How the company Kodak got involved in a dubious game with crypto currency

In the distant past Eastman Kodak was an advanced technology company. She hired the most highly qualified engineers of her time and put on the release of patents and the development of new chemical processes. As a result, she managed to create a global industry for the production of cameras and films. In the heyday of Kodak, 145,000 people worked for the company.

However, the era of digital photography has bypassed Kodak, and today we can talk only about the former glory of the company, whose headquarters is still open in Rochester in the state of New York. Many patents are sold, the buildings are leased or destroyed, and since the company filed for bankruptcy in 2012, it continues to go to the bottom.

Now the company, whose history is 130 years old, is trying to revive, however small the chances are. On the way to this goal, Kodak made a bet on crypto-currencies. This is a daring game that has inspired some investors, discouraged others and raised questions about how prudently Kodak chose business partners. Among them — photo agency paparazzi, a promoter — the owner of a penny stocks and a company offering a device called «magic machine making money.»

This month Kodak transferred the rights to its name to the digital currency of KodakCoin. It is advertised as «crypto currency, designed to help photographers and agencies improve their control over copyright on images.» In addition, Kodak received a license for a device for mining bitcoins. It is called Kodak KashMiner and is intended for the mining of Kodak’s proprietary crypto currency (but it is also promoted as bitcoin-miner).

Following the announcement of new projects, the price of Kodak shares increased by more than 200%, after which it practically did not go down. The new course of the company is partly due to the fact that the blockade plays the role of a magic talisman on the modern exchange market. Investors are trying to make money from the popularity of bitcoin or etherium, and many companies that have barely made ends meet have managed to dramatically change their destiny (at least for the time being) by simply adding the word «blocky» to the title or announcing the launch of a new crypto-currency venture project , not related to their previous activities. The most striking example of this kind is the Long Island Iced Tea, whose capitalization tripled in the evening after it changed the name of the brand to Long Blockchain.

Such adventurous steps attract the attention of regulators. Recently, the chairman of the SEC Securities and Exchange Commission (SEC), Jay Clayton, said that the agency «is closely watching the published reports of open companies changing their business models in order to benefit from the promises of benefits that the distributed registry technology is supposed to bring.»

Kodak — the most famous company with a long history, entered into a crypto-currency game. This step caused a lot of criticism. Almost immediately, critics attacked the company’s plans, branding them with unscrupulous «wiring for money.»

However, the director of Kodak Jeff Clark believes that the company’s ideas are quite feasible. According to Clark, the technology of the blockade attracted his attention last summer. Then he realized that she was able to solve the eternal problems of photographers: the need to confirm the rights to images, track violators of copyright and receive payment.

Clark says:

The new currency is created not by any firm for the production of canine feed. It’s about solving the problem of managing the rights to digital products. Kodak has been working on this for many years.

If the company plans to be implemented, the photographers will be able to upload images to the KodakOne platform, create a license for each image, and find copyright infringers on the network. Instead of dollars, customers will be able to pay photographers coins KodakCoins.

It is expected that ICO KodakCoin, which was originally planned for Wednesday, January 31, will collect at least $ 20 million (on Tuesday evening, the KodakCoin website reported that the ICO is postponed for several weeks, as it is required to verify the credentials of potential investors). However, it is not clear what the collected funds will go to and why it is impossible to create a similar system without a blockage. There is a more pressing question: why should photographers want to receive payment in digital tokens, not cash?

Talking with the leaders of KodakCoin, I never received any intelligible answers. As for the white paper KodakCoin, it is a collection of loud phrases and foggy graphics, and not a detailed statement of the announced intentions.

Here it should be clarified: the management of digital copyright — a serious issue for photographers, and the blockade theoretically able to become an attractive solution. But the specific characteristics of KodakCoin give cause for concern.

First of all, despite the name, KodakCoin is not a project of Kodak. The new project is the company WENN Digital — located in California, a branch of the British photo agency, which specializes in licensing paparazzi photos. Under the terms of the license agreement, Kodak will not receive any direct profit from the ICO. The company will get a minority stake in WENN Digital, 3% of all issued KodakCoin coins and deductions from future profits.

Cameron Chell, chief consultant for the KodakCoin project, said that the original offer of coins was a «fateful moment» for Kodak and the new project should lead to a «renaissance» of the company. However, the reputation of Chell, the Canadian entrepreneur and the lecturer-motivator who once opened the public to Tony Robbins, is not flawless. In 1998, Chell, accused of violating the rules of the Canadian stock exchange Alberta Stock Exchange, agreed to a five-year ban on work on the exchange and paid a fine of $ 25,000. The head of the company, in which he worked before starting cooperation with Kodak, was accused of fraud , after which the company was closed with shame.

In response to questions about these episodes, Chell noted that he was «young, inexperienced and irresponsible», but «learned a lot since 1998 and is now trying to behave in a way that does not give rise to such hasty judgments.» The Kodak spokesman did not respond to a request to comment on Chell’s identity and did not say whether he knew about the above episodes.

In recent years, Chell began to submit himself as an expert on the blockade. KodakCoin, he calls his largest project to date. Chell is the chairman of Appcoin Innovations, which until last year was registered as the literary agency Redstone Literary Agents, and then turned into a consulting firm offering a «ready-to-use set of services for the development and implementation of blockade and crypto-currency technologies» (I quote the company’s documentation).

According to the SEC, Appcoin Innovations, which is engaged in OTC trading, whose shares are worth a penny, in 2015 and 2016 did not receive any profit. The company must receive 20% of all KodakCoin coins issued and some of the funds from the ICO (if it is successful, it could be millions).

Now consider the coins themselves. We can assume that this digital currency will be publicly available. However, due to regulatory requirements, «kokak-koiny» will only be available to accredited investors in the United States. An accredited investor is defined as a person whose net asset value is $ 1 million or more, or having an annual income in excess of $ 200,000. How many of your acquaintances are possessed by crypto-currency photographers millionaires? Even if photographers meet all the requirements for participants, there may be problems with the waste of «kokak-coins» and their transfer into cash. The SEC warned investors that it may be difficult for them to resell assets placed through a closed subscription and they will have to keep them «indefinitely».

According to the representative of KodakCoin, the company hopes that its tokens will eventually be in free sale, and in the future it will be able to release tokens of other types that are not subject to such restrictions. White paper KodakCoin reports that token owners can receive other benefits, such as part of KodakOne’s profits and access to a niche in the market, and then they can spend KodakCoin coins to buy cameras, studios and trips. However, there is no guarantee that all this materializes.

In addition, it seems that the experts on crypto-currencies are not too impressed with Kodak KashMiner — the device for bitcoin mining, which this year was advertised at the consumer electronics exhibition in Las Vegas. The device advert says that the two-year lease of this device, «performing complex mathematical calculations,» will cost users $ 3400. Half of the coins, wooed through Kashminer, will be returned to Spotlite, a company licensed to use the Kodak name, and users will receive the remainder.

While we have little imagination of how the work with KashMiner will look, however, renting an installation can be a waste of money. At an exhibition in Las Vegas, potential users of KashMiner were promised that in two years they will be able to earn on the mining of bitcoins using a $ 9000 device. However, experts say that this is an unrealistic estimate, because over time the process of mining will only become more complicated. In addition, according to them, KashMiner is just a renamed version of the popular device for mining bitcoins, which you can safely buy for an amount less than the cost of rent.

All this: the «pedigree» of KodakCoin, the currency itself and beautiful, but indistinct arguments about its potential — makes you think and points out the possibility that the declared task will prove inadequate for Kodak.

The original material Kevin Roose (Kevin Roose) published in the New York Times