• Home
  • About RSIS
    • Introduction
    • Building the Foundations
    • Welcome Message
    • Board of Governors
    • Staff Profiles
      • Executive Deputy Chairman’s Office
      • Dean’s Office
      • Management
      • Distinguished Fellows
      • Faculty and Research
      • Associate Research Fellows, Senior Analysts and Research Analysts
      • Visiting Fellows
      • Adjunct Fellows
      • Administrative Staff
    • Honours and Awards for RSIS Staff and Students
    • RSIS Endowment Fund
    • Endowed Professorships
    • Career Opportunities
    • Getting to RSIS
  • Research
    • Research Centres
      • Centre for Multilateralism Studies (CMS)
      • Centre for Non-Traditional Security Studies (NTS Centre)
      • Centre of Excellence for National Security (CENS)
      • Institute of Defence and Strategic Studies (IDSS)
      • International Centre for Political Violence and Terrorism Research (ICPVTR)
    • Research Programmes
      • National Security Studies Programme (NSSP)
      • Studies in Inter-Religious Relations in Plural Societies (SRP) Programme
    • [email protected] Newsletter
    • Other Research
      • Future Issues And Technology (FIT)
      • Science and Technology Studies Programme (STSP) (2017-2020)
  • Graduate Education
    • Graduate Programmes Office
    • Overview
    • MSc (Asian Studies)
    • MSc (International Political Economy)
    • MSc (International Relations)
    • MSc (Strategic Studies)
    • NTU-Warwick Double Masters Programme
    • PhD Programme
    • Exchange Partners and Programmes
    • How to Apply
    • Financial Assistance
    • Meet the Admissions Team: Information Sessions and other events
    • RSIS Alumni
  • Alumni & Networks
    • Alumni
    • Asia-Pacific Programme for Senior Military Officers (APPSMO)
    • Asia-Pacific Programme for Senior National Security Officers (APPSNO)
    • SRP Executive Programme
    • Terrorism Analyst Training Course (TATC)
  • Publications
    • RSIS Publications
      • Annual Reviews
      • Books
      • Bulletins and Newsletters
      • Commentaries
      • Counter Terrorist Trends and Analyses
      • Commemorative / Event Reports
      • IDSS Paper
      • Interreligious Relations
      • Monographs
      • NTS Insight
      • Policy Reports
      • Working Papers
      • RSIS Publications for the Year
    • Glossary of Abbreviations
    • External Publications
      • Authored Books
      • Journal Articles
      • Edited Books
      • Chapters in Edited Books
      • Policy Reports
      • Working Papers
      • Op-Eds
      • External Publications for the Year
    • Policy-relevant Articles Given RSIS Award
  • Media
    • Great Powers
    • Sustainable Security
    • Other Resource Pages
    • Media Highlights
    • News Releases
    • Speeches
    • Vidcast Channel
    • Audio/Video Forums
  • Events
  • Giving
  • Contact Us
Facebook
Twitter
YouTube
RSISVideoCast RSISVideoCast rsis.sg
Linkedin
instagram instagram rsis.sg
RSS
  • Home
  • About RSIS
      • Introduction
      • Building the Foundations
      • Welcome Message
      • Board of Governors
      • Staff Profiles
        • Executive Deputy Chairman’s Office
        • Dean’s Office
        • Management
        • Distinguished Fellows
        • Faculty and Research
        • Associate Research Fellows, Senior Analysts and Research Analysts
        • Visiting Fellows
        • Adjunct Fellows
        • Administrative Staff
      • Honours and Awards for RSIS Staff and Students
      • RSIS Endowment Fund
      • Endowed Professorships
      • Career Opportunities
      • Getting to RSIS
  • Research
      • Research Centres
        • Centre for Multilateralism Studies (CMS)
        • Centre for Non-Traditional Security Studies (NTS Centre)
        • Centre of Excellence for National Security (CENS)
        • Institute of Defence and Strategic Studies (IDSS)
        • International Centre for Political Violence and Terrorism Research (ICPVTR)
      • Research Programmes
        • National Security Studies Programme (NSSP)
        • Studies in Inter-Religious Relations in Plural Societies (SRP) Programme
      • [email protected] Newsletter
      • Other Research
        • Future Issues And Technology (FIT)
        • Science and Technology Studies Programme (STSP) (2017-2020)
  • Graduate Education
      • Graduate Programmes Office
      • Overview
      • MSc (Asian Studies)
      • MSc (International Political Economy)
      • MSc (International Relations)
      • MSc (Strategic Studies)
      • NTU-Warwick Double Masters Programme
      • PhD Programme
      • Exchange Partners and Programmes
      • How to Apply
      • Financial Assistance
      • Meet the Admissions Team: Information Sessions and other events
      • RSIS Alumni
  • Alumni & Networks
      • Alumni
      • Asia-Pacific Programme for Senior Military Officers (APPSMO)
      • Asia-Pacific Programme for Senior National Security Officers (APPSNO)
      • SRP Executive Programme
      • Terrorism Analyst Training Course (TATC)
  • Publications
      • RSIS Publications
        • Annual Reviews
        • Books
        • Bulletins and Newsletters
        • Commentaries
        • Counter Terrorist Trends and Analyses
        • Commemorative / Event Reports
        • IDSS Paper
        • Interreligious Relations
        • Monographs
        • NTS Insight
        • Policy Reports
        • Working Papers
        • RSIS Publications for the Year
      • Glossary of Abbreviations
      • External Publications
        • Authored Books
        • Journal Articles
        • Edited Books
        • Chapters in Edited Books
        • Policy Reports
        • Working Papers
        • Op-Eds
        • External Publications for the Year
      • Policy-relevant Articles Given RSIS Award
  • Media
      • Great Powers
      • Sustainable Security
      • Other Resource Pages
      • Media Highlights
      • News Releases
      • Speeches
      • Vidcast Channel
      • Audio/Video Forums
  • Events
  • Giving
  • Contact Us
  • instagram instagram rsis.sg
Connect

