billion
January 2014 $600 Million
Amazon.com 1000% growth in 4 quarters Dogecoin
Market cap in Q2 1997 $441 million 16 December 2013 $1 Million
Market cap in Q2 1998 $4.95 billion 19 December 2013 $14 Million
Market cap in Q4 2010 $81.2 billion January 2013 $8 Million
Nxt
eBay 1000% growth in 2 quarters November 2013 $21 Bitcoins
Market cap in Q3 1998 $1.81 billion 4 December 2013 $3 Million
Market cap in Q1 1999 $16.6 billion 24 December 2013 $24-43 Million
Market cap in Q4 2010 $36.7 billion 26 December 2013 $101 Million
January 2014 $60 Million

Sources:
http://www.businessinsider.com.au/fastest-growing-large-companies-2011-2
http://en.wikipedia.org/wiki/History_of_Bitcoin
historical charts, http://coinmarketcap.com/

8. Innovations over Bitcoin

“It’s hard to scam in proposed scheme. He [BCNext] promised to launch Nxt. All main features are completed and Nxt can be launched even today. I can do it by myself after I figure out how to create Genesis block. Disassembled code is quite ugly but readable. This coin is the most innovative among all other coins I supported, so if BCNext is hit by bus I will launch it.”
Come-from-Beyond
„I updated my server to show BCNext the stock exchange interface.“
Come-from-Beyond, November 14, 2013

“Besides Bitcoin, Nxtcoin ist the best I’ve seen so far. No clone, completely new code base, with 100% PoS, DNS, Messaging, Decentralized exchange, colored coins, no mining but “forging”… definitely better than any other clone alt-coin.”
McDoxy, trollbox
“I have not invested in any altcoins because I don’t believe that any of the “problems” or issues that they address can’t be addressed by Bitcoin itself.”
Cameron Winklevoss, before release of Nxt

Luckily for us, Nxt solves this problem by giving a way to “inflate” number of “coins” via Asset Exchange. These “coins” can be backed by NXTs.
If u think about it, you’ll notice that Nxt simulates real economy (NXTs == gold, issued assets == paper money)
Come-from-Beyond
Early altcoins are highly vulnerable to 51% PoW attack. Nxt is not. Early altcoins are mostly pump-n-dump shitcoins, lost user base quickly. Nxt is not. Nxt was highly vulnerable to zombie attack.
ImmortAlex
Q: What’s currently the plan regarding exchanges and stuff?
Come-from-Beyond: Launch decentralized exchange and let centralized ones to die.

The Great Cycle of a altcoin, fork of Bitcoin or fork of fork of Bitcoin, or …:
(1) Coingen.io —->
(2) Pay and Generate ——>
(3) Copy and paste another shit coins article —–>
(4) Post Shitcoin gets accepted —– >
OR —– > Dies from being too shity even for shitcoin hoarders -> 1
(5) Reward bounties for supporting shitcoin —– >
(6) Shitcoin Giveaways —– >
(7) Try to get on a trade site ——>
OR —– > Never gets accepted, because it’s the lowest form of shit -> 1
(8 ) Gets accepts and slowly dies because no more money is to be made off of shitcoin.
OR —– > All support is lost for shitcoin, back to step 1
(9) In very very rare cases such as Doge —– > Gains massive appeal and fame for being a new breed of shitcoins, Dies in 6 months. -> back to step 1

Nxt:
1. Invent and create a new system – Nxt
2. Create a plan, divide it in 3 parts. Share only first part of the PLAN. Start with a cryptocurrency
3. Share the coins to the original stakeholders after fair 2 months long IPO
4. Implement all existing functionalities very slowly, so the price of NXT can be low for many months
5. Leave everything decentralized
6. Share the second part of the PLAN, wait 6 months to achieve 1 million accounts
7. Share the third part of the PLAN to achieve 100 million accounts
8. Change the world

Innovations of Nxt – Features
Nxt Features
Running Prepared In progress Concept not ready
Decentralized Alias System Decentralized Asset Exchange Decentralized Marketplace Decentralized Mixing Service
Basic DDoS Protection Colored Coins Distributed Storage Distributed Computing
Arbitrary Messaging Transparent Mining Multi-signatures Smart Contracts
Instant Transactions Blockchain Shrinking Hardware Wallets
Two-phase Payments Advanced DDoS Protection
Voting System
Reputation System
Bitcoin Features
Running Prepared
Multi-signatures Colored Coins
Hardware Wallets

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Why NXT Ought to be Taken Seriously

