In two weeks from today, I shall expect to be reading news that some investor grabbed the desiccated corpse of Enron, announced a new Enroncoin cryptocurrency, and saw explosive gains immediately after the fact. And that would only be slightly less ridiculous than Eastman Kodak Co (NYSE:KODK)) announcement of KodakCoin.
Yet because it is 2018 and nothing matters anymore, Kodak has seen its stock shoot up from $3.10 Tuesday morning to $10.70 at the closing of trades on Wednesday. To get an idea of Kodak’s fortunes before KodakCoin, that $10.70 mark is still below its 12-month high of $14.70.
There will be some contrarians who will try to argue that Kodak’s decision is not a cynical, ridiculous last gasp of relevancy by taking advantage of the cryptocurrency just like businesses 20 years ago slapped “.com” to bleed gullible investors. But the most charitable interpretation of the KodakCoin move is that it is an interesting concept which could solve certain legitimate problems, but there is no reason to believe that Kodak can pull this off. And when we examine Kodak’s other move towards cryptocurrency, there is no reason to believe that interpretation.
Solving a Problem?
So what is KodakCoin supposed to be? Kodak itself claims that the cryptocurrency is part of a new image rights platform called KodakOne, which is described as “a revolutionary new image rights management and protection platform secured in the blockchain that seamlessly registers, manages and monetizes creative assets for the photographic community.”
KodakOne, at a first glance, is not ridiculous. An online database which lets photographers more easily license their work and prevent unlicensed users on the Internet from using their images would be useful, and Kodak may be able to pull something like that off given their background. And with blockchain, images would be able to be more easily traced back to their founders, as opposed to today when all sorts of memetic images propagate the Internet with no one having a clue where the original image came from.
So, blockchain could be used to help protect images and ensure photographers receive royalties. But why is KodakCoin necessary? Kodak claims that KodakCoin “will become the image of choice for the image economy” and that it will ensure that payments are made instantly.
The slight problem with this is that the image economy is a subset of the real economy. Why would an artist want to receive payment in KodakCoins instead of dollars? In fact, Matt Levine with Bloomberg points out that SEC regulations mean that ordinary people cannot actually buy KodakCoins nor can photographers who receive Kodakcoins can easily exchange them for actual money.
Kodak could put in real work to try and create a blockchain platform without using some ridiculous cryptocurrency. But then they wouldn’t get hot press about jumping on the cryptocurrency bandwagon and so their stock probably would not have shot up as much. And that is what really matters for this dying company.
Kodak’s Scam
Perhaps if we were looking at just KodakOne and KodakCoin, we could believe that Kodak was simply trying to use blockchain to solve a problem. But Kodak’s other cryptocurrency-related move firmly slams the lid on the idea that they are approaching blockchains or cryptocurrency with good faith.
This other move as reported by ZDnet is called the Kodak KashMiner, which exists to mine Bitcoin. Customers would pay $3,400 upfront for a two-year mining contract, as the KashMiner would produce $375 per month of Bitcoins at current Bitcoin value. The customer, at the end of two years, will thus earn $9,000 in two years in exchange for $3,400. Given that this is such a good deal, why does not Kodak just grab the $9,000?
Because the $9,000 is a blatant pack of lies. They might as well be selling you men’s facial moisturizer because that $375 will go down over time given the nature of Bitcoin mining, and of course that assumes that Bitcoin’s price stays stable over the next two years. If Kodak is not approaching the KashMiner with anything resembling good faith, why should investors assume they will do with KodakCoin?
A Bursting Bubble
Everything listed above should make it absolutely clear that investors should not even remotely consider KodakCoin. But Kodak’s blatant pandering towards the cryptocurrency craze is a clear warning about how this bubble is approaching its limit. I do not know when the cryptocurrency bubble is going to burst, as the human capacity for self-delusion is almost without limit. I do know that I do not want to be anywhere near when it does burst. Kodak’s moves is a warning not just to the company, but towards all cryptocurrencies in general.