An analysis of Vertcoin: A centralization resistant digital currency

Vertcoin is a popular peer-to-peer digital currency undergoing rapid feature development, and gaining in value quickly. In this post, we’ll offer both fundamental and technical analysis.

Vertcoin has been around since early 2014, making it one of the older active digital currencies. The project has been rejuvinated in the last year or two after a change in leadership. Originally created by Bushido, James Lovejoy is now the lead developer, and there is an active team of developers on the project guiding the roadmap.

Like many digital currencies, Vertcoin is a fork of Bitcoin. There was no premine, meaning every coin must be mined via a Proof of Work algorithm. There are 84,000,000 total possible coins, four times that of Bitcoin; block rewards are 50 VTC, and occur approximately every 2.5 minutes.

At the time of publishing, Vertcoin has a market capitalization of $163+ million, and is ranked #39 amongst all cryptocurrencies. That’s a rapid increase in a short amount of time, which will be addressed in the price analysis section below.

Some people compare Vertcoin’s potential to Litecoin, and believe that it can follow a similar growth trajectory. Like many currencies, Vertcoin has undergone significant growth in price and volume in 2017, but due to an active team and quick adoption of modern cryptocurrency features, there is a possibility for significant growth still.

Features of Vertcoin

Vertcoin has been quick to add some of the latest features in the cryptocurrency space.

ASIC resistance

A core tenet of Vertcoin’s marketing is that it is resistant to centralization. This is primarily accomplished by focus to stay ahead of dedicated ASIC mining hardware; the first attempt at this was in late 2014, when they successfully hard forked to adopt the Lyra2RE hashing algorithm.

ASIC resistance allows Vertcoin to be mined by more parties using GPUs, rather than fewer entities running specialized miners, like exists with Bitcoin. The belief is that such restrictions reduces the the risks of 51% attacks, and other schemes.

One-click mining

In addition to excluding ASICs, Vertcoin has also attempted to make GPU mining as easy as possible for participants. Their one-click mining software is in open beta, which simplifies the setup process drastically compared to some other coins.

The software allows the miner to find and pick a pool to mine with, input their wallet address, and begin. Lowering the barrier to entry like this can make Vertcoin more attractive to new miners.

Segwit, Lightning network, and atomic swaps

In May 2017, Vertcoin locked in SegWit (segregated witness) — one of the first coins to do so — with more than 75% of Vertcoin nodes signaling for the change. SegWit offers many benefits for digital currencies, one of which is the simpler implementation of the Lightning network.

The Lightning network allows coins to be more scalable, and utilization of the network is shared by Litecoin, Decred, Vertcoin, Viacoin, and perhaps some others now (it’s getting harder for me to keep up).

Using the Lightning network enables instant off-chain payment channels, meaning only the opening and settlement of the transaction are on the blockchain, reducing load on the blockchain. There are two Lightning implementations under review: Lightning Network Daemon (LND) and the Lightweight Lightning Network (LIT). Vertcoin team members tell me they are supporting a LIT implementation, as it is, “founded on being multi-currency.” Whereas LND is Bitcoin only — though in May announced Litecoin support, so perhaps could open up further down the road.

Vertcoin has also successfully tested atomic swaps: peer-to-peer transactions with built-in escrow like functionality.

The first Vertcoin atomic swap was with Charlie Lee — founder of Litecoin, on September 20th.

A lot of these features will be better supported and worked out down the road, as they are quite new. But Vertcoin’s quick adoption of new technology helps put it in an upper echelon of current coins.

With these features combined, affordable, scalable, and instant transactions are possible. It is possible that any coin implementing these features can receive greater adoption due to the shared functionality across coins. However, the Lightning Network is still in development and these features are a good ways from real world usage.

Wallets

In May, Vertcoin released a new wallet called Electrum. In addition, the Ledger hardware wallets now support Vertcoin.

Electrum and the Ledger hardware wallet allow users to store Vertcoin themselves, rather than keep them on centralized exchanges, further securing the coins. In addition, the Electrum wallet is being updated to include support for Lightning — enabling those lightning-based transactions directly from the wallet. Support for the Trezor 2 wallet is also planned.

There is also a version of Electrum being released imminently specifically designed for use with a TOR connection.

