Cryptocurrency startup receives USD 12 million in ICO: Will relocate from California to Denmark
Founder Rune Christensen has made a cryptocurrency, he wants Denmark to be the front runner in blockchain technology and he dreams of introducing Universal Basic Income to developing countries. A group of American VC’s have granted his company 12 million dollars to make the vision come true.
Currently based in the US, Rune Christensen and his startup MakerDAO are to receive 12 million USD in venture capital to develop a digital currency almost no one uses.
In itself, this sounds unbelievable. However, even more beyond belief, are the plans the young Dane has for his company – or more accurately the decentralized autonomous organization.
In the start up business, and especially in cryptocurrency many ideas are often based on nothing more than thin air.
In response to the skepticism, Rune Christensen sends a bank statement from MakerDAO, proving a liquidity of almost $74 million. Besides the money, the startup employs 30 people full time. However, the question remains: What’s the fuss about? Why has a large, American fund decided to invest in an unknown cryptocurrency?
In the center of it all we find MakerDAO’s new currency DAI. It is a code-based cryptocurrency like Bitcoin. But it’s different in especially one regard: DAI is tied to the American Dollar, meaning 1 DAI equals 1 USD.
This makes DAI a so called ‘Stablecoin’. Meaning, it tries to avoid the volatile aspect usually associated with Bitcoin.
Considering the cryptocurrency system as a whole, most people in the business believes it is absolutely vital that stable currencies are made to work for use in day to day payments and transactions. The utility of Bitcoin which varies in value from day to day is not sustainable long term.
This issue has often been addressed by key players in the financial sector. And in crypto. Vitalik Buterin, the cofounder of Ethereum, whose cryptocurrency Ether currently has a market value of around 85 billion dollars, recognizes that currencies such as Bitcoin and Ether are too volatile. He even goes as far as to recommend online stores accepting Bitcoin to start accepting payments in DAI, the new cryptocurrency originating from Denmark.
A launch put at strain
I have a meeting set up with Rune in the center of Copenhagen. However, he cancels last minute as he, in his own words, has some fires to put out.
Shortly hereafter, he writes to set up a meeting in Roskilde later same day. It has to this afternoon, because he is on his way to China. What about doing the interview by phone, I ask. “Sure, what about now?” he replies and two minutes later we are speaking on the phone.
Rune has been busy since the launch of DAI just before christmas. Parallel to the launch of the new cryptocurrency, Bitcoin experiences some very dramatic decreases in value. And other cryptocurrencies follow. Also, the MakerDAO’s own volatile currency, MKR, which work as security for DAI, drops almost 50 % in value over the course of four days.
In other words: from day 1 the new stablecoin is put at strain. At the time of writing, however, the DAI holds a steady value of 1 US Dollar. It has passed its first, major test.
Technology works like a home equity loan.
The so called stable coin, DAI, is based on the Ethereum-blockchain.
In order for non-experts to understand the system behind DAI, crypto entrepreneur Gregory DiPrisco has come up with an analogy.
The DAI is to be considered like a home equity loan. In the bank, asking for a home equity loan, the house acts like a security interest in return for cash. If the house decreases in value, the loan will have to be paid back, but if unable to do, the bank will take the house.
To understand how this analogy translates to DAI, ”just replace your house with Ether, the bank with a smart contract, and the loan with Dai. That’s all there is to it,” as DiPrisco writes.
Large sums can be lost when the cryptocurrency decrease in value, but in order to avoid losing the collateral pledged in return of the DAI, MakerDAO has developed a system where only the investors in the volatile MKR currency are subject to risks, not the buyers of the DAI.
You can also watch how MakerDAO explains their stablecoin in this video.
“The money doesn’t really matter”
In a world where everyone can have their own, personalized currency, it is no surprise that the creators of them become somewhat estranged to money as a concept.
In a short span of time, MakerDAO has obtained a significant liquidity but what Rune Christensen value highest in regard to the large, American venture investment, is not the money itself.
“The money doesn’t really matter. We already have money. However, we can benefit from especially Andreessen Horowitz and Polychain which both can contribute their skills to the organization,“ says Rune Christensen.
Andreessen Horowitz, which also goes by the name a16z, is one of eight investors in total. It is an American VC-Fund which, since its foundation in 2009, has made a significant profit from investments in companies such as Instagram, Skype and Oculus VR.
