How to make and lose $ 2b on blockchain

Now, some technology experts and green industry figures are posing an embarrassing question: is Power Ledger the personification of blockchain overlap?

"I'm a software engineer, I'm training, I've been online for over 35 years and I'm an energy fanatic," says Simon Holmes in Court, Green Energy's investor. "I still do not understand what precious problem they are trying to solve.

"The basic infrastructure to handle large-scale transactions already exists – [there’s] there is no need to use Blockchain. "

Blockchain, which is the basis for Bitcoin and similar currencies, was invented in 2008 by an unknown person. Despite billions invested in technology, it is not clear whether there are profitable blockchain companies not directly involved in cryptocurrencies.

"We have seen a lot of profitable blockchain applications, but all have been focused on obtaining and trading crypto and their profitability is generally linked to prices – think of miners, exchanges and portfolio providers," says John Henderson, venture capitalist of AirTree Ventures.

The blockchain frenzy

Part of the popularity of blockchain is both ideological and financial. Encrypted databases scattered over the Internet, controlled by anyone, blockchains represent a technological rebellion against the centralization of economic power in governments and central banks, which many believe to be responsible for the global financial crisis.

"Blockchain was seen as a nirvana: its ideological roots are the decentralization and removal of institutions," says Peter Williams, a Deloitte Consulting partner specializing in technology. "The Zealots are in self-sufficient identity, all decentralized and the end of the institutions".

Last year, the blockchain enthusiasm drove a wave of global investment. Some 1225 initial coin offerings, the blockchain equivalent of IPO or fluctuating stock, raised $ US $ 5.5 billion through the sale of blockchain tokens or coins, mostly from individual investors, according to the website of ICO Data. It was predicted that technology would change dozens of industries from shipping to health care.

In Australia, Green was at the forefront of the movement. His company promised to apply Blockchain's anti-authority ethos to challenge large electricity monopolies.

Green had been in London for 11 years. After starting as a commercial assistant at the Royal Bank of Scotland, she joined JP Morgan, where she assessed the environmental and social risk of new loans and shares.

Going to places in Perth

In 2013, she returned to Perth, where her father had raised and trained racehorses. He began to scale the business and social hierarchy of the city.

Green enrolled for a PhD at Curtin University, consulted with The Green Enterprise, and ran for the Perth City Council. She joined the One Million Women Advisory Committee, a women's climate change group based in Sydney.

Within four years she was vice-mayor and director of one of Perth's coolest start-ups. He was tweeting Elon Musk, trying to get him interested. (He did not answer). "The motto I live with is" everything is possible ", he said at the time.

Green had devised a plan worthy of his motto: to cash in the bitcoin boom by creating a billion virtual currency tokens.

His tone was almost impossible for the strangers to understand. The ambition was unmistakable.

"The Power Ledger platform is a transparent, transparent and interoperable energy trading platform that supports a series of ever-expanding energy applications, with an energy exchange token without exchangeable friction, Sparkz," said the 28-page poster of Power Ledger.

It looks like an IPO

It seemed like an IPO. It was not. Instead, tokens gave investors the right to use Power Ledger technology at some point in the future. They had no right to any profit.

Most companies that raise capital use stockbrokers or bankers. Power Ledger turned to what is known in the blockchain world as "bounty hunters".

One and a half million POWR tokens were reserved for people to promote sales on social media. Dozens of newspaper articles and blogs have been published. The Huffington Post profiled the company and compared the blockchain with the first Internet.

Articles exaggerated results of Power Ledger. The company was often described as an electricity retail market, and looked like an eBay or Amazon for solar energy. In reality, he was building the technology and did not have an operational commercial market.

Twitter has been flooded with messages. Some claimed that Musk had sought advice from the company. The fake accounts have been rewarded with POWR tokens for their promotional work.

"Some of our bounty groups were professional bounty hunters who chased tokens because that's what they do," Power Ledger said in a post a few weeks after the sale of the token. "Some were bots that reported incredible 5,000 likes of our social media in a single 24-hour period."

Necessary transparency

The Australian Securities and Investments Commission disapproves of people who make investments without revealing their interest.

"Of course, in my opinion, it is not a good practice for people to promote ICOs and receive an advantage if they are not transparent about the benefits they receive," says John Price, an ASIC commissioner.

Peter Williams, Deloitte's partner, goes further. These are "classical techniques of market manipulation," he says.

Asked why Power Ledger used bounty hunters, Green says he is not familiar with the phrase. "I do not know what you're talking about," he says.

