If you ran a high end clothing store, would you pick up scraps of clothing out of people’s dumpsters and then resell them to the general public? Probably not. But if you ran an altcoin exchange, would you list every single coin that asked or had some sort of demand? Probably, and here’s why.
Regardless of what else they may be, altcoins are part of a long legacy of open source projects that have a very strong history of success. Open source is one of the last bastions of the free market, allowing anyone to use the software to their own ends. Cryptocurrency, let us not forget, is peer to peer and decentralized. That’s the whole point!
Any time centralization happens, power is transferred into the hands of a few people from the many. These people traditionally have always abused their power, leaving all users worse for the wear. The same thing would happen if altcoin exchanges were allowed to pick and choose which coins they deal with. In fact, look at Cryptsy, Mintpal, and Poloniex. These exchanges have been around for a long time and rarely add new coins unless they have a distinct profit motive to do so. If it weren’t for newer exchanges like Bittrex, Coinnext, EurupeX.eu and others, some new coins would find no market at all. This could potentially stifle competition and growth, hurting alternative cryptocurrencies in the process.
Although many scams happen, lots of new altcoins are legit. If these legit coins can’t find a market because of the actions of other cryptocurrencies that went before them, the whole industry will suffer. Innovation will be stifled and the power of altcoins will fall into the hands of shadowy cabals who are working primarily for their own interests.
Even setting standards above and beyond the few technical ones now needed could create issues. Why delay a new coin market entry based on ‘missing pieces‘ which can easily be added later? Launch the coin and let the market decide. Since the project is open source, third parties can easily fill in the blanks.
Launches Have High Volume
Once an altcoin has been out for awhile, it usually finds it hard to gain trading volume. New coins tend to get most of the action. A brand new cryptocurrency has none of the baggage that its old school competitors do. At launch there are no bagholders and nobody has lost a fortune. This freshness tends to make early investors irrationally exuberant.
For new altcoin exchanges starting out, it makes a great deal of sense to aggressively list new coins. The new coins have volume, which can trickle over into other markets on the same site. The strategy of adding new coins has worked very well for Bittrex and is being followed by Coinnext and others. If they can get traders into their sites with the lure of brand new coins, their overall volume will continue to grow. This means higher fees and higher profit. Never forget that altcoin exchanges are businesses and they need trading fees to survive. A low volume exchange will end up doing just as much work as a high volume exchange, but for much less profit!
Altcoin launches are big and are only going to get bigger. The current trends towards almost all coins being listed is a good one. Give them a chance and see what they can do. If they don’t perform, the market has decided and they can be de-listed. That solution seems fair enough for everyone involved.
Trying to raise the bar higher is a good idea, but there’s no logical way to apply launch standards. The altcoin exchanges are in competition and currently have no motivation to do so. They know if they don’t list a certain altcoin, a competitor will!
The key for investors to stop getting burned is to start asking questions and demanding answers. Most of the scams are literally comical in their simplicity. If enough people get burned enough times, eventually they’ll demand higher standards from the coin Devs and that’s exactly what they’ll get. For now, it’s caveat emptor.
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