Syscoin — The Empty Bazaar


TL;DR. Ecology:2. Technology:3. Decentralization:2. Valuation:3. Rating:3/10


(Update 2019-04-12: Please see the first semi-annual ratings review of Syscoin here.)

Syscoin was introduced on as early as April 2014 by user danosphere. The team had formed earlier when developing on the meme project KittehCoin, a project not dissimilar to the famous Dogecoin. By using the Litecoin code base, the project also inherited most of the code base from Bitcoin. The relation to Litecoin ensured that Scrypt initially was chosen as mining algorithm, just to later be switched to Bitcoin's SHA-256 for easier overall integration as well as merge-mining with the Bitcoin network.

Syscoin's main stated goal was to introduce more flexibility in the core protocol with an early type of smart contracts, not to be confused with Ethereum's more flexible 'turing complete' contracts. With the new code, people would be able to create certificates on the blockchain to act as digital titles of ownership. So in other words, the blockchain enabled digitization of assets that could then be traded. On top of this, Syscoin wanted to facilitate decentralized trading of such assets as well as tangible ones, not unlike what Ebay is offering.

On 19th of July 2014, the Syscoin team initiated their presale. Initially, only 8% of all tokens were to be created (where 5% were allocated to the public through the presale). After some complaints about the fact that ASIC miners were to obtain most of the non-premined 92% of all tokens, the presale conditions changed so that contributors could buy up 15% of the total supply instead (with further 2% reserved for the developers and 1% for bounties). During this period, all code was kept closed source. The reason why investors were not bothered was because of an escrow service that would release funds to Syscoin developers only after a successful launch.

On the 17th of August, the network went up with a 2 billion coin issuance schedule over the next hundred years. The launch was a bit rough as users with the Windows wallet initially could not sync the blockchain. Problems were apparently large or many enough to warrant a statement from the escrow, stating that refunds was a possibility if the situation did not improve. No refund ever happened, but there were still critical problems that prompted hardfork after hardfork just days after launch.

A week later, on 26th of August, a new BCT thread was posted since the blockchain now was up and running. Some new releases were in the pipeline and the project ran seamlessly when the escrow Moolah suddenly announced that they were going to close business. According to CCN journalists, quoting evidence provided by, among others, Dogecoin's creator Jackson Palmer, Moolah was run by a scammer. The Syscoin team announced legal proceedings immediately as a majority of all presale funds were still stored over there. A majority of these funds were never seen again.

Development continued throughout the year and in 2015, the team approached Ethereum as they saw potential use of that platform's smart contracts in terms of developing escrow, a decentralized marketplace, auctions etc. Syscoin already had a working decentralized marketplace where offers were stored on-chain, but they saw even further merit in Ethereum. More specifically, trustless escrow functionality and other new features were deemed unfeasible with a Bitcoin code base as it prompted hardforks with every new implementation. At around this time, there was also talk of holding a second crowdsale for what was named SYS2. SYS2 was designed to be a marketplace-focused utility token on Ethereum's blockchain, that could be converted from regular SYS with ratio 1:1. During this conversion, old SYS were going to be burned. Another important aspect was that the main Syscoin developers were going to shift to Ethereum-based development (Solidity) of SYS2, leaving holders of original SYS in uncertainty as the chain went in to 'maintenance mode'.

On October 17th 2015, the beta of what was deemed last Syscoin release (named Shade) was available on GitHub. At the same time, the name of Forge had been decided for the new SYS2 asset. Then, just weeks later, the Syscoin team decided to ditch the Ethereum plans and focus solely on the Shade release instead. This release came with some large changes as well, including the need to import private keys in a new SYS2 wallet to obtain tokens on a new blockchain, which genesis block was to be a snapshot from the old blockchain. The new blockchain specifications also changed the maximum number of tokens in existence, from 2 billion to around 6.68 million.

On 29th of February 2016 the Syscoin 2.0 beta was released. Later that year as the full 2.0 version neared completion, the team changed the proposed issuance schedule and max cap again, while giving themselves 15 million SYS. The conversion was reverted back to a ratio of 1:1 while maximum supply was more than halved. On top of this, the team was asking for donations as well. The full 2.0 release occurred on 1st of May 2016, enabling among other things Bitcoin payment options for the integrated marketplace. A week later, a new BCT thread went up. For the 2.1 release more than 6 months later, another snapshot was taken to get rid of some blockchain bloat.