Getting to RSIS

Map

Address

Nanyang Technological University
Block S4, Level B3,
50 Nanyang Avenue,
Singapore 639798

View location on Google maps Click here for directions to RSIS

Get in Touch

    Connect with Us

      rsis.ntu
      rsis_ntu
      rsisntu
    RSISVideoCast RSISVideoCast rsisvideocast
      school/rsis-ntu
    instagram instagram rsis.sg
      RSS
    Subscribe to RSIS Publications
    Subscribe to RSIS Events

    RSIS Intranet

    S. Rajaratnam School of International Studies Think Tank and Graduate School Ponder The Improbable Since 1966
    Nanyang Technological University Nanyang Technological University

    Skip to content

     
    • RSIS
    • Publication
    • RSIS Publications
    • Altcoins: Hidden Gems or Outright Scams?
    • Annual Reviews
    • Books
    • Bulletins and Newsletters
    • Commentaries
    • Counter Terrorist Trends and Analyses
    • Commemorative / Event Reports
    • IDSS Paper
    • Interreligious Relations
    • Monographs
    • NTS Insight
    • Policy Reports
    • Working Papers
    • RSIS Publications for the Year

    CO21115 | Altcoins: Hidden Gems or Outright Scams?
    Tan Teck Boon

    28 July 2021

    download pdf
    RSIS Commentary is a platform to provide timely and, where appropriate, policy-relevant commentary and analysis of topical and contemporary issues. The authors’ views are their own and do not represent the official position of the S. Rajaratnam School of International Studies (RSIS), NTU. These commentaries may be reproduced with prior permission from RSIS and due credit to the author(s) and RSIS. Please email to Editor RSIS Commentary at [email protected].

    SYNOPSIS

    Altcoins have seen spectacular growth until recently. They are unsuitable for most people due to their volatile and cryptic nature. Because there is room for fraud, it is important to raise public awareness of the risks involved.

    Source: Altcoins – Alternative Cryptocurrencies, Forextime.com, flickr, CC BY 2.0

    COMMENTARY

    THE COVID-19 pandemic has fuelled a speculative frenzy in altcoins. Quite simply, an altcoin is any cryptocurrency that is not Bitcoin. But now that the sizable market for these Bitcoin “alternatives” has tanked, one cannot help but wonder if investors have been pouring big bucks into crackpot schemes all along.