Satoshi’s discovery is often thought of as simply money over IP but the scope of his discovery is much wider than this – his legacy much greater. Sometimes, it is important in a network to be able to achieve consensus. Other times, it is important in a network to be able to avoid centralized points of weakness. Individually these problems are solved relatively easily. However computer scientists found it more challenging to describe a method for allowing both of these qualities to be realized simultaneously. This is Satoshi’s true legacy, not money over IP specifically, but how to achieve a consensus in a decentralized network. The difficulty of the problem results from the fact that in a decentralized network no two distinct perspectives can ever be expected to witness the same picture of the state of the network. It’s not even a question of right versus wrong, they are both correct, but different. Satoshi’s solution was to use something called a block-chain to house a consensus record, and proof of work as a fair means of determining whose perspective the official record should be a reflection of.

 

Nxt offers a slightly different solution to this same problem. It, too, uses a blockchain to house the consensus record. However, it solves the problem of determining whose perspective the consensus record should be a reflection of differently. NXT uses proof of stake rather than proof of work. In a proof of stake scheme, one gains the right to author a block by demonstrating their administrative capacity over a particular quantity of a digital asset. However unlike its predecessor Peercoin, NXT introduces the idea of randomness in the selection of which stakeholder has the right to author a block. Think of it like the number of coins you administer being analogous to the MHash/second that you would have in a proof of work crypto. Or, another way to think of it, as each unit of currency being an entry into a lottery where the winning lottery ticket is selected at random.

 

The first step to understanding the advantages of proof of stake is to understand the shortcomings of proof of work. I will address two such shortcomings: First, because mining is expensive and because there is no such thing as a free lunch, this cost must be borne by someone. At present, with Bitcoin, this cost is borne mostly by the savers in the form of loss of purchasing power due to inflation. Later, when the block subsidy is diminished/eliminated, this cost will shift towards those who most actively use the currency in transactions; Second, hashing efficiency scales logarithmically with investment in infrastructure. In lay-terms, that means that a person who has invested 10billion into mining infrastructure will be able to produce significantly more than 10 times as much hashing power as someone who has invested 1 billion. This creates mounting pressure towards centralization relative to the level of capitalization of the proof of work coin market.

 

Peercoin currently is the most noteworthy implementation of POS, and all the other POS schemes on the market, as I understand it, are forks of Peercoin. Peercoin is an innovative step in the right direction. It solved the above mentioned problems, but only at the cost of introducing new ones. Peercoin’s security model relies on the assumption that large stake holders will remain honest, out of fear that the loss of value of their stake would outweigh the advantages of a successful double-spend. The main problem with this assumption is that different people rarely have the same idea about what constitutes self-interest. Imagine, for example, a situation where a large stake holder in Peercoin is an even larger stake holder in alternative monetary schemes and stands to benefit from the Peercoin capital exodus by being on the receiving end of that exodus in his other investments.

 

The natural solution to the problems outlined in Peercoin is to introduce randomness into the selection of which stakeholder wins the right to author a block. It sounds simple, but in reality, it is not as simple as it sounds. The system cannot simply hash the previous block and use the digest as the parameter for selecting the winner (the right to author the next block) because the block authors would simply contrive transactions that will cause the block to digest into a hash that gives the right to author the next block. In-fact, you cannot base it off of a digest of any part of the block that the author has free reign over, or we run into the same problem. So here is the trillion dollar question: How do you arrive at a series of unpredictable but consensus verifiable number without proof of work? This is NXT’s key innovation.

 

In abstract, it works by having the author of the next block be selected by comparing the author’s public key containing his stake to the public key of the author of the previous block. The quantity of his stake multiplies the threshold for applicable submission. In-order to prevent an attacker from simply creating a public key that will win, and loading that public key with his stake, NXT introduces the idea of effective stake. Only stake that has remained stationary for 1440 blocks (24 hours) has the right to author a block. Since forgers regularly drop on and off of the network at various times for various reasons, it will never be possible to predict who will mint each and every one of the next 1440 blocks. This stops the attacker from creating a public key that will win the 1441st block and loading that public key with his stake. In-order to prevent an attacker from creating a “trap”, where if he manages to become lucky enough to author one block in the future and he has prepared a set of funded addresses which would “catch” the subsequent blocks, NXT does not only rely on the previous block authors signature alone, but instead builds an entirely separate “block chain” which is the result of hashing every public key ever used to author a block.

 

The more astute among my readers may notice a bit of a chicken and egg problem here. How does the network protect itself against an attacker on block two if there is no way for that author to have had his stake remain stationary for 1440 blocks? The answer is that the dev(s) never really did describe a proper solution to this problem, as an attacker could have exploited the chain on block 2, but they didn’t. And now, at this point, it’s a bit like a ball rolling down a hill, it has gained the necessary momentum to sustain itself indefinitely.

