The Rundown
In the world of cryptocurrency, countless new projects pop up every day. While a lot of them look strong, and even experience success, many others end up going nowhere. In fact, a lot of these projects end up being outright failures.
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The worst of these failures start out with promising futures, generating a lot of hype and raising large amounts of starting capital. Then, they flop. They either quietly fade into the sea of failed crypto projects, or crash spectacularly in a blaze of public drama.
The following list shows the biggest of these failures, the most hyped projects that couldn’t deliver, as well as ones that blew up because of internal and community conflict.
Top 5 Biggest Failures in Cryptocurrency History
5: SpaceBIT
SpaceBIT is one of the most ambitious cryptocurrency projects to date. Branding themselves as “the first decentralized space company,” SpaceBIT announced its idea to the world in late 2014.
The company wanted to launch several “nano-satellites” into orbit — yes, space — to provide a globally-accessible blockchain. This blockchain would be used for both bitcoin cold storage and helping unbanked regions access financial services.
The media went wild with this announcement — Bitcoinist included. Throughout late 2014 and early 2015, the Bitcoin community followed SpaceBIT with great enthusiasm, waiting for updates about the project.
In that same time period, the team behind SpaceBIT ran the conference circuit, doing multiple presentations and building hype even further.
However, despite all the hype from the community, and all the talk from the team, SpaceBIT never revealed any kind of prototype or proof-of-concept. In fact, after the first couple months of 2015, we stopped hearing about SpaceBIT altogether.
What was the reason for this disappearance? In short, the team behind SpaceBIT started a new blockchain company, BlockVerify. A source close to the original project told us that all efforts are currently focused on this new project, and that SpaceBIT has been totally shelved since March 2015.
4: Gems
GetGems, originally branded as “Gems,” is a social networking platform that uses cryptocurrency to pay members that view advertisements within the app. GetGems was so proud of their idea, that in 2014, they said it would disrupt social media as we knew it.
But, those claims seem to have fallen flat. At the end of 2014, the company reported a disappointing crowdsale, raising only $111,000 USD. Such an amount is quite small compared to other cryptocurrency projects with similar claims of disruption, which have raised tens of millions of dollars in funding.
This project is still up and running, but adoption numbers look underwhelming. 90-day Google Play ranking statistics from SimilarWeb show that the app is pretty unpopular in the countries where it’s available. GetGems’ most successful country seems to be Uzbekistan, where the app has regular stints in the top 50 for the “communication” category. At press time, the app ranks 63rd in Uzbekistan.
3: Dogecoin
Dogecoin started out as a joke, but quickly became a very serious cryptocurrency backed by a passionate community. In 2014, the community became known for using DOGE in charitable acts. Most notably, the community raised enough DOGE to send the Jamaican bobsled team to the 2014 Winter Olympics.
The currency even survived and thrived through two hard forks.
But, it all got ruined when Dogecoin exchange Moolah went down, with founder Alex Green running off with everyone’s money. After Green shut down the exchange and disappeared with its funds, DOGE crashed, and the community all but disbanded.
Since then, Dogecoin has not been able to return to its former glory.
2: PayCoin
PayCoin was launched in fall 2014 by the notorious Josh Garza and GAW miners. The white paper for the coin seemed promising, calling for new variations of blockchain technology that would produce a new breed of cryptocurrency.
However, Garza quickly converted PayCoin into a generic altcoin clone so he could push it onto the market faster. Apparently, scammers aren’t keen on waiting to steal your money.
PayCoin had a huge launch, becoming one of the largest cryptocurrencies in the world by market capitalization. But the house of cards began falling. With GAW continually failing to follow through on its promises — one of them being the infamous $20 PayCoin floor — people began losing faith in the currency.
With GAW totally shutting down in 2015, federal authorities launching an investigation of the company, and Garza fleeing the US, PayCoin hit rock bottom.
The currency’s dedicated community attempted to pick up the pieces, hoping to redesign the coin to meet its white paper specifications. These efforts have so far been fruitless, the developers unable to overcome PayCoin’s tarnished reputation.
1: DAO
Now we arrive at the largest failure in cryptocurrency history: Ethereum’s DAO.
The announcement of the DAO in April 2016 sent waves throughout the cryptocurrency community. The Decentralized Autonomous Organization — crypto-anarchists and Bitcoinists dreamed about it for years, and Ethereum finally made it reality.
People were so excited about it that they purchased DAO tokens by the truckload. The DAO token sale quickly made this project the largest crowdfund in history, bringing in over $168 million USD. This success translated into market activity once the coin got listed on exchanges. At its peak, according to CoinGecko, the DAO token reached a price of 0.19 USD.
The glory didn’t last long, though.
On June 18, an attacker exploited a vulnerability in the DAO smart contract, resulting in a loss exceeding $50 million USD. Once news of the attack circulated, traders dumped the DAO token, sending its price spiraling downwards.
Following the attack, Ethereum Foundation developers proposed a hard fork of the Ethereum blockchain that would roll back the attack and return the stolen funds to their owners. This proposal sparked outrage throughout the cryptocurrency community, with detractors arguing that such a move went against the central point of blockchain technology — immutability
The fork went through, but did not achieve consensus, which created a separate Ethereum blockchain that operated independently of the forked chain. Consequently, Ethereum Classic, a token operating on the “old” blockchain, arose. Since its birth, Ethereum Classic has competed with the “new” Ethereum for consensus. So far, neither has won.
The drama surrounding the fork tarnished the reputation of the Ethereum Foundation, Vitalik Buterin in particular. As such, Ethereum has lost much of the respect and prominence it once enjoyed, despite still being one of the largest cryptocurrencies by market capitalization.
If this trend continues, we might see the entire Ethereum project on the next top 5 failures list.
What do you think are the worst cryptocurrency failures? Let us know in the comments below!
Update (9-14-2016, 10:39 AM EST): This article has been updated to correct an inaccuracy. Ethereum underwent a hard fork to reverse the DAO attack, not a soft fork.
Images courtesy of Crypto-Graphics, Bitcoinist, PayCoin, DAO.
