Bitcoin Core Developer Jeff Garzik Believes NXT is a “Scamcoin”

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scam nxt coinWhile many people believe there is a divide in the Bitcoin community when it comes to the early-adopting libertarians and the new breed of venture capitalists, it seems that the real battle in the world of cryptocurrency is between Bitcoin and appcoins.

Around the same time that Chris Odom, the creator of Open Transactions, was dismissing the relevance of altcoins at InsideBitcoins London, Bitcoin core developer Jeff Garzik was tied up in a public spat with the NXT community. As someone who has been suspicious of projects that create their own cryptocoins for quite some time, I’m happy to see this public debate on the legitimacy of appcoins.

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Why Does Jeff Garzik Have a Beef with NXT?

Garzik took to Twitter and bitcointalk.org to talk about the shadiness of NXT as an alternative crypto-financial system. After being asked to explain himself on a bitcointalk.org thread, Garzik replied with the following list of issues:

  • It is marketed like a scammy penny stock.
  • Anon early super large stakeholders + Proof-Of-Stake == the big guys run the table, if they choose. https://download.wpsoftware.net/bitcoin/pos.pdf  The central bankers are in place from Day One unless they are super-virtuous and give tons away “fairly.”
  • Anonymous developers
  • Closed developing process.  Source is periodically handed down from the ivory tower to the masses.
  • Certain notable personages (& key stakeholders) that dodge, dodge, dodge, when an obvious attack vector — mitigated in other crypto-finance projects by known techniques — is highlighted.
  • Active resistance to making it easier to independently reproduce the software
  • Technical criticism is routinely met with bizarre behavior (notably from come-from-beyond)
  • Attacking critics, rather than responding to criticism.
  • Several security incidents that smell like inside jobs.

As you can see, there are many different aspects of the NXT development process that rub Jeff Garzik the wrong way. There aren’t many outside the NXT community who don’t see the correlations between their marketing practices and those of a penny stock, and many of our readers have probably come across the marketers who seem to do nothing but pump the proof-of-stake cryptocurrency on various forums and social media websites. A recent episode of Let’s Talk Bitcoin also rubbed me the wrong way when a member of the NXT community wasn’t really able to come up with any reasons for the altcoin to exist in the first place. The guest on Let’s Talk Bitcoin continually mentioned features that were either already implemented in Bitcoin or right around the corner for the world’s most popular cryptocurrency. I experienced this same phenomena when debating a NXT supporter on Twitter.

I reached out to Jeff to see if I could get him to expand on some of his thoughts related to NXT’s long term viability, but he simply stated:

“You know I have to go all corporate-y and not comment officially beyond what flames happen to appear in various places on the Internet…  Flames are my own personal opinion from personal accounts, not my employer, etc.”

A Response from NXT

nxt responseThe NXT community was quick to respond to Garzik’s criticisms, and plenty of NXT supporters wanted to let the Bitcoin developer that he didn’t know what he was talking about. One of the main issues Garzik mentioned on Twitter is that the hashes didn’t match when he compared his own build of nxt.jar from source to the shipped version of nxt.jar that most of the NXT users download without thinking twice. Jean-Luc, the lead NXT developer, pointed out why this may have happened on the NXT forum:

 

“The reason for non-reproducible builds is that the jar packaging tool includes time dependent information in the jar archive, which depends not only on the timestamps of the class files being packaged but the time the package is built too. Different javac compilers and on different platforms may also result in different class files.”

This claim was also made by many other members of the NXT community, but it may not be completely accurate. Garzik was quick to point to a tutorial on how to create a deterministic JAR. The tutorial also pointed out that different builds of the JAR need to be made with the same compiler, so that aspect of Jean-Luc’s claim seemed to be accurate. It was at this point that it became clear that Garzik’s concerns were more about the centralization of the development process than anything else. This point of view was evident in one of Jeff’s earlier posts:

“What is necessary, for NXT or any other crypto-finance software, is to prove independent reproducibility. The next step is to proactively have developers and community members cross-check each other, to make sure the build produced is the same for all. This helps ensure that the release manager is not under duress, unknowingly infected with malware, or corrupt.  No security solution is perfect, but it raises the bar significantly. You should never trust just one person to produce release binaries, in any crypto-finance project.  That’s called a Single Point of Failure, and it is easy to attack such a narrow victim vector.”

The core of Garzik’s issues with NXT were also seen when he responded to @Thein_Sein on Twitter about whether or not calling the controversial altcoin an outright scam was taking it too far:

“When massive stakeholders push back this hard on a provable build process…  run away.”

Appcoins Have Little Value Anyway

While, according to at least one Bitcoin core developer, there may or may not be foul play behind the scenes at NXT, the reality is that none of this really matters in the grand scheme of things. As Daniel Krawisz eloquently described in the appcoins debate on Let’s Talk Bitcoin, appcoins or altcoins should only rise in value with their respective networks  if there is a reason to hold them. The comparative advantages of bitcoin as money over fiat and altcoins give people a reason to hold it, but these same arguments do not apply to appcoins like NXT. Users of the NXT token should want to hold the coin for the lowest amount of time possible because they don’t know how to value the asset. This is currently an issue with LTBcoin as well, but it seems that they have some changes on the way that could fix the problem. Having said that, this solution only applies to network coins that can fix the price of certain goods or services in terms of their own tokens.

Whether NXT plans to create a system of decentralized storage or they want to get people to use their decentralized asset exchange, the fact of the matter is any added value from those enhancements will go to bitcoin. Why would anyone hold NXT when they could hold a money with the liquidity, security, and network effects of bitcoin? They can take advantage of the features found in any appcoin’s network without taking on the volatility risk associated with holding that app’s token. Users may take advantage of a NXT feature for a brief moment in time, but money going in and out of the network does not increase the coin’s market cap. An increased price only takes place when people are holding the token in question.

Images from Shutterstock.

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