The market finally began to throw in the towel on Online Blockchain (LSE:OBC) today following the release of a frankly baffling corporate update. Many eyebrows were raised last October when tech firm On-Line shot up by as much 394pc after adding tech buzzword of the year ‘blockchain’ to its name to become what we now know as Online Blockchain. Today saw the business finally begin to return to earth on the back of a much-anticipated release that saw it vaguely update investors on its ‘social validation blockchain’ project, with shares falling by up to 30pc.
PlusOne Coin, as the project is known, was developed with ADVFN and allows content platforms, content providers, users, and other stakeholders to use the blockchain as a means of interacting with each other.
The firm described it in the following way: ‘Online’s development of Plus 1 Coin has continued following this initial launch, with functionality added (and further developments are planned later this year). As of today, PlusOne Coin has been implemented on ADVFN’s UK, US and Brazil internet platforms and approximately 85,000 PlusOne Coin receipt transactions (see Glossary below) have been validated through mining on the PlusOne Coin blockchain. As previously announced, Online and ADVFN are each bearing their own costs in respect of the PlusOne Coin cryptocurrency cooperation project at this stage, and while there are currently no financial arrangements between the two companies in respect of this project, we anticipate that Online will in due course charge publishers like ADVFN a license fee for its software which supports the wallet, on terms to be agreed.’
We are often told to only invest in companies we understand. Based on this description, I will not be investing in Online Blockchain any time soon. Indeed, the website for ‘social media currency’ PlusOne Coin reads rather like a synopsis for a dodgy episode of TV show Black Mirror:
‘This bitcoin-like currency enables content providers and platform owners to monetize their social media sites while giving their audience more power to affect the social media content they consume. Blockchain technology enables cryptocurrencies like Bitcoin, Ethereum and PlusOneCoin (+1 coin).’
Think about that next time you post a picture of your cat on Facebook.
Cynicism aside, the firm goes on to add that it has begun working with teams of independent blockchain developers on new project initiatives, opening up opportunities in ‘mining’ activities. It has developed ‘Happypool.co’, a ‘mining pool’ that enables miners to pool their computing power together to mine blockchains.
Happypool charges a small commission for bringing together miners paid in the cryptocurrency generated from successful mining. This service is currently at an initial stage, enabling mining in a small number of cryptocurrencies, including PlusOne Coin. It has begun to generate some commission, but this is ‘not yet material’.
Online Blockchain added: ‘We believe that blockchain mining activity is more than the simple generation of cryptocurrency for profit, and while we are now generating some revenue from mining, we are looking beyond this to other potential opportunities and we intend that Happypool will be an initial foundation on which we can develop additional blockchain support services to miners and blockchain creators alike.’
Finally, the business said it expects to begin mining more generally as part of both its research and development activities in the current quarter.
The bottom line is that it is easy to poke fun when companies come onto the scene with highly technical ideas that have not yet been tried and tested. Sometimes these ideas will work, but more often they will not. It is down to individual investors to decide whether to take the risk.
The problem with On-Line Blockchain and other bandwagon-jumping firms springing up since the rise of cryptocurrencies is a lack of substance and justification when tempting investors to part with their cash.
For example, the PlusOneCoin website reads: ‘A social media user has a PlusOneCoin wallet with crypto coins in it that they can spend on content, appreciating content providers, fellow users on the website by up voting or highlighting themselves. With the magic of blockchain and cryptocurrency technology anyone can have a piece of the PLUS1 money supply by simply using their personal computer to mine this Cryptocurrency. PlusOneCoin is easy to use, tradable (between wallet holders) and you can mine it on any personal computer. Coming soon to your favourite community websites!’
Here, we have Online Blockchain, a listed company with a market cap of £5.7m, claiming it can make users of its product money through the ‘magic of blockchain’. At the risk of sounding flippant, I expect magic is rarely listed in a firm’s business plan. Even if Online Blockchain has a decent product behind it, surely an informed investment cannot be made until much more clarity is provided.
Author: Ben Turney
Disclosure: The author of this piece does not own shares in the company mentioned