In first part of 2017, Syscoin adopted SegWit and started experimenting with Lightning Network on the mainnet; low-fee second layer transactions were deemed essential for the upcoming Blockmarket Desktop client where users were to trade in a decentralized and easy manner. On the 29th of August 2017 it was revealed that big changes to the core protocol were at hand. Masternodes were going to be introduced later on, effectively changing Syscoin from a Proof of Work blockchain to a Proof of Work and Proof of Stake hybrid. The staking bonds were not going to be threatened with harsh slashing conditions as is the case for Ethereum's PoS future, but rather incentivized through the loss of rewards should nodes misbehave.

On 12th of September 2017, Blockmarket Desktop was finally released. Soon thereafter, more details on the masternode system was released. Block rewards were going to be allocated to stakers (75%) and miners (25%). Minimum staked number of Syscoin tokens were set to 100 000. The Syscoin team was going to fire up maximum 5 masternodes per team member to ensure initial network stability. Not long after the first specifications however, some changes were made which included masternode seniority (incentivizing nodes that had maintained the network for a long time), a decrease of PoW block reward from 25% to 15%, and an introduction of 10% block reward to what the team called Decentralized Governance Proposals.

Moving on to 2018, rumors started that the private company Blockchain Foundry Inc that the Syscoin team earlier had consolidated under, had plans on an IPO in Canada. Although the company is obviously for-profit, the marketplace infrastructure was initially confirmed to be open source in the future, and as a result also free. This sentiment seems to have shifted however and Blockmarket Desktop is now closed source. On the 27th of March 2018, the Syscoin team through the Blockchain Foundry Inc released an update on some SEC regulatory developments that they worried about.

On 1st of May 2018, Syscoin 3.0 was released from a 2.X snapshot, which also explains why today's block explorer starts at that point. 2 months later, Blockmarket Desktop 3.0 was released by the team. By this point the decentralized trading had few hurdles as it had been refined for years. On 4th of July, Binance halted all Syscoin trading as it appears that some of the exchange's API keys were compromised, resulting in abnormal trading on the BTC/SYS pair. Some initially claimed that the Syscoin blockchain itself had been exploited but on a closer look that claim did not hold up. On 14th of August, it was announced that Blockchain Foundry Inc was to be listed on Frankfurt Stock Exchange. Soon thereafter a mandatory Syscoin 3.1.0 core release was posted.

And that is essentially where we are today; a functional and more or less decentralized marketplace on a network powered by PoW merge-mining and bonded masternodes. The last software client release was on the 25th of September, just a couple of weeks prior to this analysis.


The Ecology surrounding Syscoin has been affected by numerous issues over the last few years. Starting from the beginning, one of the Syscoin co-founders shows an unusual amount of ignorance during the coin's presale as he refutes that marketcap should be calculated with anything other than circulating supply. Obviously, since the vast majority of all supply was to be minted through PoW mining, it is essential to account for at least parts of it when calculating a total value of the cryptocurrency. What prudent analysts may do is to not include supply that is reaching the market within a decades or two, but to not include supply that is minted even within a couple of years is just wrong.

After the troublesome launch of the network, the escrow exchange published a statement that among other things mentioned that the Syscoin team had requested that some of the contributed BTC were to be used as buy support on the exchange. This is a really weird request and BD Ratings is strongly against core teams that directly meddle with the price of the cryptocurrency they are developing on. Later on, the lead developer of the project was also focusing on price and made some very unprofessional statements. The reason why these are immoral is that he is stating that future functionality will increase the price, but won't state what those features are.

Moving on to the SYS1 to SYS2 conversion to an initial ratio of approximately 299:1. This makes little sense to BD Ratings, as the marketcap ought to stay the same given the exact same fundamentals. The Syscoin team never properly explained the reason for this proposed reduction in total amount of coins, but it is not hard to guess that the insane upward price movement would catch some peoples' attention. One argument they gave was that the network didn't really need billions of coins. They absolutely failed to understand that total supply is just a number, since any unit is divisible. Luckily the proposal was shelved and at least this important property of the coin was not ravaged other than the more minor max supply reduction to ~900M coins.

