Now we’re going to talk about how to launch an Altcoin, and what happens to Altcoins after their launch, what’s involved with this process. And as we mentioned, an Altcoin generally involves creating a new reference client, typically by forking the existing code base of some existing, more well-established Altcoin or Bitcoin, itself. And the easy part is to add in a bunch of technical features or modified parameters you think will work out well. To get people to join your network, you need to make this reference kind available to them so they can download it. Typically this involves announcing the source code to your reference client on the popular Bitcoin talk forum. That's the easy part. The hard part is actually bootstrapping your Altcoin. The value of an Altcoin comes from this bootstrapping process of people who valuable. In order to get your Altcoin bootstrapped, you need to find people who will be miners. Miners are needed to join the network in order to make it resilient to a tax from other Altcoins. For your Altcoin to have any value, there have to be people who are stakeholders who own units of the currency and consider them valuable or useful to them. An Altcoin needs a development community because Altcoins typically need to be modified to update, to respond to bug fixes, and to add new features, and to increase the scalability and efficiency as your Altcoin becomes popular and more transaction volume occurs on the Altcoin network. It's also important for people to buy and sell Altcoins to provide a liquid market so that people who want Altcoins or want to sell them can find a place to buy them from. Just to illustrate the point about the reference client being the easy part, I wanna highlight a site that doesn't exist at the moment. It was only up for a short while and it might come back. And it's called the Coingen Beta. And it's an automated service that generates modified Altcoin for you as a service. It's a website where you can enter in the name of an Altcoin that you'd like. You can make up a three letter currency code abbreviation. You can upload an icon for whatever mascot or logo you want for your coin. There are check boxes so you can set a variety of different standard parameters. You can adjust some numeric parameters. After you've picked all of these settings, you actually just click Create My Coin and you can download this modified fork of Bitcoin and immediately release it and start running it. Typically you have to pay some fee to the service, like .05 Bitcoins for this. You can do this to very easily create any sort of Altcoin. So there's really no challenge in just creating a reference client, so that clearly doesn't make the difference in whether an Altcoin will be successful or not. Besides a referenced client, there's a lot of technical infrastructure that most altcoins have and Altcoins seem to need, in order to be successful. It's important to have some way of initially getting users to have coins. Some of the infrastructure that supports this in Bitcoin and in many Altcoins are things like tipbots or faucets. Tipbots allow you to give units of your Altcoin to users who don't necessarily aren't necessarily users of your network. You can deposit some of your Altcoin in a tipbot, and it will send this person a message telling them how many Altcoins they have available and how to download the reference client and claim it. This is a way of introducing new users to the system. Another thing is a faucet, like the Bitcoin faucet, that will give out small amounts of your Altcoin units to anyone who shows up a web site, maybe enters an email address. Almost all Altcoins have some kind of distinctive marketing or branding that makes them memorable and easy to recognize. This includes logos or a more comprehensive theme. Other infrastructure that's needed are exchanges or automated ways of exchanging Bitcoin or Altcoins for other kinds of currency or Altcoins. Or exchanging Altcoins for products or services from merchants. Now there are a lot of existing exchanges and payment processors that already support many Altcoins, so this is often a matter of just convincing them to include your new Altcoin in their list of supported cryptocurrencies. Besides the reference client, there are a lot of developer and diagnostic tools, such as testing suites or an entire testing network version of your Altcoin that people can experiment with. And things like a block explorer, that allows people to look at those transactions and the blocks as they arrive. Most Altcoins now have some kind of steering foundation, usually by the organizers or launchers of the Altcoin in the first place. Bitcoins' founder, the Satoshi Nakamoto, just released the source code for the reference client and basically disappeared after that. There's now a Bitcoin foundation that does provide some of the function of encouraging development and lobbying, but it's in no way an official organization. Many Altcoins, it's actually the founders of the Altcoin and the people who launch it who continue to maintain the Altcoin after it's launch, and form some kind of organization to do that. Now a very important thing for an Altcoin, andn a way of getting stakeholders initially, is to provide some way of initially allocating units of the currency to individuals besides just the mining process. So in every mining-based coin, some new coins are created and handed out to miners who solve proof-of-work puzzles and earn mining rewards. But there are other ways of allocating coins as well. One is called a pre-mine which is where the founders of the currency reserve some portion of the money supply for themselves. They get a stash of the units of their own Altcoin. Sometimes they say that these pre-mined amount is intended to be used for further development of the currency, or to pay developers, for example. Another way of allocating units of an Altcoin initially, is through a pre-sale. And this is where the founders, instead of taking these units for themselves, they sell them to individuals for some other currency like Bitcoin or dollars or any other. Now the people who buy those currencies are the initial holders of them. On the other hand the founders get this revenue of ordinary money or Bitcoins, which they can also use to, for example, pay the developers to build the currency. Another interesting way of getting an initial set of stakeholders in your Altcoin is called proof-of-burn. Otherwise this is called unilateral pegging. The way that this works is that, a user who destroys one unit of Bitcoin that they own, earns one unit of the currency in your Altcoin. Now, this is intended to have the effect that anyone who, whoever ends up holding an Altcoin, believes that's at least worth as much as the value of the Bitcoin that they destroyed in order to get it. On the other hand, there's no way to recover the Bitcoin in this case, it's actually destroyed. An alternative is to have Bitcoin ownership grandfathered in. In other words, if you had, say, a current date taken like a snapshot, if at a current date you own one unit of Bitcoin then at the time of this Altcoin launch, you also own one unit of the Altcoin. All right, in this case the original Bitcoin doesn't have to be destroyed. And the final mechanism is called an airdrop, which is if the Altcoin is targeted at some kind of community or group, then an initial allocation of coins is simply distributed to members of this group. Now I wanna tell the story of an Altcoin