 

In addition to solving some of the previously mentioned problems with proof of work, NXT also offers a number of potential advantages. While it is not possible to predict who will author the block 1440 blocks from now, it may be possible to predict, one, two or maybe even ten blocks into the future. What this means is that, if a merchant trusts the next six forgers in line to author the next 6 blocks (perhaps because they have a long standing reputation for honesty), then it is equivalent to the merchant as if this transaction has 6 instantaneous confirmations. What we are talking about here is the possibility of a decentralized crypto with instant transactions. No more waiting around for confirmations, as with Bitcoin. This is the first Holy Grail of NXT. Furthermore, you could, in theory, rather than broadcasting your transactions to the whole network, send them directly to the next block author. He could, in theory, clear your transactions with other market actors before recording them in the blockchain. So as an example, imagine that a shopper is paying Walmart 10 dollars and Walmart is paying a contractor 10 dollars during the same 1 minute period. Instead of recording both transactions in the blockchain, the block author could simply record it as the shopper having paid the contractor directly. If that contractor wants to then spend 10 dollars on a new pair of shoes in the same block, then the Walmart shopper’s 10 dollars could be paid directly to the shoe salesman. This could potentially allow NXT to match or even surpass Visa’s transaction load. This is the second Holy Grail.

 

Thus far, it surely seems as if I have been deifying NXT, so in the interest of fairness I should take this opportunity to separate some of the real innovations from conjectural innovations, the real innovations from the non-innovations that are sometimes touted as innovations, and point out some of the risks involved in investing in this technology.

 

First, and most importantly, is NXT a pre-mined scam coin? Well, maybe, as of the time of writing we have not really seen compilable open source code. If you are concerned about this then I advise waiting for open source code that you can compile and run yourself before getting involved. However, if at the time of reading this there is compilable open source code then we can safely say, no, it is not a scam coin. One of the requisite characteristics of a scam is an element of secrecy. Such an accusation would be false here, for the same reason that Bitcoin bugs have used to rebut the same criticism against Bitcoin a thousand times. Open source software cannot be a scam because scams require secrecy and there are no secrets in open source code.

 

Perhaps the question that ought to be asked instead is whether the implementation of this amazing idea is flawed. I wish that I could provide a simple “no” here but, like in the last paragraph, the answer is more complicated than that. Aside from the obvious caveat that there could be as of yet uncovered critical mistakes in the software, there are stakeholders out there who presently own more than 50 million out of the total 1billion coins issued. This means there are multiple individuals who individually own more than 5% of the total stake each. To put it bluntly, this is unacceptable. This is not the level of decentralization we have come to expect from a decentralized crypto. For NXT to be successful this must change. Fortunately, there is one good reason to expect that it will change. That reason is that, even for the dragons themselves who sit atop vast hordes, it is not in their own interest to horde their own NXT. With a little luck these individuals will realize that if they continue to horde their NXT, then someone else will simply copy the code/idea and release “Even-NXT-er” with fairer distribution, and they will be left out in the cold, lords of the world’s metaphorically largest pile of worthless abstraction. To any dragons who may be reading this, I want ask you rhetorical question that I hope will take very seriously. Is it better to be 1/20th owner of all the shit in the world, or 1/100th owner of all the gold? If these early investors wish to avoid killing their golden goose then they must strike the proper balance between the reward that they rightfully deserve, for the risk they have legitimately taken, and the necessity for a certain level of decentralization in a decentralized network. For me, the amount that would make me personally feel comfortable would be no single individual owning more than 1% of the total currency supply. That would amount to a max of 10 million coins per single individual. Furthermore this is not a problem that can be put off for later, if it is not addressed soon, then there will be no later for NXT.

 

Often NXT is touted as the future of decentralized exchange. This very may well be true, in fact I think it probably is true. However the ability to implement this feature is not in any way unique to this platform. Any other crypto-currency could be used for exactly the same thing. All we are talking about here is a promise from the developers to include in their platform, a feature, that any other crypto-coin developer could have also promised to include in his had he chosen to make such a promise. Decentralized Alias System, Decentralized DNS, Arbitrary Messaging, Distributed Storage, Voting System, Reputation System and Smart Contracts are all further examples that fall into this same category.

 

I am not prepared to give investment advice; however, I am prepared to tell you that if you ignore the ideas behind NXT, then you do so at risk. Even if this particular implementation of these great ideas fails, the ideas themselves are here to stay, and they are going to fundamentally alter the crypto-currency landscape forever.