    If there is fraud, then there is room for policy intervention. Unfortunately, it is impossible to take a deep dive into every altcoin here. But by looking at a select few, it is possible to tell what is happening in that fascinating space.

    Ether: Successor to Bitcoin?

    Ether is the digital currency of the Ethereum blockchain network, an ecosystem of app developers and users not unlike Apple’s App Store. With a market capitalisation of about US$260 billion, the number two cryptocurrency was snapped up by investors expecting it to become the future currency of an idealised financial system in which individuals and businesses transact directly, cutting out intermediaries like banks that take a cut from every financial transaction.

    There are reasons why Ether may dethrone Bitcoin to become the world’s most-wanted cryptocurrency. Firstly, Ether uses only a fraction of the energy needed by Bitcoin thanks to a more energy-efficient mining system. In a world increasingly concerned about sustainability, Ether certainly has a more compelling story.

    Ether also appeals to investors because it fixes Bitcoin’s limited smart contract capabilities and these digital agreements are key to the financial disintermediation that cryptocurrencies will supposedly bring about.

    Obviously, Ether’s future hinges on the continued growth of Ethereum and no one knows if the blockchain network will ever become a $2 trillion behemoth like Apple.

    But some speculators did jump ahead betting that the altcoin would head to the moon – only to get burned when it plunged by more than 50 percent recently. So even if Ether is a gem, its extreme volatility makes it inappropriate for investors seeking stable and predictable returns over time.

    Monero: The ‘Dark’ Coin

    While Ether fixes Bitcoin’s limited smart contract capabilities, Monero targets Bitcoin’s deficient privacy features. There is a common misconception that Bitcoin transactions are private. They are not since Bitcoin transactions are logged in an open ledger. Monero, in comparison, blocks any efforts to uncover specifics of its transactions through the use of strong encryption.

    Since its launch in 2014, Monero has built a significant following among people who consider the privacy or “dark” coin the true cryptocurrency. Thanks to its ultra-strong privacy features, Monero has long been used by criminals, hackers and fringe characters.

    With a market capitalisation of about $4 billion, it is the largest privacy coin out there right now and true to its enigmatic nature, its creator(s) is a mystery while its army of developers has remained largely anonymous.

    Given its popularity among privacy enthusiasts, is Monero a gem? There are several things to look for in an investment. At risk of over-simplifying, it must be a super high-quality business that is easy to understand. Besides great products, it should have excellent management. These essential qualities are clearly missing in Monero.

    It is particularly cryptic for the average person to understand. The altcoin is great, albeit for illegal activities, and good luck figuring out the key players running it. As more government crackdown looms, the case for Monero is even weaker.

    OneCoin: A Blockchain Ponzi Scheme

    No discussion of altcoins would be complete without bringing up OneCoin, a crypto scam that duped millions of investors worldwide of more than US$4 billion between 2014 and 2017. Quite simply, it exploited investors’ greed and ignorance by promising them a chance to get rich fast with cryptocurrencies. And what better way to pitch the scam to them than by getting their friends and relatives to do the deed through a multi-level marketing scheme.

    First of all, investors were told to buy a training package containing digital tokens used to mine OneCoin. Those who did must in turn sell the package to others. Commission from each purchase was then funnelled up to the ringleaders.

    In reality, there was no mining or blockchain. OneCoin was simply an epic Ponzi scheme that made its handful of Eastern European fraudsters incredibly rich at the expense of everyone else.

    The scam took off because it preyed on investors’ fear of missing out on the next big cryptocurrency. Some early Bitcoin investors did strike gold and OneCoin’s appeal was that it supposedly gave investors a second chance to get rich. The ringleaders also used the cryptic nature of cryptocurrencies to their advantage. They knew perfectly well that investors would not figure out that it was all a scam until too late.

    Altcoins ─ Unregulated, Poorly Understood

    Altcoins are largely unregulated and poorly understood. Hopefully, the examples above have shown that even the hottest ones are fraught with significant risks. Even if some of them turn out to be gems one day, fortunes will be blown before they are found given how messy and inchoate the space is. Then there are the scams to contend with and one can be sure that OneCoin is not the last.

