porn is crypto’s killer app, Coinbase users vs. Bitcoin users, irrelevant social networks

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This post covers news for CW32 (12.08.2018 – 18.08.2018). It is based on Researchly’s Industry Sentiment tool.
Read the previous issue here

This issue covers the difference between Coinbase and Bitcoin users, how free speech doesn’t (yet) matter for Crypto Social Networks, crypto’s killer app (Adult Industry and institutional investment assets), and the competition between nationcoins and stablecoins.


Privacy

This week saw a few announcements around privacy;

  • Coindesk reported on Taproot, a technology to make Bitcoin transactions private.
  • A computer scientist published his initial implementation of BOLT, a privacy add-on for the Lightning network.
  • Privacy coin Zcash announced the release of Zcash 2.0.0. It includes several changes, among them more efficient private transactions.
  • Coinbase acquired Distributed Systems. Distributed Systems offers decentralized identity solutions.

One thing that this news show is that there are two types of crypto users.

Coinbase users vs. Bitcoin users

The names Coinbase and Bitcoin do not refer to the actual Coinbase/Bitcoin users but are metaphors to emphasize the differing demands users have from crypto/blockchains. One difference is their demand for privacy; Bitcoin users want full privacy and complete independence from banks and other institutions. Coinbase users want to stay as close to the current legal framework as possible.

The above-mentioned news depict how these different needs are served. The technological progress around privacy (e.g. Taproot) or Privacy Coins in general, serve the demands of Bitcoin users. Innovations that make blockchain/crypto as transparent as possible (e.g. Coinbase’s Distributed Systems) serve the needs of Coinbase users.

When extrapolating these groups into the future the question arises how these opposing views will influence society. If the Bitcoin users dominate, our society will fundamentally change into a self-governing community (setting aside the technical feasibility). On the other side, if Coinbase users dominate, the ideal proposed by Bitcoin users will end representing mere “bumps” in the historical landscape.

Read More: Why Coinbase and not Bitcoin will replace Mastercard

Intelligence

Insights into 29 Privacy Blockchains, Platforms & Currencies. More in Researchly’s Free Crypto Database

Related Posts

Social Networks

Blockchain social network Minds goes live. After about five months on the Rinkeby test network, social network Minds is going live on the Ethereum Mainnet. (Coindesk)

Minds is a blockchain-based open-source social network founded in 2011 that raised over $1 Million. It is very similar to Steemit where participants are rewarded with tokens (e.g. for publishing articles). Users can also pay for marketing services with these tokens (e.g. to increase one’s reach) or reward other members.

Minds sees its role in the social media sphere as a platform for free speech. As Elizabeth McCauley, blockchain business developer and Minds adviser puts it:

“When governments crack down on free speech and team with centralized social media surveillance companies, [Minds] provides a refuge for individuals seeking an avenue for global interaction and idea exchange.” – Coindesk

The free speech narrative is common amongst blockchain-based social networks. Sapien Network is a social news platform whose core values, among other things, are “Free Speech” (see Website). Similarly, Sociall another social network praises itself to be “Self-Governing” where they give “the power back to the people instead of having all power sit with the owning entity” (see Website). Moreover, on tataUFO, a dapp that describes itself as “Instagram on Blockchain” (based on the Social Networking Protocol TTC) content administration and governance lies within users.

Given the anti-free speech activities by incumbents (Google’s alleged workings on a censored search engine being the most recent example), one could see how there could be a market for Minds and similar. Nevertheless, these startups have yet to show traction. Minds has 1.25 million registered users (Coindesk), Sapien Network 4000, and tataUFO allegedly 10 Million (see Website). Although tataUFO and Minds have a considerable user base, it is nothing compared to giants like Facebook and Instagram which count 2234 Million in Q2 2018 and 1000 Million in June 2018, respectively.

Maybe like the visions of Bitcoin users, crypto social networks will end up mere fads in the technological landscape.

Adult Industry

This week has shown two news mentions related to the adult industry.

Pornhub subsidiary wants to pay you cryptocurrency for watching porn – but don’t get too excited Tube8 will integrate the Vice Industry Token (VIT) into their platform. Tube8 is a subsidiary of Pornhub and has about 150 million monthly visits. Through the integration, users will be able to earn VITs when using Tube8 (e.g watching videos). (thenextweb)

Playboy Files Fraud Lawsuit Against Blockchain Startup
Playboy is suing Global Blockchain Technologies (GBT) for fraud and contract breach. GBT was supposed to help Playboy integrate the Vice Industry Token (VIT) but according to Playboy GBT did not fulfill any obligations (coindesk).

In the adult industry, more similar implementations have happened in the past. Pornhub started accepting Verge in April 2018, followed by Tron and ZenCash in June 2018. In December 2013, Porn.com started accepting Bitcoin and at times even accounted for 50% of all Porn.com sales.

