Northern Pacific Airways is promoting that its Flycoin frequent flyer currency “is honored to be named one of PhocusWire’s Hot 25 Travel Startups for 2023.” Because what could be more right now with FTX imploding; crypto exchange Gemini – founded by the Winklevi – facing pressure; Terra and Luna showing that stablecoins aren’t so stable; and 3AC collapsing?
Blockchain as a technology can be extremely useful for generating trust, which is incredibly important for economic transactions. Blockchain will matter a lot especially in lower-trust societies but also to allow unknown players to act with trust which expands markets and makes them more contestable.
But this is the worst possible time to be trying to go mainstream with a new cryptocurrency, especially magic beans like FlyCoin.
Naturally the project began last year when it actually still seemed like a good idea to issue your own digital coins. The way I saw it best described is,
- You issue 1 billion shares in your house
- You sell 1 share to your spouse for $1
- Now the market value of your house is $1 billion, and you can borrow against it
- Only with the digital equivalent, there’s not even a house
All of the crypto-enthusiast criticisms of fiat money working this way, too, are basically true as far as they go. But there’s both more user demand and confidence for dollars and euros (and to some extent even pounds) and there’s a lender of last resort. This summer the lender of last resort on crypto was… FTX. Whether it was just trying to prop up companies with exposure to its own tokens (not wanting the value of its own collateral to plummet) or trying to bring customer deposits onto its own platform to ‘borrow them’, just a few months ago it seemed like there was the digital equivalent of the Fed operating out of the Bahamas, and now there’s not.
Of course Northern Pacific began with the idea of flying Boeing 757s between the mainland U.S. and Asia, via Anchorage, before pivoting to flying between the U.S. and Mexico before shifting again towards Asia in part because of a new joint venture they’re entering into with Northern Marianas Airways of Saipan. Meanwhile they’re being sued for trademark infringement by BNSF.
Starting with skepticism about a cryptocurrency right now isn’t a good place for an issuer to be, but that’s no worse than where they start with the airline itself. Flycoin is not Ethereum.