Many technologists viscerally felt yesterday’s announcement as a punch to the gut when we heard that the Signal messaging app was bundling an embedded cryptocurrency. This news really cut to heart of what many technologists have felt before when we as loyal users have been exploited and betrayed by corporations, but this time it felt much deeper because it introduced a conflict of interest from our fellow technologists that we truly believed were advancing a cause many of us also believed in. So many of us have spent significant time and social capital moving our friends and family away from the exploitative data siphon platforms that Facebook et al offer, and on to Signal in the hopes of breaking the cycle of commercial exploitation of our online relationships. And some of us feel used.
Signal users are overwhelmingly tech savvy consumers and we’re not idiots. Do they think we don’t see through the thinly veiled pump and dump scheme that’s proposed? It’s an old scam with a new face.
Allegedly the controlling entity prints 250 million units of some artificially scarce trashcoin called MOB (coincidence?) of which the issuing organization controls 85% of the supply. This token then floats on a shady offshore cryptocurrency exchange hiding in the Cayman Islands or the Bahamas, where users can buy and exchange the token. The token is wash traded back and forth by insiders and the exchange itself to artificially pump up the price before it’s dumped on users in the UK to buy to allegedly use as “payments”. All of this while insiders are free to silently use information asymmetry to cash out on the influx of pumped hype-driven buys before the token crashes in value. Did I mention that the exchange that floats the token is the primary investor in the company itself, does anyone else see a major conflict of interest here?
Let it be said that everything here is probably entirely legal or there simply is no precedent yet. The question everyone is asking before these projects launch now though is: should it be?
I think I speak for many technologists when I say that any bolted-on cryptocurrency monetization scheme smells like a giant pile of rubbish and feels enormously user-exploitative. We’ve seen this before, after all Telegram tried the same thing in an ICO that imploded when SEC shut them down, and Facebook famously tried and failed to monetize WhatsApp through their decentralized-but-not-really digital money market fund project.
The whole Libra/Diem token (or whatever they’re calling its remains this week) was a failed Facebook initiative exploiting the gaping regulatory loophole where if you simply call yourself a cryptocurrency platform (regardless of any technology) you can effectively function as a shadow bank and money transmistter with no license, all while performing roughly the same function as a bank but with magic monopoly money that you can print with no oversight while your customers assume full counterparty risk. If that sounds like a terrible idea, it’s because it is. But we fully expect that level of evil behavior from Facebookers because that’s kind of their thing.
The sad part of this entire project is that it launched in the UK—likely because it would be blatantly illegal in the United States—where here retail transfers are ubiquitous, instant, and cheap. The digital sterling held at our high street bank or mobile banking app works very well as a currency, and nobody needs or wants to buy a dedicated trashcoin for every single app on our mobiles. This is all just bringing us back to some stone age barter system for no reason.
The larger trend is of activist investors trying to turn every app with a large userbase into a coin operated slot machine which forces users to buy from a supply of penny-stock-like tokens that are thinly traded and which investors and market makers collude on to manipulate prices for their own gain. As we saw with the downfall of Keybase users don’t want a tokenized pay-to-play dystopia, and most technical users rightly associate cryptocurrency with scams and this association will act like a lightning rod for legal scrutiny. This association weakens the entire core value proposition of the Signal app for no reason other than making a few insiders richer.
Signal is a still a great piece of software. Just do one thing and do it well, be the trusted de facto platform for private messaging that empowers dissidents, journalists and grandma all to communicate freely with the same guarantees of privacy. Don’t become a dodgy money transmitter business running behind HMRC’s back. This is not the way.