Later, in an email, Greens states that Power Ledger, unlike other blockchain companies, works hard to be transparent. "We managed the ICO through a corporate structure, through our limited proprietary business," he says. "We have a tax exposure, we had a demonstration of the concept before going to market and we did all these things because we realize that we have to bring more legitimacy to our space and to ICO and to cryptographic space in general" .

Perfect timing

In near perfect timing, Power Ledger raised $ 34 million a couple of months before bitcoin reached its peak. No other Australian blockchain company was so popular.

Initially, tokens were a big investment. Sold by Power Ledger for US8.38 ¢ each, within five weeks it was trading at $ 1.79. In a year and a half, a company with less than 30 employees had created a $ 2.4 billion wealth.

The tokens assigned to Green, other private investors and key personnel were worth $ 360 million. The former merchant assistant had been struck by what is known in technology circles as the "money truck".

Green has become a technological celebrity in good faith. She presented at the World Economic Forum in Davos to contribute to the launch of the Global Blockchain Business Council. EY has named Green as one of its entrepreneurs of the year.

The accounting company had identified it quickly during the process. The contenders of other categories were required to go through applications, interviews, presentations for many months. The name of Green was simply forwarded to the judges with a few others.

A market that does not exist

Flattery was based on Power Ledger's house-to-house trading idea, which is "perfect for any home, office or retailer connected to the power grid".

But the system does not operate outside some pre-established tests that cover a small number of people. The low cost of electricity, the ubiquity of supply and the efficiency of outgoing payment systems are significant obstacles, critics say.

There is no way to subscribe to the Power Ledger trading system. Power companies are needed: the Power Ledger website invites consumers to put pressure on them, but Origin Energy ran a simulation and decided not to proceed.

Asked how many buildings worldwide use the Power Ledger system, Green says, "I do not know exactly why."

Its CEO, David Martin, says the number is less than 100. All are test sites, with the exception of three Perth condominiums who were part of Green's doctoral thesis. "We never said anyone could come in and start trading," he says.

Uneconomical trading

The government provided $ 2.6 million to test the system on about 40 homes in Fremantle. The project is classified as the first electricity market where residents can set their own prices. It is a possibility for Power Ledger to fulfill its fundamental promise of generating higher prices for solar producers and lower prices for consumers – the classic example of an efficient market.

A participant, who asked not to be named, states that the trading system is not worth using. Former manager in the energy sector, he has his solar panels and the electric car. It sells electricity for 7 ¢ per kilowatt and buys 26 ¢ per kilowatt.

Using Power Ledger, he expected to exchange electricity with his neighbors between 7 ¢ and 26 ¢, saving money on both sides. Power Ledger takes a cut of about half a hundred kilowatts.

But the local electricity retailer and the electricity grid, Synergy and Western Power, charge a connection fee of $ 3 a day to the participants in the process. Overloading makes trading uneconomical for you.

"I was quite disappointed because I found the idea of ​​very exciting energy trading and I really wanted to experiment with it," he says.

Project manager Karla Fox-Reynolds of Curtin University says other houses are buying and selling. "They feel empowered and have the opportunity to participate in the energy market," he says. The project is advertising for more recruits.

& # 39; The road is not always straight & # 39;

Any criticism of the low rate of use of Power Ledger is unjust, says Green, because it is such a young company. "The road is not always linear," he says. "I think the value of it over time will be immeasurable."

Even some booster blockchains are skeptical. Fred Schebesta, owner of a cryptocurrency broker, says he can not see what the token price will drive.

"I think they will need millions or hundreds of thousands [of customers] be profitable or really take off, "he says." The value of the token holders is not well aligned with the value of the business. "

Now the bitcoin boom seems to have passed, many technology industry leaders are wondering if ICOs were an investment fashion that shifted wealth instead of creating it.

"The ICO mania is and was worse than the dot-com boom, where the capital raised represented at least a part of the rise and was subject to regulation," says Deloitte's partner Williams.

After reaching a spectacular peak in January, POWR tokens crashed with the rest of the bitcoin market. Today they trade around 6.5 ¢, about 20 percent below the issue price.

The company continues to reward bloggers who promote virtual currency. One of the boosters is a price comparison site, Finder.com.au, which invests in cryptocurrencies.

"Power Ledger is an ambitious project but it still has the potential to transform the energy sector all over the world," wrote one of the site's contributors, Tim Falk, last month.

Falk, who recently wrote about the best carpet cleaners in 2018, focused on PKR tokens.