The Wolf Of Wall Street

How NautilusCoin could change the digital currency market—forever

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BY DAVID SEAMAN

The alt market, that is the market for any digital coin other than Bitcoin itself, is fascinating—it's like watching evolution in fast motion, mixed with The Wolf of Wall Street. Sometimes a lot of money is made, and sometimes coins die terrible deaths; dreams are crushed, but the dance goes on.

Here are two set to be the focus for a while.

NautilusCoin, a much-hyped newcomer launched by CNBC regular and well-known fund manager Brian Kelly, is currently the talk of the town. The coin experienced first day trading volume on MintPal of more than 3,000 BTC, which equates to about $1.34 million.

NautilusCoin’s innovation, other than being the first coin launched by someone with such a public reputation, is a 1 percent pre-mine which goes toward a financial tool called the NSF, NautilusCoin Stabilization Fund. A pre-mine is when a coin generates some of the currency for itself before opening it up to the mining public. In this case, 1 percent of the total amount of NautilusCoins which will ever be produced have been set aside.

Pre-mines are fairly common in the crypto world—and usually looked down upon. Why should the developers be privy to money that no one else can mine for? Yet pre-mines can turn out to be good: in this case, we know precisely where the money is going, and it is highly unlikely Brian Kelly will skip town for the islands with his 1 percent of the Nautilus market.

And without that pre-mine, the stabilization fund could not exist. Like a light-handed, actually benevolent central banker, the NSF is designed to swoop in when fear hits Nautilus prices, scooping up coins from panicked sellers and maintaining a liquid market until sanity returns. Although not omnipotent (the coin admits it is only a "speed bump," not a panacea), the NSF represents a degree of sophistication that is quite new to digital currency. 

It also incorporates something called DigiShield, another new innovation in the crypto community designed to keep multi-pools from gaining too much of the network. (DigiShield was originally developed by DigiByte, another cryptocurrency. DigiByte's developers helped Nautilus implement their tech.)

For a digital currency to thrive, the marketplace has shown that it needs to be mined by a broad range of people or entities—the greater the distribution of miners, the healthier the coin's network is believed to be. This all comes down to a need for decentralization: you don't want all of the transaction processing, as well as the record of those transactions, to be held in only a few places by a few entities. 

Instead, you want the data on millions of hard drives distributed around the world so that no government, corporation, or malevolent actor can delete records of who owns what. And you don't want only one or two mining organizations to earn all the coins, because that distribution is too lopsided—it resembles something much closer to the financial system we have today.

To this end, some protection against powerful multi-pools is a must. 

NautilusCoin is hoping to be the stable currency within crypto that, over time, may become merchants’ favorite: when you buy something with a digital currency, you don’t want any wild swings in price during the checkout process. And the merchant wants to hold something that is likely to retain its value. In fact, daily price volatility has been one of the major sticking points keeping merchants from integrating Bitcoin. 

By having a semi-managed, semi-stable currency in the alt market, the thinking is that there's now something merchants can adopt without fear—and by extension, this lends legitimacy and greater purchasing capability to the entire alt coin market

NautilusCoin is only 19 days old, and it remains to be seen whether it will be embraced by everyday users—or tossed aside for something newer.

But although still a cryptobaby, the coin's developers have already established some products that can only be purchased with NAUTs. One is a NautilusCoin t-shirt, sold at a stabilized price (e.g. the number of NautilusCoins you pay for the shirt does not change, even as the price of a NAUT fluctuates against fiat). And another is Dirac, a third generation digital currency developed by Blockchain Technology Group's Bryce Weiner.

Weiner announced on Twitter and on Dirac's pre-release information page that Dirac "will be traded in an exclusive currency pairing against NautilusCoin (NAUT market) on AllCrypt." He continues, "Between 90 and 100 days after launch, the market will be gradually purchased at fair market value for 25,000NAUT over a period of 30 days, backing the currency network and fixing the price at that moment at roughly 0.07NAUT."

What makes Dirac desirable? "Dirac has a specially modified codebase which allows for a process of currency cloning that is simpler than ever before," Weiner argued. "Thousands of clones can now be created and each blockchain comes pre-built with merged mining."

The thinking is that since Dirac's algorithm is more energy efficient than existing Scrypt-based coins; over time, new coin developers will use Dirac to make their own coins, instead of using Scrypt. As this happens, a whole new ecosystem of coins may emerge, just as today there's a huge selection of coins that use the older, more energy-intensive Scrypt algorithm. 

And when that ecosystem grows, NautilusCoin would be one of the only ways for users to get in, at least for as long as Dirac remains in an exclusive trading pair against NautilusCoin.

David Seaman is a journalist and host of the David Seaman Hour, available free on iTunes Podcasts and StitcherThis article was originally featured on Medium and republished with permission. 

Photo via Pink Cow Photography/Flickr (CC BY 2.0)