    Meanwhile, regulators are hamstrung because the organisations behind these cryptocurrencies often operate outside their jurisdictions. Going after the scammers is also easier said than done when you do not even know who they are.

    Ultimately, it is up to the investor to do the necessary due diligence. Unfortunately, there is so much conflicting and biased information out there that the man on the street will be hard-pressed to separate the wheat from the chaff.

    It is safe to say then that there is a need to raise the public’s understanding of altcoins with high-quality accessible information. This will level the playing field by making it harder for those in the know to take advantage of others. It will also help ordinary folks make better decisions with their hard-earned money.

    So on the policy front, raising public awareness should go hand in hand with tighter regulations. A caveat emptor attitude is just not good enough because an ounce of prevention here is worth more than a pound of cure; in the case of OneCoin, it could literally be worth billions.

    About the Author

    Tan Teck Boon is Research Fellow in the Office of the Executive Deputy Chairman, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.

    Categories: Commentaries / Country and Region Studies / Cybersecurity, Biosecurity and Nuclear Safety / International Political Economy / International Politics and Security / Non-Traditional Security / East Asia and Asia Pacific / Global / South Asia / Southeast Asia and ASEAN

    Last updated on 02/08/2021

    comments powered by Disqus
    RSIS Commentary is a platform to provide timely and, where appropriate, policy-relevant commentary and analysis of topical and contemporary issues. The authors’ views are their own and do not represent the official position of the S. Rajaratnam School of International Studies (RSIS), NTU. These commentaries may be reproduced with prior permission from RSIS and due credit to the author(s) and RSIS. Please email to Editor RSIS Commentary at [email protected].

    SYNOPSIS

    Altcoins have seen spectacular growth until recently. They are unsuitable for most people due to their volatile and cryptic nature. Because there is room for fraud, it is important to raise public awareness of the risks involved.

    Source: Altcoins – Alternative Cryptocurrencies, Forextime.com, flickr, CC BY 2.0

    COMMENTARY

    THE COVID-19 pandemic has fuelled a speculative frenzy in altcoins. Quite simply, an altcoin is any cryptocurrency that is not Bitcoin. But now that the sizable market for these Bitcoin “alternatives” has tanked, one cannot help but wonder if investors have been pouring big bucks into crackpot schemes all along.

    If there is fraud, then there is room for policy intervention. Unfortunately, it is impossible to take a deep dive into every altcoin here. But by looking at a select few, it is possible to tell what is happening in that fascinating space.

    Ether: Successor to Bitcoin?

    Ether is the digital currency of the Ethereum blockchain network, an ecosystem of app developers and users not unlike Apple’s App Store. With a market capitalisation of about US$260 billion, the number two cryptocurrency was snapped up by investors expecting it to become the future currency of an idealised financial system in which individuals and businesses transact directly, cutting out intermediaries like banks that take a cut from every financial transaction.

    There are reasons why Ether may dethrone Bitcoin to become the world’s most-wanted cryptocurrency. Firstly, Ether uses only a fraction of the energy needed by Bitcoin thanks to a more energy-efficient mining system. In a world increasingly concerned about sustainability, Ether certainly has a more compelling story.

    Ether also appeals to investors because it fixes Bitcoin’s limited smart contract capabilities and these digital agreements are key to the financial disintermediation that cryptocurrencies will supposedly bring about.

    Obviously, Ether’s future hinges on the continued growth of Ethereum and no one knows if the blockchain network will ever become a $2 trillion behemoth like Apple.

    But some speculators did jump ahead betting that the altcoin would head to the moon – only to get burned when it plunged by more than 50 percent recently. So even if Ether is a gem, its extreme volatility makes it inappropriate for investors seeking stable and predictable returns over time.

    Monero: The ‘Dark’ Coin

    While Ether fixes Bitcoin’s limited smart contract capabilities, Monero targets Bitcoin’s deficient privacy features. There is a common misconception that Bitcoin transactions are private. They are not since Bitcoin transactions are logged in an open ledger. Monero, in comparison, blocks any efforts to uncover specifics of its transactions through the use of strong encryption.

