Almost from the inception of bitcoin eight years ago, food activist Liz Reitzig has been fascinated with the potential of cryptocurrency, especially with its potential to revolutionize local food distribution. “It enables small farms worldwide to bypass the corporate distribution systems, and connect directly to those they serve,” she says.
But it’s been a tough go. Just as bitcoin has experienced several serious price crashes since its introduction in 2009, so has Reitzig experienced setbacks. Early on, she lost several of her own bitcoins to hackers. Then, two years ago, she was involved with a venture to market a food related cryptocurrency that didn’t attract enough funding to launch.
Last week, though, a new cryptocurrency venture she has helped get off the ground—known as Foodcoin—gained traction, lots of traction. During what is known as a pre-initial-coin-offering (pre-ICO) of their token, the new project attracted $1.5 million worth of sales on its first day, mostly through bitcoin and ethereum. By the end of a week, it had more than $3 million committed by individuals who want to get in early on acquiring a currency for buying food privately from farmers. In part, this money will be used to develop the “blockchain” platform (which includes technical items specific to cryptocurrency such as “wallets,” and “smart contracts” and other special software) enabling Foodcoin to be used as a digital currency in conjunction with ethereum.
What made the event especially noteworthy is that the offering wasn’t even available to U.S. citizens, because of regulatory uncertainties in the U.S. So all the money, from about 2,000 subscribers, that was committed came from Europe, Russia, Australia, Asia and other parts of the world.
Bear with me while I try my own cyber-currency calculation: According to the Foodcoin website, Foodcoins will be valued at 100 for each ethereum cyber coin; at recent market prices of around $300 per ethereum, Foodcoins would be worth about $3 each. Subscribers to the current pre-ICO, which ends tomorrow (Wednesday), will receive a 35% bonus in Foodcoins for being first in. Think I’ve got that right—I suggest you read the web site and the accompanying white paper on the site to get all the details and make your own calculations before making any commitment.
The online entity behind the Foodcoin offering, 1000ecofarms, is less than a year old, having launched last October as an online marketplace for food sellers. It is described in a white paper on the Foodcoin site as having more than 650 food sellers, with about half in America and half in Russia. It says it has offices in Bethesda, MD, and Moscow, and is up to 4,000 registered users. The Foodcoin web site shows photos of five other co-founders besides Reitzig, though it’s difficult to determine from the one and two-sentence biographies of each whether they have the expertise and credibility to develop all the software they promise to make Foodcoin a viable cyber currency.
The international interest in Foodcoin becomes more easily understandable in the context of a worldwide explosion of interest in cryptocurrency. That interest has seen bitcoins roughly quadruple in dollar terms just since last spring, from about $1,200 to more than $5,000 at one point in recent weeks.
According to The Wall Street Journal, there have been more than 100 ICOs so far this year. So far, 10% have declined in value and 30% haven’t traded, the paper reports. Losing deals, which initially raised nearly $300 million, have lost about 40%, on average. There have also been some astounding gains. The WSJ reports on a Chicago entrepreneur who in the last year has turned an $80,000 inheritance into $2 million.
Some experts quoted by the WSJ compare the current digital coin craze to the dot-com boom of the late 1990s, when all sorts of companies were adding .com to their names and raising huge amounts of money in public offerings. That boom ended badly in 2001.
As just one indication of the uncertain nature of the current marketplace, the Chinese government declared ICOs illegal on Monday, causing bitcoins to lose 5% of their value, and ethereum, the second digital currency, to lose 17% of its value, according to the WSJ. All of which points to the difficulties governments are having in trying to determine how to regulate and tax currencies created outside of official governmental bounds. America’s SEC has been very tentative in determining if or how to regulate these currencies, and so far has shied away from approving anything substantive and long term in scope.
Can Foodcoin succeed in its stated goal of developing “a new blockchain ecosystem, architecturally designed to create a global marketplace of food and agricultural products….a universal trading platform for businesses related to food”? Given the explosion of interest in digital currencies and so-called “blockchain ecosystems”, it certainly seems do-able.
Practically speaking, though, I wouldn’t expect rapid acceptance in the U.S. of digital currencies for private food, if only because farmers are notoriously slow to adopt new technologies. Many owners of small farms that sell directly to consumers have only in recent years begun making active use of email to accept orders and alert their customers about such matters as food availability and pickup hours. American Amish farmers, who are heavily into the private sale of food, don’t even have their own computers or accept credit cards. While some have signed up for online platforms to take orders, in practice most prefer to be paid directly by customers in cash or by personal check.
Even for those of us who are active in the online world, making and accepting payment in bitcoin and ethereum is still a major leap and requires learning new ways of thinking and interacting. Here is just one issue I have encountered: How do you set up a bitcoin account when the online account platform doesn’t accept dollars or other cash as we know it so that you can buy into a cybercurrency? The questions for many users just multiply from there.
The developers of Foodcoin expect the barriers to dissolve as banks and other such real-world entities become involved in mediating transactions, if only to avoid being left out of the new world of virtual currencies being developed. According to the Foodcoin white paper, banks will come around to avoid “the risk of exclusion from the trade transaction chain and reduction of the customer base with global implementation of blockchain.”
Full disclosure: I have no connection to Foodcoin or 1000ecofarms.com. I have also ended my involvement in the Real Food Consumer Coalition, to avoid any appearance of conflict of interest when I report and write about food rights and other food issues.