Can Crypto Crack the Retail Market?

    2019/05/15 23:16 Maggie Li huang Created with Sketch.


Greetings from day three of Consensus, where the mood has grown increasingly celebratory after bitcoin broke $8,000 for the first time in almost a year onTuesday. Bitcoin and other cryptocurrencies have been rallying for the last two weeks, and some have speculated that investors could be using crypto as a hedge against the capital markets, which have suffered as trade tensions between the U.S. and China grow.

Among the flurry of announcements timed to the crypto conference, one stands out as particularly big for the industry: Whole Foods and a host of other major retailers are working with a new venture, Spedn (pronounced “spendâ€), to accept payments in Mike Sullivan


In this weekâ€TMs newsletter, we examine an effort to allow people to spend cryptocurrency at major U.S. retailers, as well as a new stablecoin backed by Sequoia China.

Spedn Stakes New Path for Crypto Adoption

Over time, the narrative around bitcoin has shifted from being the internetâ€TMs nativecurrency to being “digital gold†for storing value. That left an opening for others todevelop new ways to make cryptocurrency suitable for real-world commerce, and thoseefforts have ranged from tokens that have near-infinite scalability to tokens that neverlose their value of $1.

A new initiative, backed by early crypto investors Cameron and Tyler Winklevossâ€TMexchange Gemini and a startup called Flexa, is chasing mainstream adoption yetanother way, but seems a little less “crypto†in the process. The two companiesdeveloped an app called Spedn that allows people to use bitcoin and three othercryptocurrencies to make purchases at retailers by tapping their phones on scannersalready used for products like Apple Pay. The Winklevii held court at Consensus thisweek, with groups of attendees passing through their booth, which featured Spedn-branded T-shirts and baseball caps available for purchase using the app.

The catch? The retailers never actually have to deal with cryptocurrency. Gemini settlesthe transactions on the back end by taking the usersâ€TM cryptocurrency and sendingdollars to the retailers. In other words, they havenâ€TMt fully solved the problem thatothers have been tackling for years, which is to move commerce over to a crypto-basedsystem.

This one gets halfway there, but it is hard to see why people accustomed to using dollarswould suddenly start buying their Starbucks coffee in ether. “Youâ€TMre just going toend up recreating the fiat banking system,†said Jake Yocom-Piatt, a project lead at Decred, a rival cryptocurrency to bitcoin.

It is interesting to consider Spednâ€TMs approach in light of the news that Facebook istrying to enlist e-commerce companies in its effort to roll out a cryptocurrency. Whilerelatively little is known about that project, it will be interesting to see if the social mediacompany takes a similar approach, or whether it will succeed in convincing retailers tohold crypto on their balance sheets. A critical difference is that Facebookâ€TMs token isdesigned to be pegged 1:1 to the dollar, while bitcoinâ€TMs value swings by the day.Granted, in addition to bitcoin, ether and Bitcoin Cash, Spedn allows users to pay inGemini dollars, which are fixed at $1.

Exclusive: Sequoia-Backed Stablecoin Raises $4 Million

One issue with stablecoins is that they sometimes arenâ€TMt as stable as their namesuggests: For example, tether has lost its $1 peg several times in recent years asquestions swirled around whether it was fully backed by cash reserves. Neutral, a NewYork–based crypto startup, is trying to solve this problem by holding a basket ofseveral different stablecoins and issuing its own token designed to be even more reliablethan any of them would be on their own.

In a previously unreported funding round, Neutral has raised $4 million from SequoiaChina, FBG Capital and Bixin, a Chinese company that operates bitcoin wallets andmining pools. The Neutral Dollar, as its stablecoin is called, will be available for tradingstarting next week, and will be tied to the value of Neutralâ€TMs reserves of USD Coin,Paxos, TrueUSD and Dai, four of the most widely traded stablecoins.

Most buying and selling of cryptocurrencies is done in stablecoins; they allow traders tomove out of cryptocurrency positions without converting their holdings to fiat currency.The idea is for people holding Neutral Dollar to be able to swap that token for any of theconstituent stablecoins at any time. The basket also could be adjusted in the future toadd or remove other stablecoins, said Yulong Liu, a former investor at FBG who is one ofthe co-founders of Neutral.

A challenge for the startup could be persuading enough exchanges to use Neutral Dollaras a trading pair in transactions. Demand for a stablecoin rises as more people use it, butit can become irrelevant if it canâ€TMt easily be traded for other assets.

Deals Overview

Bitfinexâ€TMs CTOsaididon Twitter that the exchange hit its $1 billion fundraising goalfor its new token after just 10 days.

Agoric, a company creating software to verify the security of blockchains,raisised$4million from investors including Rippleâ€TMs Xpring and Outlier Ventures.

Regulatory Watch

A lawsuit against DJ Khaled and Floyd Mayweather alleging that the celebrities violatedsecurities laws through their promotion of ICOs wasdisismisisedby a federal judge inFlorida.Valerie Szczepanik, the SECâ€TMs crypto czar,saididat Consensus on Monday that exchanges conducting token sales could be punished for securities violations if they arebased in the U.S., unless they abide by registration requirements and other rulesgoverning broker-dealers.

Bakktâ€TMs CEO said the NYSE-backed venture istatargetitininga July launch of its bitcoinfutures contract after being delayed for months due to regulatory issues.

From the Blogosphere: Balaji on Blockchain

Balaji Srinivasan is back in the spotlight just one week after leaving his high-profile roleat Coinbase. The exchangeâ€TMs former chief technology officer published anop-e-edinCoinDesk on Tuesday outlining why companies might benefit more from using ablockchain than from a traditional database. The content of the op-ed is less excitingthan the fact that it exists. Where is he heading netxatr?

The Jobs Board

The European crypto exchange Bitstamp hired Hunter Merghart, former head of tradingat Coinbase, as its new head of U.S. operations.

    Adapted from: The Information Executive editor: 李萍萍
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