Privacy features

In addition to the Tor wallet, the Vertcoin team has one more significant privacy feature on the roadmap, to implement stealth addresses. Monero and other coins also use stealth addresses, which basically allows you to receive payments at a public address that does not expose the full history on the blockchain for that address.

I am told by their team they don’t have plans for further features for privacy, as they see Monero and others as more suitable for fully anonymous transactions.

However, at least some form of transaction privacy is an increasing concern for many users of cryptocurrencies, and adding privacy features to Vertcoin will likely increase interest amongst said users.

The Vertcoin network

The hashrate for Vertcoin has been steadily increasing in recent months, to over 2.5 terahash per second (TH/s), up from around 250 gigahash per second (GH/s) just in August. The rapid rise is in part due to greater profitability mining Vertcoin, but it can also be a virtuous cycle, as price may also follow hashrate.

If prices remain high or go higher, Vertcoin can become even more profitable to mine. Furthermore, if the network can gain devoted followers, more people will host nodes or mine Vertcoin simply to support it — both of which improve it as a coin. Difficulty is also increasing quickly in response to these changes.

The first Vertcoin halving is estimated to occur on December 12th, reducing the block reward from 50 to 25 blocks. This will reduce new supply to the network, and happens around every four years.

There are currently 284 active Vertcoin nodes according to BitInfoCharts. This is twice as many as just a week ago, according to a call for help from the Vertcoin team. For the sake of comparison, Litecoin has nearly 1,100 nodes, and Bitcoin has over 10,000. 40% of active Vertcoin nodes are in the US, and the majority of the rest are in Europe.

There are around 5,000 people in the Vertcoin Discord chat (which they just recently moved to from Slack), more than 13,000 Reddit followers, and nearly 40,000 Twitter followers.

In all, the Vertcoin community is growing significantly with active development from the team and increased interest based on feature development and price action.

Threats to Vertcoin

Vertcoin has succeeded lately with rapid development, feature adoption, and the general increase of interest in cryptocurrencies. There is no Vertcoin foundation or other funding mechanism to further the development of Vertcoin.

There are nine listed developers on the website, and six team members on Discord. But there is no formal governance system beyond those designed into the coin via incentives. This is common for open source software, and how Bitcoin itself works. However, some coins like Decred or Dash have governance and funding mechanisms designed into how they work, which some believe makes them better suited to improve and be sustainable over time.

Vertcoin is most like Litecoin in my mind, aside from Litecoin using the scrypt hashing algorithm. Both Litecoin and Vertcoin are Bitcoin forks and share much of their codebases. However, there is a Litecoin Foundation dedicated to furthering Litecoin itself. In my mind, the biggest threat for Vertcoin is whether it can set itself apart from Litecoin.

Many alternatives to Bitcoin (alts) deal with this exact issue; even Litecoin deals with this issue in relation to Bitcoin. Over time, we’ll see how they evolve and develop. People that believe in alts broadly believe the cryptocurrency space can be successful with dozens or hundreds of currencies each fulfilling their own purpose or being useful in their own way.

I have seen some people cheekily call Vertcoin bronze to Litecoin’s silver (Charlie Lee often refers to Litecoin as silver to Bitcoin’s gold). We’ll see how well such comparisons hold up over time. During a time of great price speculation, it becomes easy to get excited about the future of a coin.

Litecoin awareness also increased with its addition to popular exchange Coinbase, which is the second most popular place to trade Litecoin today.

Trading Vertcoin

Nearly 100% of Vertcoin trading happens on two major exchanges: nearly 75% on Bittrex and around 25% on Poloniex. There is basically no active trading of Vertcoin on non-English speaking exchanges.

Litecoin, by comparison, is most traded on Bitthumb (16%) against the KRW, followed by Gdax (Coinbase) against USD (10%), and fairly well diversified elsewhere. Vertcoin has significant opportunity for further trading volume if it can get added to new exchanges — especially exchanges in Asia. This is a stated goal on their roadmap.

Vertcoin price analysis

Vertcoin has undergone a rapid price increase of late. It currently trades around $4 USD, or around 70,000 satoshis (.0007 bitcoin). By the time of publishing, this will likely be out of date, but I will do a broad price analysis.

I prefer to analyze general bullishness or bearishness using the Ichimoku Cloud system. Josh Olszewicz is the undisputed king (in my mind) of using Ichimoku for crypto analysis. You should follow him on Twitter, read all his articles on Brave New Coin, and check out his guide to using Ichimoku on YouTube.

