We focus primarily on Bitcoin here because it’s the most prevalent, the most awful, and the most hilarious, but since it was released as an open source project, other developers were free to use its source and create their own versions of the cryptocurrency, offering what they considered to be improvements or extra features. Most of them are more or less pump and dump schemes and don’t actually provide anything useful or act as a viable alternative.
The general lifecycle of one of these altcoins is as follows (thanks to SA forums poster eames for the easily digestible info):
1. Copy-paste bitcoin-, litecoin- or similar code from github and slightly modify it, maybe even hire a coder to add an actual feature. The latter is optional because but it may make the marketing in step 4 easier.
2. Hire a professional web and logo designer… to make the whole deal look “trustworthy” to buttcoin investors. (MS Paint would likely suffice)
3. Start mining the new currency privately with a few… buddies until you all have a couple hundred thousand or whatever. This is called “premining”.*
4. When you have a large enough headstart, publicly release the coin, telling everybody that now is the time to become an early adopter. Your new coins are the future! Marketing! Hype! Since the community is full of people with more Buttcoins than brains, you’ll have no problem finding adopters who will gladly buy your useless coins. **
5. Once the coin has gained some momentum, tell btc-e.com you may accidentally send them hundred thousand of your coins if they start trading the coins on their site in return.
6. Very slowly dump your hundred thousands of coins after the IPO on btc-e.com, trading them into hundreds or thousands of BTC which you can sell for actual money.
7. Weeks later, by the time people realize that it is all a huge pump and dump, you have hopefully sold off a good chunk of your coins for BTC.
8. btc-e.com removes your new coin because the trading volume is too low and nobody is interested in it anymore. People forget about it and move on. You convert your BTC to USD and buy a nice house and car. A very nice house and a very nice car.
* Step 3 may not work anymore because the buttcoin community has realized that premining is not cool. You could still rent mining power for the very rewarding period right after the launch and/or DDoS any mining pools that may pop up during the first “land rush” to make sure the currency is not evenly distributed and you get all the initial coins.
Now that we’ve established how to make your own *coin, let’s take a look at a few of the notable failures.