In the world of cryptocurrencies, new money is not printed by a quasi-governmental agency that decides behind closed doors how much new wealth will be created and how it will be distributed. Instead, it's "mined" by an ever-shrinking number of dedicated individuals, many of whom band together to leverage their combined computing resources to solve intricate mathematical equations which add to the blockchain ledger and allow for the release of a tiny crop of new "coins." And while it might seem like a game-changing notion to remove The Man from the process of wealth generation and bring it all back to street level, it turns out there are a few flies in the cryptocurrency ointment. But a Denver entrepreneur believes he may have the secret to solving the cryptocurrency conundrum, and his solution is to turn the whole process on its head.
While cryptocurrencies like Bitcoin have shown immense promise, they remain a fringe economic player at best for a couple of good reasons. The first is sustainability. You see, every time a blockchain transaction gets verified the block grows, and the next transaction becomes that much more difficult to verify. Mining that you might have been able to do with a decent computer in your living room 7 or 8 years ago now requires massive amounts of computing power and uses so much energy that solo mining has become essentially unprofitable. Most miners now band together and split what they mine. But even so, as the blockchain ledger continues to grow the question of future sustainability cannot be ignored.
The second issue surrounding cryptocurrencies is one of value. As in, how much is a Bitcoin, or any other nonexistent unit of cryptocurrency, worth? With no official sanctioning body calling the shots and speculators swooping and causing valuations to soar and crash in waves no one can answer that question. No matter what you think of central banks they tend to do one thing pretty well: that is, they do a pretty good job controlling the value of money. Any fluctuations tend to be minor (except of course in failed states like Venezuela), and people can be fairly certain the value of money tomorrow will be pretty close to what it was today. This stability stems largely from the belief that the nation issuing the currency is going to be there tomorrow to continue to back it. With crypto, there is no nation behind it so establishing value becomes extremely problematic.
While a solution to the problem of sustainability has yet to emerge a Denver startup, led by entrepreneur Alan Forbes, believes it may have found an answer to the issue of valuation. After examining the issue at length, Forbes determined that the best way to establish the value of a cryptocurrency was to put it to work in the real world. As such Forbes’ startup, Blockchain Holdings Inc., will take the money they hope to raise from their ICO and use it to fund real-world mining projects, oil and gas wells, research into clean energy and blockchain development. The revenue generated by these projects will then determine the value of the currency, which they’re calling Xscrip.
Blockchain Holdings Inc. has secured a number of potentially lucrative investments in, among other things, a blockchain developer, a type of geothermic fuel cell and production rights on 1 billion barrels of oil and gas in western Colorado. The goal is to raise $45 million through the Xscrip ICO then funnel that money into developing these investments. As these investments begin to produce profits, 40 percent will be held to fund future investments while 60 percent will be passed back to those who bought into the ICO in the form of a dividend. That dividend will manifest itself as an increase in the value of a single unit of Xscrip. This will enable the company to establish a real, verifiable value for the currency and also shield investors from taxes until they decide to sell their “coins."
Forbes is proud of the fact that his company isn’t trying to be cute with securities laws. Blockchain Holdings Inc. has filed all the necessary papers and Forbes readily admits his scheme to establish the value for his cryptocurrency is, in fact, a securities offering. Forbes has also insisted all investors must have either a net worth of $1 million or an income of $200,000 per year for at least the last two years. And that's all well and good. The thing is, all of this - the tying of the currency's value to real-world investments, the treating of crypto coins as securities, the courting of wealthy investors and especially the SEC filings - all of it, runs contrary to the spirit that put wind in the sails of the whole cryptocurrency movement.
From the time it was launched by the now legendary (and probably nonexistent) Satoshi Nakamoto in 2009, Bitcoin and the crypto movement has been about wresting control of money from the hands of The Man and returning it to the people. By playing by The Man's rules and freezing out non-wealthy individuals, Forbes and Blockchain Holdings Inc. are essentially waving a white flag and stating they give up on the ideals that provided crypto its appeal in the first place. To crypto’s true believers it’s like the Rolling Stones going disco or George Lucas selling Star Wars to Disney.
The soaring valuation of Bitcoin in 2017 and its subsequent crash left a lot of people questioning the wisdom of putting their faith in a fiat currency with no state guarantor. As such it’s no real surprise that “traditional” investors have swooped in and tried to find a way to stabilize the market by tying cryptocurrencies to real-world investments. Will it work? Probably, to a certain extent. Still, we have a sneaky suspicion that somewhere, Satoshi Nakamoto is taking a very dim view of it all.