What is a Shitcoin? Understanding the Term and its Impact on Cryptocurrency

‘Shitcoin’ has received significant attention as a particular group of cryptocurrencies in an ever-expanding digital asset marketplace. While a select few- Bitcoin, Ethereum, and maybe others- have been appreciated and widely adopted, many others have blanketed the market with dubious intentions or almost non-existent worth. So, what is a shitcoin and how exactly does it pan out in the cryptocurrency world?

What is a Shitcoin?

Now, almost like ‘the underdog,’ the adjective ‘shitcoin’ denotes low or seemingly futile cryptocurrencies, usually devoid of purpose, use in the real world, or well-baked technological basis. The term has been adopted pejoratively by crypto-enthusiasts and is aimed at coins they deem either scams or run-of-the-mill projects aimed at raising some quick funds for their creators at the expense of long-term benefits to users or investors.

In essence, shitcoins refer to the numerous cryptocurrencies created in response to the hottest trends in the ecosystem to ride the wave of hype. Often they are issued with plenty of marketing and PR behind their release, with little attention afforded the prospect of assembling a viable whitepaper, roadmap, or clear use case.

Common Traits of Shitcoins

Not all shitcoins boast the same properties, but there are several common traits that many share, such as:

Lack of Purpose: Shitcoins have no meaningful purposes or solutions to address real-world problems. Oftentimes, when it comes to Bitcoin as a decentralized currency or Ethereum serving as a platform for decentralized applications, shitcoins do not possess any mission at all.

Low Market Capitalization: These coins are often low on market capitalization, suggesting that there isn’t high demand for them. Low volume and heightened volatility for crypto trading are a common phenomenon with such coins.

Frequently Exploited by Pump and Dump: Shitcoins are usually targets of schemes wherein the original creators or promoters inflate the coin’s price temporarily, thereby tricking naïve investors. They then sell off their holdings while those misled investors are left nursing losses.

Not Much Development or Community Activity: A good coin has an active community and code developers who will continue improving it. Most shitcoins are commonly abandoned once their developers tire of their coin.

Poorly Written or Non-Existent Whitepapers: A good project would usually have a well-thought-out whitepaper explaining its value proposition, tech, and roadmap. Most shitcoins would either have no whitepaper or have their papers filled with buzzwords but no real substance.

Why Do Shitcoins Exist?

While there exist a number of reasons that give rise to shitcoins, the core reasoning is weak entry levels in creating cryptocurrencies. A person can easily create a token making use of a platform such as Ethereum. This has flooded the market with numerous new coins: many of which were projected without serious conception or planning.

Besides that, hype and speculation in the crypto market create a breeding ground for scams. The investors willing to make quick money end up jumping into projects without proper diligence, thus granting the opportunity to scammers to create coins with the sole purpose of siphoning off money without providing any value in return.

How to Identify Shitcoins

If you would like to avoid “investing” into a shitcoin, consider these tips:

Research the Team: While scamming is easy, one should still study the Ethereum-based platform. Team credibility and experience should be checked. Oftentimes, shitcoin projects are not transparent on who developed them.

Check the Whitepaper: A good whitepaper ought to clearly outline the purpose of the project, as well as the technology and roadmap to achieve that goal. If a project gives vague promises and possesses a poorly written whitepaper with complex jargon, that can raise a red flag.

Look for Community Support: Legitimate projects are likely to have great active community support. For those with minimal or no community support, their long-term viability may be in doubt.

Check the Usage: Look for any real-life applications that such coin seeks to solve problems; if no problems exist and its usage is vague, it may very well be a shitcoin.

Impacts of Shitcoin on Cryptocurrency

Those are mixed; they can, on the one hand, provide an overall improvement in choices and act as an impetus toward innovation in the cryptospace, yet their mere existence also leads to renewed instances of scams and market volatility that create distrust among investors and regulators. Shitcoins can taint the overall identity of cryptocurrency to such an extent that genuine projects suffer fitting an application even worse.

In Short

While shitcoins can be a short-and-fast trading opportunity for hustlers, they carry with them nearly equal danger, especially for neophytes in the cryptocurrency world. Knowing shitcoins and doing sufficient research before going in will only ensure that you can now make informed decisions. For every coin which comes out now, not all are destined to be Bitcoin or Ethereum. Proceed with caution, my friends, and always invest wisely!