OK since I got asked this twice today, and multiple times the last few weeks, here is Sarah's Saturday Night guide to telling a bad cryptocurrency whitepaper from a maybe-OK one, with the help of real, awful papers.
Ready? Let's begin.
Ready? Let's begin.
First up is my favorite section from the IOTA whitepaper. Economic models matter, if the security or operational effectiveness of the system relies on all nodes acting in the same way, it's not a system that is going to working practice. (The real world is a scary place)
Next up is Telegram, which breaks the rule I like to call "mo' blockchains, mo' problems"
Maintaining a single blockchain is an economic nightmare, any system promising to maintain more than one in any kind of efficient fashion is scamming you.
Maintaining a single blockchain is an economic nightmare, any system promising to maintain more than one in any kind of efficient fashion is scamming you.
(This goes for applications too...a blockchain of blockchains is a ridiculous concept)
We are going to stick with Telegram for my next rule which is if someone promises you instant or infinite of anything they are lying. Consensus takes energy and time.
Also if any team claims to have invented more than 2 new things to get their system to work I'd tread carefully.
Also if any team claims to have invented more than 2 new things to get their system to work I'd tread carefully.
Still with Telegram because they wrote a 132 page whitepaper & with only 17 references.
Everything is built on everything else, if there is a lack of references to exiting research the team is either under-researched or making shit up.
Everything is built on everything else, if there is a lack of references to exiting research the team is either under-researched or making shit up.
No whitepaper snippet, just some good advice: Blockchains multiply problems, and sometimes that's OK, but most of the time if the team have no idea how to manage community, consolidation of trust or hardforks then everyone is going to have a rough time.
The "We haven't really worked out how to do this bit yet"...the "a miracle happens here" of blockchain papers.
Shout-out to "they use a DAG construction", DAG based cryptocurrencies are economically not viable without centralization, just say no.
This stuff:
Oh yeah and all this stuff too:
Oh fuck I almost forgot about CloudCoin.
"it's quantum resistant because it doesn't depend on encryption"....is also something to look out for.
"it's quantum resistant because it doesn't depend on encryption"....is also something to look out for.
Basically any whitepaper that uses the word "oracle" in the same breadth as "decentralized" and "privacy" is awful....
...or just "oracle" really.
...or just "oracle" really.
This bit from the Nano whitepaper is a great example of completely failing to account for economic realities - describing their PoW as an "anti-spam" tool and then almost in the next breath declaring that their protocol is vulnerable to transaction flooding/spam/dos attacks.
Oh if they're designing a consensus or trust protocol and don't say the word "sybil" it's probably a scam.
Generally: if someone offers you a cryptocurrency with no mining, and fast transfers, you are being scammed.
Such a system is economically infeasible without trusted nodes, in which case what is even the point of a whole a distributed system, just be a bank.
Such a system is economically infeasible without trusted nodes, in which case what is even the point of a whole a distributed system, just be a bank.
There is like a tiny Proof-of-Stake exception to that rule, but it's hardly worth mentioning, and really difficult to do without trust consolidation.
If this is how they explain Tor it's probably a bad paper.
(Generally if they mention Tor at all tbh,you can't just create an anonymous coin by piping stuff over Tor)
(Generally if they mention Tor at all tbh,you can't just create an anonymous coin by piping stuff over Tor)
That last one was from Verge, who also had a ridiculous section on using multiple hash algorithms for PoW, which is also a giant red flag of a team who have not thought through their economic model.
Ok so red flags:
* Lack of economic security model .
* Weird behavioral assumptions for system actors.
* Multiple Blockchains.
* DAG construction.
* *we haven't worked out this bit yet*.
* Instant transactions / Infinite Scaling.
* "Anonymity" achieved only through Tor.
* Lack of economic security model .
* Weird behavioral assumptions for system actors.
* Multiple Blockchains.
* DAG construction.
* *we haven't worked out this bit yet*.
* Instant transactions / Infinite Scaling.
* "Anonymity" achieved only through Tor.
If a white paper has none of those, it's probably still a terrible whitepaper but it *might* have merit. Probably not. This space is a hellscape.