    Since its launch in 2014, Monero has built a significant following among people who consider the privacy or “dark” coin the true cryptocurrency. Thanks to its ultra-strong privacy features, Monero has long been used by criminals, hackers and fringe characters.

    With a market capitalisation of about $4 billion, it is the largest privacy coin out there right now and true to its enigmatic nature, its creator(s) is a mystery while its army of developers has remained largely anonymous.

    Given its popularity among privacy enthusiasts, is Monero a gem? There are several things to look for in an investment. At risk of over-simplifying, it must be a super high-quality business that is easy to understand. Besides great products, it should have excellent management. These essential qualities are clearly missing in Monero.

    It is particularly cryptic for the average person to understand. The altcoin is great, albeit for illegal activities, and good luck figuring out the key players running it. As more government crackdown looms, the case for Monero is even weaker.

    OneCoin: A Blockchain Ponzi Scheme

    No discussion of altcoins would be complete without bringing up OneCoin, a crypto scam that duped millions of investors worldwide of more than US$4 billion between 2014 and 2017. Quite simply, it exploited investors’ greed and ignorance by promising them a chance to get rich fast with cryptocurrencies. And what better way to pitch the scam to them than by getting their friends and relatives to do the deed through a multi-level marketing scheme.

    First of all, investors were told to buy a training package containing digital tokens used to mine OneCoin. Those who did must in turn sell the package to others. Commission from each purchase was then funnelled up to the ringleaders.

    In reality, there was no mining or blockchain. OneCoin was simply an epic Ponzi scheme that made its handful of Eastern European fraudsters incredibly rich at the expense of everyone else.

    The scam took off because it preyed on investors’ fear of missing out on the next big cryptocurrency. Some early Bitcoin investors did strike gold and OneCoin’s appeal was that it supposedly gave investors a second chance to get rich. The ringleaders also used the cryptic nature of cryptocurrencies to their advantage. They knew perfectly well that investors would not figure out that it was all a scam until too late.

    Altcoins ─ Unregulated, Poorly Understood

    Altcoins are largely unregulated and poorly understood. Hopefully, the examples above have shown that even the hottest ones are fraught with significant risks. Even if some of them turn out to be gems one day, fortunes will be blown before they are found given how messy and inchoate the space is. Then there are the scams to contend with and one can be sure that OneCoin is not the last.

    Meanwhile, regulators are hamstrung because the organisations behind these cryptocurrencies often operate outside their jurisdictions. Going after the scammers is also easier said than done when you do not even know who they are.

    Ultimately, it is up to the investor to do the necessary due diligence. Unfortunately, there is so much conflicting and biased information out there that the man on the street will be hard-pressed to separate the wheat from the chaff.

    It is safe to say then that there is a need to raise the public’s understanding of altcoins with high-quality accessible information. This will level the playing field by making it harder for those in the know to take advantage of others. It will also help ordinary folks make better decisions with their hard-earned money.

    So on the policy front, raising public awareness should go hand in hand with tighter regulations. A caveat emptor attitude is just not good enough because an ounce of prevention here is worth more than a pound of cure; in the case of OneCoin, it could literally be worth billions.

    About the Author

    Tan Teck Boon is Research Fellow in the Office of the Executive Deputy Chairman, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.

    Categories: Commentaries / Country and Region Studies / Cybersecurity, Biosecurity and Nuclear Safety / International Political Economy / International Politics and Security / Non-Traditional Security

    Last updated on 02/08/2021

    Back to top

    Terms of Use | Privacy Statement
    Copyright © S. Rajaratnam School of International Studies. All rights reserved.
    This site uses cookies to offer you a better browsing experience. By continuing, you are agreeing to the use of cookies on your device as described in our privacy policy. Learn more
    OK
    Latest Book
    Altcoins: Hidden Gems or Outright Scams?

    SYNOPSIS

    Altcoins have seen spectacular growth until recently. They are unsuitable for most people due to their volatile and cryptic nature. Because there i ...
    more info