When inspecting on-chain activity at time of writing, it is evident that most blocks contain only one input: the block reward. Like most other smaller public blockchains right now, no one is using them. This lead us to one of the main issues that BD Ratings have with decentralized exchanges for physical goods: is there really a need for a blockchain, given that you want to trade legal goods? It seems to us that marketplaces like Ebay could easily integrate payment options with cryptocurrencies instead of merging the trading infrastructure with a public blockchain. Decentralization is a positive thing if entities want to shut down a marketplace for digital goods, but as Blockmarket Desktop focuses on physical goods, any local authorities can just participate there and attack any centralized supply network that delivers these goods.

Grade: 2

Reasons: Very low on-chain activity. Extremely low respect for coin parameters, destroying Syscoin as a store of value. Not convincing argument for even having a blockchain.


Syscoin has a Bitcoin core code base, drawing strength from very solid development. The PoW consensus mechanism was highly battle tested as well which is why it was somewhat strange that the developers decided to make the blockchain a PoW-PoS hybrid. Before this announcement, Lightning Network had already been implemented, so a change to achieve higher transaction throughput was probably not the main reason. The Syscoin developers later claimed to have created a scalability solution called ZDAG, based on the PoW and PoS hybrid structure. If this solution is feasible or not is outside the scope of BD Rating's technical knowledge, and more peer review as well as real world proof are needed for any verdict.

Continuing on the path of adding new properties, Syscoin went wild for smart contracts, token creation capabilities, aliases with a reputation system, and other useful things. The problem however is that the more levers to pull, the more technical attack surfaces a blockchain has. Should Syscoin grow considerably and attract more malicious eyes, the bloating of core functionality may very well lead to a wack-a-mole game with bugs being exploited and subsequently patched. Evidence for this was seen for example in the Ethereum blockchain during its first years. As soon as Syscoin have stabilized in terms of core structure, then time will reveal if it is sound or not.

Somewhat related to the fact that Syscoin implements a lot of things is the fact that the blockchain has been 'restarted' multiple times with block snapshots taken to ensure proper genesis allocation. BD Ratings does not have the technical knowledge to address this issue properly, but it is somewhat distressing that block explorers are cut short because of this, and there might be some drawbacks with this method since other large and bloated blockchains have chosen not to do exactly this.

The Syscoin team have initiated bug bounties, which is a proper way of incentivizing people to look for weaknesses in the code base. The Blockmarket Desktop client was audited as well and the results were acceptable.

When inspecting the GitHub repositories, BD Ratings conclude that there is development going on from mainly three developers, but the pace has currently declined somewhat.

Grade: 3

Reasons: Core protocol has changed considerably during the years, possibly reducing overall robustness. Chain snapshots and restarts. Bug bounties.


The first large example of centralization in the project showed itself in 2015 when the Syscoin team decided to virtually abandon the blockchain in favor of Ethereum dApp development. They are of course entitled to do exactly whatever they want, but it still reveals how vulnerable the old blockchain was in terms of having an active team of developers looking out for it. Now, this decision was later withdrawn.

Further blatant evidence of centralization surfaced during the whole coin issuance debacle, where the team first agreed on a 299:1 conversion for the new SYS2 chain, only to change this one more time. Furthermore, they also allocated 15 million SYS to themselves for the 2.0 release, and anyone with power to confiscate chain wealth in this manner proves that the blockchain is highly centralized. Stating such terms during an ICO phase is much more ethical as potential contributors prior to seignorage can decide whether to suffer it or not.

The Syscoin 3.0 warning issued in 2018 is further clear evidence that the project as a whole suffers from centralization through the company Blockchain Foundry Inc. The company is a tangible attack surface should authorities not like what they see happening on the Blockmarket Desktop application.

Grade: 2

Reasons: Seignorage. Core developers have power to make huge changes to the blockchain. Core developers belong to a for profit legal entity that can get sued and shut down.


At time of writing, Syscoin is priced at USD 0.088. The marketcap of all circulating supply is ~USD48M, and of maximum supply is ~USD79M. It's considerably higher than the marketcap of Particl, another decentralized market focused blockchain. Syscoin is quite difficult to value when put in contrast to for example Bitcoin. But there is no way around the fact that a blockchain worth more than USD 48M ought not to see its properties change as much as Syscoin has done. The team's constant tampering with the blockchain is destroying the store of value property, and the unit of account property.

Possible things that may change this low rating in the future is: decentralization efforts, proofs that ZDAB is a good scalability solution, and much higher activity in the marketplace.

Grade: 3

Reasons: Centralized coin. Too many large changes destroys properties.