What is the Ven Currency?
Combine Bitcoin, the Yuan, and Facebook credits, and you get Ven
In one of our previous reports about Bitcoin, we highlighted the peer to peer (P2P) elements which provide a free method of transferring funds. As such, at its core, Bitcoin is simply a network of joined users who agree to use the same currency. Using that system, we theorized that it wouldn’t be surprising to see other online businesses such as Amazon and Facebook, or banks, leverage their client base to create a uniform method of payment transfer between its members.
Similarly, Ven, which was created in 2007 by social membership site Hub Culture, was launched as uniform currency to be used between members. However, rather than first create a large user base, and then connect users with a uniform currency as is typically done, Hub Culture reversed things around and revolved their social network around Ven. Once registering for Hub Culture and buying Ven, members can use the currency to send payments to each other or purchase physical goods that are being offered on the network.
Moving to Hub Culture, the group is an on/offline network that includes physical locations called Pavilions where members can meet up and use Ven, as well as small online retail sites representing different cities around the world. According to Stan Stalnaker, Founding Director of Hub Culture, in a conversation with Forex Magnates, Pavilions are often temporary spots that are created in different cities around important functions taking place. For example, one was created at Davos during the World Economic Forum.
Understanding the relationship between Ven, Hub Culture, and social networks is important. Without this background, viewers of the Hub Culture site who see the combination of membership and a private currency system may confuse it with a Rotary Club or Freemasonry organization. In actuality, anyone can register and acquire Ven, with full membership being processed through an ‘invite only’ policy; similar to other small networks such as how Pinterest began.
Although similar to Bitcoin in that it provides a seamless and free transaction method, Ven contrasts in that it is a centrally backed currency. The product is issued through Hub Culture, who backs the currency by a basket of currencies and assets. As such, for every dollar exchanged to Ven, Hub Culture converts the funds into a mixed bag of assets. The portfolio of assets are held in a custodian account that backs issuance of outstanding Ven. The result is that Ven floats freely against major currencies, but as its value is derived from a basket of holdings, volatility is minimal. Currently, one Ven is worth nearly 10 cents. Because of this, in a small way Ven resembles the Chinese Yuan as it freely floats, but moves slowly due to China pegging its value to a basket of global currencies. (note to self for further research – what would happen if China ever uses its $3.2 trillion in currency reserves to buy Facebook or Google?)
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In contrast to a fully floating currency though, at this point there are no official exchanges to convert Ven back into hard currency. The only exception is for merchant members who collect Ven by selling goods through Hub Culture’s site and pavilions and can exchange their digital currency with the group. As such, the goal continues to be the promotion of using Ven across the network; thereby strengthening ties between members and merchant affiliates. Helping trigger this monetary expansion are the so called Pavilion events which provide networking opportunities.
One of the goals of Hub Culture, and its launch of Ven is to bridge the online and offline world. Stalnaker explained that there are three main advantages that Ven provides; a global currency available utilizing free P2P technology, highly diversified with little volatility, and linked to carbon to promote environmentalism (this is done by including carbon futures in its basket of assets – the more they buy, it leads to higher prices which in theory would lead companies to be greener). According to their claim, by creating a stable and online friendly currency, Ven merchants can take advantage of the opportunity to sell goods globally, with minimal currency exposure risks.
Moving to increase its online exposure and usage, Hub Culture has launched today what it believes is the first digital currency fund (there are a few Bitcoin-only investments). The fund, sold in units of 10,000 Ven ($917) will be investing in both Ven and Bitcoin, with a 50/50 split between the digital currencies. Hub Culture is marketing the product as suitable for ‘speculative investors’, but having the added diversity that comes with combining Ven with Bitcoins. Other points of the marketing page include a “low correlation to Equity/Bonds” and “for Sophisticated/professional Investors seeking higher than average returns.
The Bitcoin/Ven digital currency fund is part of a growing list of investment products being created by Hub Culture. Other funds include a Greece Liquidity (goal to invest in distressed Greek assets), Tech Incubation, and Gold fund. The funds are part of what they call ‘crowd-sourced’ deals that are used to finance investments or social awareness projects.
Safety Of Funds
Will Ven take off? Part of that equation relies on how large Hub Culture can build its network. Having a small network base, the currency is limited in its use cases. But, the small numbers have allowed Hub Culture to cultivate the proof of concept of the currency. The big question though is just how safe is this network? This is especially so given that Ven revolves around having a central backed system. This contrasts with Bitcoin, and in fact is one of the items that Ven promoters mention when explaining its benefits when compared to other digital currencies.
Like any fiat currency which is backed by the good faith of the government, Hub Culture has been working to elevate its reputation. This is partly done through the launch of the offline pavilion centers that provide users tangible knowledge of the network’s existence and Ven’s buying power. Additionally, Hub Culture has hosted media personalities such as Arianna Huffington and Robert Scoble to present at their gatherings or speak about the future of digital currencies. In terms of actual financial backing and regulation Ven remains a work in progress as Stalnaker explained “we have an audit committee of seven industry professionals who oversee float, and float reserves are held with HSBC and other banks. We are working on insurance policies around transparency for float reserves, but they are not yet finalized”.
Will Ven succeed? Only time will tell. But, it’s worth pointing out that despite Bitcoin’s huge run up and drop, prices have been steadying above $100 (near $150 at publishing time). Additionally, VC’s continue to show interest for Bitcoins and digital currencies as seen by two major VC names were talking up the products at Techcrunch’s Disrupt 2013 recently (Chamath Palihapitya & Chris Dixon). While their focus was primarily on Bitcoins, the interest goes beyond just that currency, but on the entire benefits and disruption P2P digital currencies provide. While Ven remains a minor player in the digital currency world, it has created a foundation of combining a social based, centrally backed, and P2P transfer in place. As such, it’s worth keeping an eye on Ven’s futures and it overall market adoption.