Vertcoin is one of very few generally bullish alts of late. I like to analyze the daily and four-hour charts frequently, and I also like to look at weekly charts when the coin is old enough to effectively do so.

On the daily timeframe, using doubled cloud settings for greater accuracy, Vertcoin is bullish across the board: Price is above the cloud, the cloud is green, Tenkan is above Kijun, and the Chikou (lagging span) is above price.

I also like to look at moving averages, particularly the 50 EMA and 200 EMA. In the daily timeframe, the 50 EMA is well above the 200 EMA and price is well above that.

Points where the 50EMA crosses above the 200 EMA are called a “golden cross” and are a strong bullish indicator.

The price has been on a fairly steady increase since the golden cross in April, 2017. The price fell below the 200 EMA for a short time, and the push back above both the 200 and the 50 EMA extended the trend to the current timeframe. There is no apparent threat of the reverse cross (50 goes below 200: the “death cross”) on either the 4-hour or daily charts.

One may also consider the Elliot Wave pattern for Vertcoin’s price movement. This is a 4-hour scale, put it could also apply to the daily. After an ABCDE bullish run, and an ABC correction, we’re on leg E of another bull run. I am unsure if we have finished this leg or not, but it’s possible we could see a correction again soon.

A pitchfork analysis can help identify support and resistance levels as well.

There is a fairly clear pitchfork on Vertcoin, and the price is currently battling the center line after a determined move from the lower channel. I show wings on the pitchfork out to 1.75, but so far it has not really entered them in either direction. If the price can jump above the median line soon, it should be able to find support there going forward, would likely coincide with a continuation of the last leg of the current Elliot Wave.

Short term correction possibilities

If Vertcoin doesn’t continue on this short term trend, we could see corrections to several areas. Natural locations to look for are the daily Ichimoku support barriers: Tenkan, Kijun, upper and lower cloud. You could also look at the 50 day and 200 day EMAs for support.

If price maintains the lower levels of the pitchfork I drew, I’d be surprised to see lower than 30k Sats anytime while maintaining bullishness; perhaps not lower than 45-50k for the first channel and primary Ichimoku supports.

Those levels range from 20k-50k Sats and I can’t advise what the right entry for someone is. However, we’ve seen that level of pricing as recently as August and September.

Longer term analysis

What first got me interested in Vertcoin was the weekly chart. I show it here with doubled Ichimoku settings again.

You can see that on the weekly timeframe, it is not technically bullish yet, as not all criteria are met, but it is in an uptrend, and there are several promising signs.

The cloud recently flipped green to be bullish, and the Tenkan is above the Kijun. Also, the price has entered the cloud. One of my favorite things I learned from Josh (linked above) is the flat line “Kumo magnet”. He notes that when a Kumo cloud has a flat line like the one shown, the price is drawn to it.

That offers us a target opportunity of around .0013 bitcoin in the coming weeks. It is not a guarantee by any measure, but it is a real target.

There is also a cup and handle pattern on the weekly timeframe, extending from September 2016 through around July 2017 for the cup, and through the end of August for the handle. You can see the recent price action that supports this pattern, as well as a bounce of the lower boundary of the cloud.

These changes also coincide with the fundamental analysis and new Vertcoin features that have been in development; however, most technical analysts are happy to look at a chart independently of fundamental analysis.

In the coming months, we could see the price hit the top of the Kumo cloud, and even perhaps form a larger cup that would extend back to May 2015. If the price can sustain itself and exit above the cloud in a bullish manner, we could see significant price action continue over the coming year.

In conclusion

It is impossible to determine the future of any coin. However, Vertcoin looks promising from both a fundamental and technical perspective.

I am keeping an eye on whether Vertcoin can jump above the Median line on the pitchfork I drew, and also whether it can reach near the 130k Satoshi Kumo target. I would expect some form of correction from there if it reaches that target quickly, if not before.

Long term, Vertcoin is around 1/20th of Litecoin’s market cap. I believe we’ll see proof of that by real world usage, adoption, and excitement for Vertcoin technology. If it can show that it has advantages over other coins in the market, and can find a place in the rapidly evolving cryptocurrency space, I think we can see a bright future for Vertcoin.


Disclosures and notices: I do hold some Vertcoin in my crypto portfolio, along with around two dozen other coins. Do not take anything said here as investment advice, and always do your own research.