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Bitcoin (BTC) Clones Becoming History, Metadoro’s Marchena Says

Thu, 04/06/2023 - 13:32
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Iván Marchena, Head of Analytical Department in trading platform Metadoro, shares his views on future of anti-scam strategies in crypto
Bitcoin (BTC) Clones Becoming History, Metadoro’s Marchena Says
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Since cryptocurrencies began to be popular numerous projects started to emerge in an attempt to replicate the success of the origins. The first cryptocurrency, Bitcoin, remains the most popular digital currency and is vulnerable to forging as it has its weak points. Even the second most popular cryptocurrency, Ethereum, created by Vitalik Buterin, merged to avoid these weaknesses and to pioneer new technology perspectives.

Early Bitcoin (BTC) forks attempted to replicate its success

At that time, blockchain projects were launched by enthusiasts that were mostly mesmerized enough to improve the technology without seeking hyped profit. Their algorithms were designed to solve particular issues that would change the system and make things better. 

This situation was very quickly changed as many opportunists saw a prospective goldmine in cryptocurrencies. Many clones of Bitcoin emerged, some with real technology efforts behind them and some without any.

The first Bitcoin fork was initiated in 2014 to increase the block size cap and transaction speed. There was a lot of buzz around Bitcoin XT in 2015 when the Guardian wrote that Bitcoin is facing “a civil war.” The new fork was praised as “extremely democratic,” making open-source technology “so much more powerful than technology controlled by any one person or organization.” 

Bitcoin XT was transformed into Bitcoin Cash (BCH) in 2017. The coin lost almost 90% of its peak price at $2,950 in late 2017 and plunged to $127 this April.

Then numerous projects that put in more or less efforts to improve bitcoin network capacity, transaction speed, privacy protections, and other issues faced by the original were set into motion. The best known are Bitcoin Classic, Bitcoin Unlimited, Bitcoin SV, eCash, and Bitcoin Gold.

New cryptos, new scams, new regulation

However, there were some other projects with no technology behind them, at least without any transparent operational blockchain. OneCoin emerged from almost nowhere in 2015. Igor Alberts from Amsterdam and Ruja Ignatova from Bulgaria were pushing the product up. Igor, who became mesmerized by it, was making 2 million Euro a month on this project in 2017 while Ruja invested heavily in the project. “In two years, nobody will speak about Bitcoin anymore,” Ignatova said while charming the audience at Webley Arena in London in the middle of 2016. 

But all this was a massive scam as the project had no blockchain behind it. The project stalled in October 2017 when it was planned to launch an exchange of OneCoin into cash. Mesmerising “Cryptoqueen” suddenly disappeared. The project was worth about as much as junk and Ruja was never found as he traces were lost in Athens. 

There have been many scam projects in the crypto market since then which undermine the trust in cryptos themselves. But a new era of regulatory grip has haunted many crypto projects. Most of them decided to operate in new regulatory environments, though it is not clear how the regulations will be implemented in different jurisdictions.

A recent buzzing story came out with Tornado Cash cryptocurrency tumbler, which runs in Ethereum Virtual Machine compatible networks. The service mixes potentially identifiable or "tainted" cryptocurrency funds with others, in order to blur the trail back to the fund's original source. The crypto mixer was sanctioned by the U.S. treasury on allegations that it supports the North Korean regime by allowing money laundering. Many DeFi Apps have started to ban users that had had even a minor encounter with crypto funds that went through Tornado Cash cryptomixer and appeared in user wallets. 

That raises many questions as crypto service projects are seen to sacrifice user privacy while cooperating with regulators in order to save their business. Established DeFi protocols seem to be taking a cautious approach to compliance by preventively banning addresses that have not only interacted with Tornado Cash, but also by tracking coins that passed through this mixer. It is clear now that projects that were established in recent years are less prone to protect its users’ private data and transactions privacy. 

So, any projects trying to mimic the most well-known cryptocurrencies are likely to be established in order to get easy money and disappear, or undoubtedly be inclined to cooperate with regulators dumping the idea of an independent financial industry free from any centralised regulation.

Author: Iván Marchena, The Head of Analytical Department Metadoro

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