eBusiness Weekly
Jeffrey Gogo
There is big money in cryptocurrencies, and they are mostly unregulated. The market was valued at $424 billion as at May 2, according to data from coinmarketcap.com. And a lot more easier money is to be made from Initial Coin Offerings (ICOs), a way that allows start — up companies to raise money directly from investors buying crypto, away from the hustle of regulatory oversight.
With slightly under $3 billion raised from ICOs so far this year, it is little surprise that everyone is keen on starting their own digital coins. And even less surprising that nearly 1 600 cryptocurrencies exist today.
But with all the euphoria, scams have also become common place. A Vietenamese technology firm made off with $660 million worth of crypto three weeks ago after fooling 32 000 people to subscribe to their Pincoin and iFan ICO.
Here, a technology start-up Rainbow Ink Ltd is sponsoring an issue of 500 million VicFalls Coins (VFC), in an effort to grow tourism at the Victoria Falls, and elsewhere in Zimbabwe, says VFC founder Prosper Mwedzi.
His coin comes with a little tweak from what would generally make an ICO what it is. We have already looked at how the VFC works in our previous instalment. Now, we review whether the VicFalls Coin is worth its salt.
Although the idea of a cryptocurrency built for tourism is appealing, the VicFalls Coin looks short technically and economically.
Unlike other coins that are backed by stuff of real economic value, such as Venezuela’s oil-backed petro coin, the VicFalls Coin is supported by nothing except the goodwill of holiday makers, if and when they decide to tour the Victoria Falls or any other tourist destination here.
Bitcoin and Ethereum have the huge amounts of computing power, for example, which is key to running the blockchain network, as some proof of their underlying value.
By comparison, the VFC’s equivalent of a pre-sale offers the first 1 000 investors 500 VFCs each for free, as a means of building critical mass towards a 500 000 coin threshold.
Obviously, the creators see this as an incentive for the coin to succeed.
Mwedzi argues that the threshold gives the VicFalls Coin “bargaining power” when negotiating for businesses to take the coin up.
What the 33-year-old lawyer is actually doing is to confirm our earlier assertions that without investor buy-in, the VFC is useless, a coin built on the hope that someone will eventually like it.
He hopes the coin to derive value from “persuading businesses and service providers to offer discount to token holders.”
But he is also aware this is not going to be easy.
So, Mwedzi, who describes himself as a cryptocurrency enthusiast, will need to prove to the targeted businesses that someone believes in his plan. What better way to get investors on board by giving away half a million VFC for free!
In an Initial Coin Offering, coins are often paid for, building a community of investors who believe in the product on offer. Doubtless, speculators will buy in, but people tend to spend money on things they value.
A free coin offering may reflect a lack of trust in the ability of the VFC to attract the necessary adoption thresholds, even by its own creators, who could be hoping for a lucky break.
Most coins will aim to solve problems that existing financial products, or any other product, have failed to address adequately.
Ripple, for example, targets to facilitate “frictionless” financial transfers globally, at a speed and cost much quicker and cheaper than most of its rivals, including Bitcoin.
Broadly speaking, Ripple has achieved this goal. More than 100 banks have so far connected to the network worldwide.
It is difficult to say whether the Victoria Falls Coin aims to solve any specific problem within Zimbabwe’s tourism sector in a way that is sustainable or value driven.
The bet seems to be on investors getting hooked onto the coin, how ever that happens, before coins created from nothing appreciate in value over time through trading on cryptocurrency exchanges.
One may look at it as purely speculative. But that doesn’t mean the VicFalls Coin will fail.
Indeed, it appears improbable for speculation to thrive, but in a market pregnant with rapid twists and turns, not impossible. Terrible ideas have made a lot of money in the crypto sphere, making money virtually from thin air.
Other digital currencies have seen significant volatility. For example, Ripple soared more than 30 000 percent in 2017, but has plunged nearly 80 percent in the past four months, from a peak of $3,81 to 85 cents.
Could the first virtual currency for the Zimbabwean tourism sector by a budding entrepreneur, withstand the geo — political risks that often have profound influences on tourist preferences, such as those this country has experienced since the early 2000s?
Can the experiment serve as an example for crypto interventions in other sectors of the economy outside the financial sector?
There is no definite answer to these musings. The VFC doesn’t provide satisfactory leads.
To expect tourism related businesses to offer discounts based on the mere fact that someone is holding a VFC they received for free in their online wallets somewhere, Prosper Mwedzi, an IT graduate from the University of Zimbabwe, may simply be expecting too much.