The other investor highlighted by Rune Christensen, Polychain Capital, is a hedge fund primarily investing in blockchain-startups.
The investments have happened through an ICO, where investors fund the company by buying up its cryptocurrency, more specifically the coins of MakerDAO. The investments, however, doesn’t equal influence.
“It is a part of the deal that the funding doesn’t give the investors influence in the company. The 12 million USD in funding comes due to a strong belief in the team and technology,” says Rune Christensen.
Headquarter to be placed in Denmark
As many other startups, the headquarter of MakerDAO is currently located in the US. The office in Santa Cruz employs a dozen or two but every week the team is expanded with one or two people, tells Rune Christensen.
MakerDAO also has an office in China, but wishes to make the move to Denmark.
“We have been surprised of how far Denmark is in the field of Blockchain. In addition, corporate taxes are low and the Danish legislation on non profits is favorable, so it all fits,” says the founder.
Especially the question of tax is important. The income of the company currently derives from investments in the company’s own volatile currency MKR and so far, not a dime of taxes has been paid.
“At the moment, we have a significant amount of money in tax havens, but we are making preparations to establish ourselves in a legit country and pay our taxes. This is one of the major concerns we believe Danish officials can help us take care of. They will be able to see the potential revenue from taxes,” says Rune Christensen.
DAI to distribute Universal Basic Income
When DAI is up and running and MakerDAO can conduct their business, paying taxes included, the technology is to find its proper cause. In other words: What is the utility of the coin?
Rune Christensen has several ideas in the making. One involves the so called Universal Basic Income, in short UBI, which for long has been a buzzword in the tech-world. Among others, Mark Zuckerberg and Jeff Bezos have shown great interest in it.
The UBI gains support from both the left and right wing in politics worldwide and both the USA, Finland and some developing countries run experiments with it. MakerDAO eyes the opportunity to become both tool and contributor.
“We are interested in supporting the agenda of Universal Basic Income to see how we can use Maker to provide a sustainable system for it,” says Rune Christensen.
MakerDAO aims to be more or less nonprofit and the plan is to spend potential profit from the sales of the coins on development of the business or on charity.
Rune Christensen notes the possibility of working together with governments in developing countries and use DAI to distribute UBI. To inhibit corruption and misuse, MakerDAO once again turn to blockchain technology.
“Either we trust the administration we are working with and trust they know their business, but alternatively, a lot of innovative applications arise from the Ethereum-ecosystem. For instance, we could use biometrics for identification which will guarantee money is disbursed only once to every person,” says Rune Christensen.
“We are not set out for revolution”
Though experiments with digital currencies have taken place ever since the nineties, it was the financial crisis in 2008 which really sparked a new, politically motivated movement which works for a decentralization of money.
A movement which MakerDAO and Rune Christensen is very much inspired of. However, they are not to be confused with anarchists who believe all current financial systems are corrupt or bad.
“The more we envision the future, the more we have become convinced that we are not set out for a revolution in neither the financial- or political sphere. We want reforms. Our goal is to assist governments and the financial institutions to diminish the bad elements in favor of the good ones,” he says.
According to Rune Christensen, the existing infrastructure in governments and the banking system are both good and sophisticated in the way it sustains the current world economy. An economy he describes as “spectacular, when seen in a historically perspective,”
DAI to prevent financial crises
The many cryptocurrencies currently flooding the market trigger certain skepticism at MakerDAO. On the other hand, they believe Blockchain projects along with current financial institutions can help improve the banking system and financial sector as a whole. In the end this will benefit every user of it.
“Our goal is to make the financial world more transparent, more efficient and, most importantly, to prevent future financial crises. We want to do so by limiting the systematic risk currently found. The problem right now is the lack of a regulated single, global economy though the need is very much apparent,“ says Rune Christensen.
Though MakerDAO isn’t to be considered as a group of cyber anarchists, the team idealistically believes in the future success of blockchain technology and its possibilities.
Whether the project will change the financial system radically or it ends up as a failure remains to be seen. However, the faith in cryptocurrency and its ability to avert the worst consequences of future financial crises is strong. As Rune Christensen says:
“Future financial crises should only hit the extremely rich who have speculated and taken risks with large amount of money. The poor and the average man on the other hand shouldn’t experience any loss. That’s the core idea.“