{"id":14861,"date":"2017-10-26T09:00:17","date_gmt":"2017-10-26T13:00:17","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=14861"},"modified":"2020-09-04T03:29:01","modified_gmt":"2020-09-04T07:29:01","slug":"mining-ico-cryptocurrency","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/mining-ico-cryptocurrency\/","title":{"rendered":"Mining and ICO cryptocurrency"},"content":{"rendered":"

Mining and ICO cryptocurrency<\/strong><\/h2>\n

There are two main cryptocurrency mining methods, Proof of Work (PoW) and Proof of Stake (PoS), which are relevant for defining the operation of an ICO. Proof of Work mining model is used in the Bitcoin, Litecoin or Ethereum protocol to mention just a few examples. Although in the case of Ethereum, its developers are considering changing to Proof of Stake in the future.<\/span><\/p>\n

The Proof of Stake is a model in which the owners of cryptocurrency are progressively rewarded – in a lottery among the holders of cryptocurrency – with new tokens of the same type. In this model, holders of more units of account or currencies are more likely to increase their holdings with new coins.<\/span><\/p>\n

The Proof of Stake model, unlike the Proof of Work model, allows for a distribution of cryptones or tokens based exclusively on the protocol developers’ priorities, which has allowed the creation of ICOs with a fraudulent or unworthy tone. The advantage of the PoS system is that it does not consume energy to secure the system unlike the Labor Test model, but unlike the PoW, the distribution of the coins can be imbalanced.<\/span><\/p>\n

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The prelude of cryptones in the ICO<\/b><\/h2>\n

In the Proof of Stake model there have been many cases in which the pre-order has been used, which simply means that the protocol developers distribute a fixed amount of cryptones to an initial small group of investors. Later – already open distribution to the general public – they try to inflate the prices of this new cryptocurrency in order, to sell them with great benefits to the new investors. Of course, the promotion or marketing campaign must be successful and attract new capital.<\/span><\/p>\n

To put it in SEC terms, many of these PoS models can operate like a pump and dump stock deal. The currency creator pumps up the coin with value and transactional volume, sells, and gets out. When the pumpers dump their coins, the volume disappears and the value crashes. <\/span><\/p>\n

Obviously, this does not mean that all models of Proof of Stake are all fraudulent, but it is true that they tend to attract scammers. Unlike the Proof of Work system in which the developer of a protocol can\u2019t control the distribution of the coins, a PoS system can be manipulated. <\/span><\/p>\n