Although sales incurred through Bitcoin on Porn.com have fallen down to about 5%, I still believe that the adult industry could be one of Bitcoin’s “killer apps”. As I have argued in Blockchain In The Adult Industry: Problems, Trends, and Solutions Blockchains solve some of the industry’s prevalent problems;

Above all, payment is the most pressing problem in the Adult Industry. Issues are payment fraud (e.g. chargebacks) and high payment fees due to lack of competing payment processors (payment processors tend to avoid the industry due to controversial content, legal and regulatory complications such as age restrictions, and reputation concerns). And those payment processors that are in the industry have great power over their customers’ accounts; there have been reports of companies closing bank accounts belonging to pornographic film actors or companies from the Adult Industry. Also, the pay per minute business model many companies follow is difficult to achieve with current financial infrastructures. Finally, lack of privacy for consumers hinders spending; because payments to adult sites appear on bank statements, users hesitate to spend money on such sites. The recent reveal that developers can read users’ Gmail emails certainly won’t improve this reservation.

Moreover, David Kay, marketing director at Porn.com’s parent company Sagan Ltd told The Guardian:

“I definitely believe that porn will be bitcoin’s killer app. Fast, private and confidential payments.”

Finally, not only can the adult industry drive adoption because they solve industry-wide problems but also because they fit human’s natural process of adopting new technologies as I have argued in The Diffusion of Blockchain Innovations In The Adult Industry.

More Insights into the Adult Industry – Researchly’s Free Crypto Database

Custody wars

Prime Trust revealed that it has been offering cold storages for Bitcoin since mid-July and that they are also capable of storing any other ERC–20 token (coindesk).

This section is slowly becoming a regular one. We have seen a range of custody announcements over the last weeks:

  • Goldman Sachs Is Considering a Custody Offering for Crypto Funds
    Goldman is allegedly working on a crypto custody solution. They are not the only incumbents working on custodial offerings. Bank of New York Mellon Corp., JPMorgan Chase & Co., and Northern Trust Corp are apparently also active in this space. (Blockchain & Crypto news CW31)
  • Crypto Security Startup BitGo to Custody Zcash. (Blockchain & Crypto news CW30)
  • BitGo added 57 Ethereum Tokens. (Blockchain Report CW28)
  • Coinbase’s Custody Services added 10 institutional customers since their start around two weeks ago. (Blockchain Report CW28)

As I have argued in Why for Crypto centralization must come first such announcements depict how the crypto space is changing:

Shifts in Crypto/Blockchain:

  1. Electronic cash, FMI (Financial Markets Infrastructure)
  2. Decentralized computing platform (Dapps)
  3. Enterprise Blockchains, store of value and (institutional) investment assets

And whereas some might despise this transformation, it is a necessity:

[…] developers should target whatever market accepts their current technological progress, instead of trying to convince users with semi-functional applications. […] By going to market as early as possible with whatever early tech there is means creating a springboard for future applications. For instance, solar powered calculators were the springboards for solar cells, digital watches & calculators the springboards for liquid crystal displays and inventory management units & simple signature capture devices springboards for pen-based computing. All these crude initial applications of the technologies allowed the companies to generate profits and to refine their technology for commercial success in the mass market. – Why for Crypto centralization must come first

On a more general level, crypto as an institutional investment asset (enabled by crypto custody solutions) depict another potential killer app. As indicated above, some dislike the idea that cryptos as an investment could be the first killer app. Some argue that Blockchain can only get adoption after the general population has adopted it. However, as I have argued in Why for Crypto centralization must come first, the general population is the wrong target market given Blockchain’s current technological progress:

Similarly, for Blockchains, the consumer mass market is by far not yet ready. Although it has enough financing (b), there are hardly yet any dapps that are better than existing solutions (or that bring new solutions) (a). And most importantly, the mainstream market is unwilling to manage the UX difficulties that the Web 3.0 brings.

Instead, the institutional investments market possess all the requirements to help crypto gain popularity:

[…] they outcompete other assets in regards to “risk-reward” (a), institutional investors have enough capital to deploy (b), and are willing to sacrifice the weaknesses (e.g. lacking infrastructure such as custody solutions) for the advantages (c). This is also why we are seeing so many incumbents enter the space with custody solutions, ETFs, and similar products. In these areas, companies can generate profits and improve the technology. Once Blockchains have reached a mainstream-ready efficiency-threshold there, developers can shift their attention to the decentralized Web 3.0. – Why for Crypto centralization must come first

Nationcoins (bank-issued currencies) vs. stablecoins

Bitt Inks Blockchain Deal With Another Caribbean Central Bank
Bitt is exploring together with the Centrale Bank van Curaçao en Sint Maarten (CBCS) the issuance of a central bank-issued digital currency for Curaçao and Sint Maarten. (Coindesk)

This comes at a time where Venezuela’s Petro is about to start circulating (Coindesk). Besides that, many other nations are experimenting with state-issued cryptocurrencies. In July, Iran has allegedly started working on a state-issued currency to circumvent US sanctions. And in May 2018 The Riksbank has started ‘examining whether the krona needs to be issued in an electronic form, an “e-krona”’. Whereas such projects are still mere explorations it is worth thinking about the impact they will have on their state-less counterpart, Stablecoins. Many have argued that given their power and distribution state-issued currencies will make Stablecoins redundant.

Whether you support this view, you should definitely check out the market map of 19 Stablecoins I have put together. Maybe all of these 19 Stablecoins will fail or maybe one of them will be the stablecoin/nationcoin winner. Check out the market map here.

Intelligence

Insights into 29 Stablecoins. More in Researchly’s Free Crypto Database

Past issues


Photo by Ming Jun Tan on Unsplash

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