called Auroracoin, which is fairly controversial. It's been widely considered either the most successful scam or one of the least successful Altcoin launches. Now the theme of Auroracoin is that it's intended to be an Altcoin that supports citizens of the country of Iceland. The idea is to distribute units of Auroracoin to Iceland citizens who would be able to claim some fixed amount of Auroracoins at some point. Now in total, Auroracoin has a total supply of, eventually, 21 million coins, half of which are given out to miners, gradually. And the other half of which, 10.5 million, are set aside and dedicated to be available for Iceland citizens to claim their fixed portion. Now Iceland has only about 330,00 people. And at the time that the airdrop began, the coins were not available for Iceland citizens to claim until several months after the coin was initially launched. Now what happened was, during the time that the coin was launched, and in between that time and when the distribution to Iceland citizens began, the price fluctuated quite wildly. It reached a fairly high peak. But by the time the airdrop occurred, the price had diminished quite a lot. And once the data of the distribution began, the price dropped very rapidly, very low, and has never recovered since. Now what went into this? One explanation is that there's a very high uncertainty about the monetary supply. At the time that the airdrop began, only a very small amount of the currency had been distributed to miners as rewards. And it is very uncertain exactly how many Iceland citizens would actually go through the effort of claiming their Auroracoins. This meant that the relative portion of the monetary supply that any miner would hold would either completely change or not change at all, depending on how many citizens actually claim the coin. Another reason for this uncertainty is that the process of distributing portions of coins fairly to individual citizens is a very difficult process. Presumably this could be done by checking something like their national identity cards. But that would be a very difficult process, even for someone who had planned it very well. The way that this was implemented was simply by the founder of the coin signing over units of the currency by making signed transactions with his public key. There's very little accountability or transparency into this. Which lead to a fairly large suspicion that he was either being inundated with fraudulent requests of attackers trying to claim more than their fair share of Auroracoins, or that the founder himself ran away and simply made transactions that gave himself a large amount of the Auroracoins, and then he could sell them off in an exchange. There is no clear way to know whether this is what happened or not, but the fact of this large amount of suspicion, I think, had a lot to do with the fact that the price very rapidly declined. Many Altcoins are criticized as being pump-and-dump schemes. This is a phrase that refers to something that happens in small value, ordinary company stocks all the time, and it also happens on Altcoins. To conduct a pump-and-dump, you have to pick an Altcoin that you're going to use as your target. This could be an Altcoin that's about to launch, or it can be an existing low value Altcoin that doesn't have a lot of participation, and doesn't have a very high value. Now while the price is so low and while the value is so low, it is easy for an attacker to acquire a large number of these Altcoins. Now after that or around the same time, the attacker would launch a targeted marketing campaign to convince the public that the reason for this acquisition of coins was because a lot of people are interested in the coin. The coin has a lot of grassroot support or it even has some big important technical merit that explains why it would become popular so rapidly. And at the peak of this excitement, as more people in the public try to buy this coin, the attacker would then sell all of his coins once they price has risen high enough. Right, now, once the market and campaign ends, because the attacker has left, and people realize that there weren't actually a large following of grassroot support or the technical merits overstated, the Altcoin's price drops and eventually declines, and users move away. This is profitable for the attacker, but it wastes a lot of cryptocurrency enthusiasts' valuable money. There are many arguments against Altcoins that essentially say Altcoins are a bad idea and harmful to the overall cryptocurrency ecosystem. One of these arguments is that, since Altcoins rely on mining power for their security, having a large number of competing Altcoins with total mining power divided among them means that any one of those Altcoins is relatively weaker against attacks than they would be if, for example, they were all consolidated. A related problem is that there's a dilution of scarcity. One of the reasons why Bitcoin is valuable is because it's perceived as having a fixed limited supply of these 21 million coins. And even if that's true, If it's very easy to create so many other Altcoins that also have their own value, then in a sense it dilutes the scarcity of cryptocurrencies as a whole. Right, and another argument is that Altcoins are very easy targets for these pump-and-dump schemes. And potentially, of the hundreds of Altcoins, most of them can only be used as pump and-dump schemes, or only attract that kind of participation. On the other hand, there are a lot of compelling arguments for Altcoins as well that basically say that Altcoins are essential part of the cryptocurrency ecosystem. For example, you could say that competition between Altcoins leads to better systems overall. The best Altcoin that has the most technical quality and the best features will eventually be the most successful and has the most value. A reason to use an Altcoin rather than simply trying to build new features into Bitcoin, or build up Bitcoin, are that the Bitcoin community is somewhat risk averse to adopting new features. If you have a new feature you want to try out, it's a lot easier to simply implement it in an Altcoin and see how it fares, than to try to convince the Bitcoin community to accept this as a change before it's been tested. In this sense Altcoins are like a research and development a testbed for potentially new Bitcoin features. Another good thing about having a diverse variety of different Altcoins with different technical composition is that if there's some uncertain event, like a catastrophic failure of one Altcoin, it might not affect all of the other Altcoins that have different makeup. This means that if one Altcoin is taken out, the world of cryptocurrencies can still continue. Another interesting point is that having multiple Altcoins has the potential to be a safeguard against the concentration of wealth occurring in any one particular place. The ability to launch new Altcoins creates the option of something like a jubilee. Which is a biblical kind of event where establishment of wealth is reset and debts are cancelled, or something like that. The ability to launch a new Altcoin has the ability to start over again, and measure wealth in a new way based on currencies of a new Altcoin. This could happen, for example, if It was decided that someone unscrupulous eventually accumulated all of the Bitcoins or too many of the Bitcoins. It's always possible to simply create a new Altcoin and start over again from scratch.