New cryptocurrency relies on stability instead of scarcity
Other products have failed because they are ill-suited with speculation fuelling activity
There is a new cryptocurrency in town, and in something akin to a Western, this smalltime wannabe hero is determined to “fix the problem with currency” and has pitted itself against (possibly) the biggest bubble of them all, bitcoin. The only problem with these high noon stakes is that the currency in question is worthless.
As it stands, there are 2trillion Qs in the world — the currency of the would-be Q payment network. Initiative Q has dreams of a $1 to 1Q valuation in its quest to “integrate the best technological improvements that have been made in the payment industry over the last few decades to create a flexible, easy-to-use and inexpensive payment network”.
These tools are nothing new, says the website, instead the problem is a classic chicken-oregg barrier: “No buyer wants to join a network with no sellers, and no seller will offer a payment option that no buyer uses, they claim.” So they adopted the “if you build it, they will come” mantra and are manufacturing demand on both sides by literally giving their made-up money away for free (for now.)
Not just to anyone, though. Only to early adopters, who are invited and verified by other people who have already joined. “Join now and you get 14 days to invite five friends, with each friend that joins earning you more Qs ”— in typical 1990s chain-letter fashion.
And as such, there is a hot new trend on social media with invitations from all sides rolling in with whispers of promises from Initiative Q. It’s the socialmedia equivalent of a cultist Avon lady with the tagline “join tomorrow’s currency, today”.
It’s a pitch made by Saar Wilf, the creator of Fraud Sciences: a start-up that developed technologies that allowed sellers on the internet to detect if a card used in a payment belonged to someone else. Paypal eventually bought his company in 2008.
Now he has joined forces with “a team of experts in disciplines ... including mathematics, economics and other social sciences”. The economic side is based on a model developed by Lawrence White, a professor of monetary theory and policy at George Mason University.
He estimates the value of the Qs (1Q:$1) on the estimated volume of the transactions on the Q network and the velocity of money — by his count around 2, indicating that each unit of currency in the world changes hands roughly twice a year.
According to White’s calculations, “the economic activity estimate in the event of successful market adoption ($5-trillion to $20-trillion) by the velocity of the estimate ($2-trillion to $12trillion) results in a total value of half-a-trillion to $10-trillion.”
It is in White’s evaluation of his made-up currency against other cryptocurrencies that things get spicy: “So far, cryptocurrencies have failed”, he writes about attempts to create a new currency. “Their focus is on ensuring scarcity but they neglect the stability value and ease of use. This makes them illsuited for trade, with nearly all activity fuelled by speculation.”
Besides the famous case of Laszlo Hanyecz, who bought a pizza with 10,000 bitcoin in 2010 to prove its potential, it is true bitcoin has never reached its promise in terms of everyday — legal — retail possibilities. Many articles were written in 2010 on designing one’s own digital currency for specific purposes as the way of the future. We could have had a cryptocurrency for children that could only be spent on certain items determined by their parents.
Instead we got the likes of Dogecoin — a “joke currency” based on a meme of a Japanese dog that was given to artists as a form of appreciation, which had a value of $1bn in January but has been plummeting ever since. And then there’s DeepOnion, another new cryptocurrency designed to be anonymous for dark web illegal weapons and drugs sales.
“Despite these shortcomings, the market of cryptocurrencies reached nearly $1-trillion,” White says, “it is not far-fetched to assume that a currency designed to reach a market’s true needs (stability of value, ease of use, etc), and is exclusively coupled to a superior payment network, should surpass this number.”
This is all well and good but here’s the rub: Initiative Q’s initial model still comes across as a pyramid scheme. What good has ever come from the promise of free money and exclusive, yet inclusive, prosperity? At what point do the scamsters start emailing you to ask for more money to help free trapped Nigerian princesses?
The truth is we don’t know. It all looks legit. These boys seem sincere in their belief that you have to spend money to make money, or at least give it away. In their favour is the fact that no actual money has been exchanged save the “money” that is currently worthless. And no credit card details have been entered or even requested. At most they have access to your email, which Facebook seems to give away every five minutes to another hacker anyway.
Maybe this will be like Ello, the long forgotten fad social network, or like Gmail, which also used this kind of hype invitation scheme to bring about the death of Hotmail.
WHAT GOOD HAS EVER COME FROM THE PROMISE OF FREE MONEY AND EXCLUSIVE, YET INCLUSIVE, PROSPERITY?