The Next big thing

The cryptoworld often seems little more than a collective anticipation for the winner right around the corner that will make overnight millionaires out of those fortunate enough to have invested heavily right before its discovery.

Ever since the successful run of ASIC MINER, the question on everyone’s mind when it comes to Bitcoin denominated stocks is “which one will be the next ASIC MINER?”. Although I’m not as much in the loop, I’m sure it’s a similar thing with mining hardware. You almost have to own the latest greatest if you want to realize the maximum profit potential.

It’s a similar phenomenon with alt coins. You can register an account on Cryptsy and use it to hold over ninety different alt coins. Most of them are going to turn out to be worthless, known as crapcoins or worse. However there is the occasional alt coin which experiences exponential growth in value, gaining by 1000% or more in a matter of days or weeks. Two alt coins which recently experienced amazing growth in value are Quark and Devcoin. Speculators abound on sites like Cryptsy, hoping to get in on a hot coin while it’s still cheap.

We’re all looking for the next big thing.

I recently learned about this neat little alt coin that’s actually called “Next,” or “NXT.” It’s creators are very confident that this coin is going to blow all the others, including Bitcoin, out of the water. One person who I trust to know these things recommended I buy and hold some, so I did (and will probably pick up more), and apparently others are buying it up to because its value has already climbed quite a bit in just the last few days.

But you can’t find it on Cryptsy yet. Next is what’s called a second generation coin. Unlike the other alt coins which are for the most part copies of Bitcoin with certain variations, Next was built completely from scratch and it addresses a couple weaknesses that Bitcoin has. These weaknesses are intense energy usage from mining and long transaction confirmation times.

Next coins are not mined per se. This particular alt coin was all released at once to 73 stakeholders. Yup, 73 people decided to trust the developer (and not cry scammer) by sending him some Bitcoin, and in return they all received their piece of one billion NXT proportional to their contribution. Thee will never be any more than one billion NXT in circulation.

These stakeholders were charged with distributing some of their vast holdings to others to get the NXT economy going. So if you visit this thread on the Next Forum and post your address, you are likely to receive a small amount of seed NXT for your account. This is important as the way to “mine” for more NXT is that you run a little Java program, leave your wallet client unlocked, and eventually, you will get to open up a block which is likely to contain someone’s previous transaction fee. Rather than invest tons of computing power to solving complicated mathematical riddles, you simply run this Java program on your regular computer and you get to mine or as the developers prefer to call it, forge, for more NXT proportional to how much you have sitting in your account. This is what’s called a proof of stake concept, as opposed to proof of work. It takes a small amount of CPU power (though a lot of memory) to do your part to maintain the NXT network and forge ahead for your reward.

Blocks are generated about once every minute and transactions are supposed to confirm instantly. This solves the issue of having to wait around for a half hour for your transaction to confirm. Instant confirmations place NXT transactions on par with Visa and Mastercard payments that are the bread and butter of debt-based currencies.

I have yet to experience first hand the instant transaction confirmation time, as for whatever reason I can’t seem to send anything at all from one NXT wallet I own to the other one. But apparently everyone else can send and receive NXT instantly. And it appears my little problem has a solution and there are Nexters who are happy to help me out, so hopefully my troubles will become a distant memory soon.

Installing the client and the Java program was rather confusing and required a certain amount of modifications. I understand people are working on making that whole process more idiot proof. I also know that the NXT team will be rolling out a whole slew of new features for the wallet client (with a number of non financial specific applications such as instant messaging, anonymous web hosting, and decentralized trading among other things) on January 3, 2014, and that this date will be the currency’s official launch date. Unlike with many of the alt coins which are announced just hours before they are formally launched, NXT has been announced for months before its formal launch. This has actually given me the opportunity to become an early adopter.

I find NXT to be an interesting concept and I wish it much success. I mention it here because it’s a great example of how these new alt coins get started and actually go places. It is not my intention to hype it (in fact, I’d prefer the value stay low for a while so I could buy more before they get too expensive). I do own a stake in the NXT economy so naturally if a whole bunch of people start a buying frenzy and I sell off at the right time I would benefit.

If you want to get into NXT, you can find plenty of good instructions on the Next Forum. You may need to fiddle with the programs a bit, but I was able to get mine going with little extra effort. The actual wallet is something called a brain wallet and it’s hosted by the NXT network itself. It is very important that you select a super long and random password which uses all the special characters to unlock your account. People have already reported their short, easy, non-random passwords getting hacked and their NXT getting transferred out to parts unknown. So pick a strong password from the beginning and don’t lose it. You can store it in a good password management program but you also want to print it out and keep it in a safe place. Losing your password is the same thing as losing your cash wallet. Once you unlock your wallet and running the forging program (it’s some sort of Java script), your computer is supporting the network. Once your first transaction has received 1440 confirmations (this will take a bit longer than a day), you are then in the running to open up a block which is likely to contain a previous transaction fee. You will need to have some NXT in your wallet in order to be able to generate a block, and the more NXT you have, the more blocks you’ll be able to open. That’s how proof of stake works.

Next’s goal is to have all trading be decentralized. One of the looming issues with Bitcoin and the other alt coins is centralized trading. You have to send coins to a trading site like Vircurex or Cryptsy in order to trade. But what happens to your coins if something bad happens to your trading platform? Next hopes to alleviate this weakness by allowing people to trade NXT right on the decentralized network. But for the time being, you do have to buy NXT on a special temporary exchange called the Bitcoin Next Exchange. It’s a bit clunky, but it gets the job done.

At this point NXT is an experiment. Will it be the Next big thing? If you buy and hold some NXT, you’ll be the first to know.

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