Global Crypto division exposed by ‘bividend’

The author is an FT assistant editor

BTCS, a public crypto company, this week donated what it calls “bividend”- one-time payment of five cents per share, paid in dollars or bitcoin.

It is a small company, which was promoted to Nasdaq last year. You can view bividend as a distraction, a small business relationship with a well-known Twitter name. It is possible that BTCS CEO, Charles Allen, agrees enthusiastically. He wanted people to see the benefits of the company and read his writings. Success!

Behind the bividend is betting which, if correct, can have serious consequences. Allen offers to pay depositors in bitcoin among other things because BTCS has 90 bitcoins sitting on its profitable pages, but has no intention of making a profit. Bitcoin, according to Allen, is an unprofitable asset, “just sitting there”. It can be appreciated. But it does not make money, which has long been the goal of a public company.

BTCS was established as a pure cryptocurrency company which is now seen as the Precambrian era in 2013. It started in ecommerce trading, selling bitcoin trading. It moved to bitcoin mines, struggled with what Allen called “crypto winter”, then spent time buying bitcoin and ethereum, deciding what to do. According to quarterly reservation, the company now has two types of cryptocurrencies, which are based on different components of its funds.

Along with dollar bills and prepaid bills, the company has $ 3.2m in “digital assets / currencies”. These are 90 bitcoins, living in the treasury, doing. . . none. The company also has $ 8.8m in “digital assets / savings”, the basis of its new strategy. Risks at risk are often ethereum. He has a job, and he earned $ 1.2m last year (the figure is not calculated, but it corresponds to the company’s quarterly reports).

Again, these are small numbers. What is important is the difference. Ethereum has a function. bitcoin is not. BTCS is starting to falter – putting ethereum and other cryptocurrencies in the form of digital escrow, fighting for the opportunity to secure a book of trades. The more money you make, the more likely you are to get a loan. His prize is a large sum of money. The company also runs so-called validator nodes – high-level pools that can generate revenue for others from outside its site.

The bitcoin protocol was not designed to be developed. Bitcoin, by design, is supposed to be there, hopefully more valuable, transferred if necessary. This is good if you are using bitcoin and you are looking forward to its future. It is bad, however, if you are a public company, trying to figure out how to make money. Betting on bitcoin in particular has been that when people grab it, it becomes very useful. There is a difference, however, between “catch” and “helpful”.

Bividend is not, to put it bluntly, profit – profit, given to its owners. Instead, I return the money. Easy for shareholders, this makes bividend tax-free. It also makes it seem like sharing it, the silent acknowledgment that says here, get this, because we do not have its plans. If BTCS is right, bitcoin is heading west for a new one. It is not a fixed amount. Nor are they profitable.

BTCS announces Hanno Lustig, an economist at Stanford Graduate School of Business, showed that the company was part of a long-standing tradition of providing benefits in some way. In the 18th century, he wrote, the Dutch West India Company paid for cloves.

Other modern joint venture companies used the same model. The Royal African Company of England contributed its share in the gold coin which later became known as guineas, the so-called African coast from which gold originated. Guineas was the first part, and only became part of the account over time. The joachimsthaler, a large silver coin that was an example of speaker and daler silver coins around the Baltic – and eventually what became known in the US as the Spanish dollar – were initially shared, too, which were donated to Saxon shareholders in the Bohemian silver mine.

But this is not what BTCS is doing. All modern partner companies pay their share of their profits from the profits. The Royal African company exported gold from Africa – gold itself was money. The West India Company exported cloves. Saxon joint ventures mined silver. BTCS currencies, however, come in the form of ethereum, or other currencies on its page that can sell. In its real business, it does not get bitcoin. According to Allen, the company will in the future provide real benefits in ethereum. But for now, it only pays bividend – to return money in the form of bitcoin, an asset that has value, but no purpose.