The mathcoins: decentralised cryptocurrency, without the blockchain?

Proof-of-work is a horrifying disaster. Proof-of-stake has been six months away for years. Bitcoin failed at most of its early promises.

But can we get the tantalising promises of cryptocurrency — decentralised, censorship-resistant, fast, cheap, secure — without the headaches?

There’s a pile of approaches along these lines — IOTA, Nano (formerly RaiBlocks), Hashgraph, MaidSafe, the Snowflake/Avalanche family — that promise new consensus mechanisms. And many don’t even use a blockchain.

I’ve been calling these the “mathcoins.” They’re of varying quality, credibility and audacity of promises.

You see a confusing page full of equations. Someone’s trying to sell you a token based on it. What do you do? How does a non-mathematician judge these things?

The pitch

Mathcoins are marketed by someone waving a PDF at you and shouting “you can’t disprove my thesis — buy my coin!”

A mathcoin will present a white paper full of equations — written in LATEX, or at least Computer Modern, to appear properly sciencey — to justify their exciting new non-blockchain approach to the problems Bitcoin tried to solve.

This is the blockchain space — so the product here is not the mathematics, but the near-magical promises.

Should I buy the token?

The price of a mathcoin is completely unrelated to the maths. Ignore the white paper.

If a coin exists and someone’s trying to sell you on it — treat it as you would any altcoin pump. Pump-and-dump rings and ridiculously manipulated markets are standard in altcoins. Mathcoins are no exception.

When the IOTA network was literally broken and not working at all for a few weeks in October 2017, the token price went up 14%. Because for trading purposes, it’s just another altcoin on an exchange.

“Coming soon” is no reason to buy a token.

The species of mathcoin

A mathcoin will sometimes have credible computer scientists attached — Emin Gün Sirer advised Snowflake/Avalanche — or at least had them take it seriously — Sirer politely critiqued Hashgraph.

Other times, it’ll attract widespread criticism of bad or obscurantist maths or cryptography — IOTA has been notorious for its utter failure to engage reasonably with outside security researchers.

The maths falls into three broad groups:

  • Obviously broken ideae.g., nothing about IOTA works or makes sense.
  • Old idea, put forward as new — there’s a lot of recycled ideas, or someone comes up with something that looks clever that they haven’t done the reading on.
  • Actually new idea — Sirer: “I might be biased, but Snowflake/Avalanche is in this category.”

The teams’ track record is critical:

  • Has delivered software before — this is rare — few teams have a track record of delivery.
  • Has tried and failed so far — e.g., MaidSafe has been in development hell since 2002.
  • This is their first attempt — typically someone with an idea, and someone collecting money to throw at the problem — will often be hoping to buy in enough expertise.

Most teams are pushing a broken idea, and it’s their first attempt. A few are pushing an old idea, and it’s their first attempt.

The products are one or more of:

  • No product yet — even with credible people involved, a non-mathematician shouldn’t worry too much about these until there’s something there.
  • Not decentralised at all — or not yet, coming soon, honest. e.g., IOTA still has the central coordinator node — and no idea how they’ll remove it.
  • Doesn’t actually work — IOTA again, whose code barely compiles, and whose network falls over in a stiff breeze.

Far too many mathcoin white papers are the mathematical version of mad scientist monologues. “They said I was mad — but I’LL SHOW THEM ALL!!”

Watch the people involved

You’re not a mathematician, you’re not up on graph theory, you can’t tell whether a given paper is credible work — or if it’s Time Cube in LATEX.

But you do know about the cryptocurrency and blockchain space — and how the people behave. Do they behave in a professional manner, responding well to critique? Or do they react badly? Are they just pumping their token?

IOTA has been notorious for this. Its leadership and community were volatile and abusive enough for it to get written up in the Financial Times. The UCL Centre for Blockchain Technologies broke off relations with the IOTA Foundation over their threats to security researchers.

Other mathcoins will make it obvious that it’s all about the token price. One RaiBlocks pumper literally stopped Rory Cellan-Jones from the BBC in the street to pitch their coin.

The rule in blockchains is: hypotheticals are worthless. Grandiose promises of magical results rarely, if ever, work out.

If someone in crypto says something’s coming soon, that’s nice, but it should absolutely not be treated as “exciting news” until they have a product — and the product doesn’t fail in some hilariously obvious manner.

No white paper without a product should be taken as “exciting news” unless you are actually a mathematician or a computer scientist and have a direct professional interest.


Thanks to Emin Gün Sirer for suggesting axes for differentiating ideas and teams.

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3 Comments on “The mathcoins: decentralised cryptocurrency, without the blockchain?”

  1. Aren’t the issues more fundamental than this?

    Having read some stuff on crypto, including your book 🙂 it seems to me that the issue is basically political, not technical.

    In order to keep people honest, they have to have some skin in the game, they have to have staked something. That gives them something to lose. In normal banking, people stake their liberty – if they break the law, they could get jailed. In the hawala system used in the middle east, which works outside the law, they stake their honour and reputation.

    As pretty much all crypotocurrencies want to keep the players anonymous, they can’t use either of these. So instead they get people to put in large sums of money, either in raw form or in the form of having to pay to waste electricity.

    When someone says that they have a cryptocurrency that works without anyone putting any skin into the game at all, surely you can know that it is bullshit, not because of the maths, but because of the politics – what is to keep the players honest then?

    1. There does feel like there should be some sort of no-free-lunch effect going on here, yes.

      OTOH, compare public key cryptography – it’s cheap, but requires utterly unfeasible effort to break head-on. So that basic security function’s not a problem any more, but now you have to think about how to maintain and verify keys and so on, as a fallible human.

      In terms of honesty – we have the whole rest of the system. ‘Cos even if a mathcoin gives us all the bitcoin promises for near-free, we still have the economics (Bitcoin economics literally can’t work), politics (KYC at the actualmoney interface) and scammers (who flock to cryptos like flies to BS). All those problems will still be there.

      1. > There does feel like there should be some sort of no-free-lunch effect going on here, yes.

        No there isn’t. You’re confusing the consensus mechanism with the data structure.

        Nano and Hedera Hashgraph use Delegated Proof-of-Stake at the end of the day. IdIOTA uses Coordinator consensus. (After moving goalposts from “CPU-bound proof-of-work” to “network bound proof-of-work”, which of course is nonsensical, as if there was a thermodynamic limit on network connectivity.)

        Stellar has been around for years btw and works very similarly to Hedera Hashgraph.

        Research in “parallelizing” the blockchain structure (also often called “braiding”) has been going on for years as well, Ethereum’s GHOST is an early attempt actually. It’s unclear if there is really an advantage in causing more Orphans. :-]

        IMO, what could be looked at in improving propagation are sidechains bound to regions (as in physical locations), with eventual settlement on the global mainchain.

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