WaBi coin and Walimai
In this post we’re going to be discussing WaBi, the recently launched coin from parent company Walimai. In his recent video, David outlined some reasons for why he put his money behind the coin and the prospects he sees for the future. Here, we will go into greater detail, covering the underlying product and use cases of Walimai’s new anti-counterfeit label, the purpose of the WaBi coin in this system, and possible risks associated with investing in WaBi.
We hope you’ll find this article a useful part of your due diligence in deciding what next crypto venture you want to invest in!
The whitepaper for WaBi is available here (https://resources.wacoin.io/WaBI_Whitepaper_ENG.pdf), and a simple one pager can be found here (https://resources.wacoin.io/WaBi_One_Pager.pdf).
Walimai and the need for trusted, authentic consumer products
While the WaBi initial coin offering (ICO) only closed a little earlier in December, parent company Walimai has been operating in the space of safe and trusted consumer products since official operations started in February 2014. The company is based in China (though operations for WaBi are based out of Singapore, thus sidestepping potential regulatory setbacks that might be expected for a crypto-based venture operating in China). Since its inception, the company has aimed to provide Chinese customers with safe and trusted consumer products, in direct response to a number of issues surrounding counterfeit goods in China.
Counterfeit products in China (and several other countries that Walimai aims to branch out into in the future) are a serious problem. Though one may understand that a cheap Gucci bag is not the real deal yet be willing to receive a knock-off product at a substantial discount, more serious problems arise when certain consumer goods are faked.
Notably, China has experienced multiple scandals in areas such as baby foods/formula, resulting in the hospitalization of thousands of babies and infants, and even deaths. Counterfeit products were found to be the culprit, and the demand for verifiably safe and authentic baby foods in China has since risen dramatically. Issues with counterfeit alcohol, pharmaceuticals, and cosmetics further demonstrate the need for a solution to the problem of counterfeit goods across a range of product categories (https://en.wikipedia.org/wiki/Food_safety_incidents_in_China).
Understanding the risks inherent in purchasing such products – with fakes often physically indistinguishable from the true product – customers are willing to pay a premium for trusted goods. Existing solutions, such as QR codes or special holograms (e.g., shiny stickers often found on laptops) are not foolproof: QR codes can be easily copied, and customers often cannot tell the difference between a genuine and a fake hologram.
Walimai’s solution, in which the WaBi coin plays a key role, is the production of a new type of label that customers can use to easily verify that a product is the real deal. One of the co-founders, Alexander Busarov, demonstrates how the label works in this video:
The label is applied at a trusted, designated point in the supply chain. The label features radio frequency identification technology (RFID) that is used to continually update information about what is happening to a product throughout the distribution process whenever it is scanned, tracking where the product has come from and what has happened to it. Information about the product is stored on the blockchain (essentially an immutable public ledger).
Customers can then freely download the Walimai app to scan a labeled product and ensure its authenticity.
IoS: https://itunes.apple.com/us/app/walimai/id1168929715?mt=8
Android: https://play.google.com/store/apps/details?id=com.walimai.client
As demonstrated in the video above, a unique feature of these labels is that they are highly tamper-resistant. The label extends over the lids of products, and if the lid is removed, it breaks the label and prevents it from working. Customers can then know that a product has been tampered with even if the label is still on the product, as it will not scan, and fake labels cannot be effectively produced because they will not register on the official blockchain.
As it stands, Walimai-authenticated baby foods already have backing from a small number of retailers in China, whose stores even have specific Walimai sections to promote the labeled products. The company has also announced that it aims to be in 1000 stores by the end of 2018, and is already be branching out into alcohol (
) and cosmetics (https://medium.com/@wabiico/walimai-protect-cosmetics-and-expanding-to-7-more-stores-4f1ca24ba557).https://twitter.com/wabiico/status/944231958145650688
- wabiico
Clearly, this is an exciting product with a real and ethical use case. In the next section we’ll move onto WaBi, the coin that is offered by Walimai and supports their system. A big question that David and others have asked is whether the coin is actually adding anything to the product/system, which will of course be crucial for its long-term value.
WaBi coin
The ICO for WaBi is already complete, with pre-ICO coins being distributed as low as 3 cents each, and the ICO offering coins for $0.25. Since trading commenced on Binance (currently the only place where WaBi is being traded in any significant volumes), prices peaked around $2.30, hit a low of around $1.10 between the 22nd and 23rd of December, when essentially all cryptos took a major hit, and is currently priced at $1.76 on coinmarketcap (on December 26th. See here for an updated price: https://coinmarketcap.com/currencies/wabi/).
So, people who bought in at the ICO stage are already sitting on a healthy profit. Those who bought in at the pre-ICO stage are sitting on a huge percentage profit, but WaBi have taken a nice approach to prevent, or at least forestall, any massive dumping of coins: those who bought in at the ICO stage must either sell their coins back to Walimai, or are in a lock-in period of 3-6 months before they are allowed to sell off.
In addition, the allocation of coins to team members of Walimai has also been spread over a 2 year period, rather than 1 year as initially planned, to convey that the founding team are backing the coin over the long-term and not simply planning to cash out with funds acquired at the ICO and jump ship.
Why does the WaBi system require a coin?
This is a question that has been asked on a number of discussion forums, and is crucial. Unlike trading in stocks, owning a coin in a cryptocurrency does not give you any stake in a company or ability to determine the direction the company takes. A coin does not pay dividends, and if it has no use or reason for adoption, then investing in a coin is just paying money for nothing but ‘vaporware’. A number of ICOs do fit this description, but WaBi coin does appear to have a purpose in the labeling system for Walimai products, and in keeping customers in the Walimai ecosystem.
Specifically, the WaBi system is only secure if people really continue to scan labeled products to check for their authenticity. There is a risk, for example, that people come to trust the labeled products so much that they don’t check for authenticity. This is a problem for people who buy the product but don’t scan it. In addition, significant gaps in time between a point of distribution and a product being scanned at sale could allow bad actors extra time in which to tamper in a way that wouldn’t affect the label. This could be a problem even for customers who buy a product and scan it.
WaBi functions as a form of reward for scanning products, because users can actually earn a certain amount of WaBi each time they scan a product with their phone. WaBi can then be used as a form of currency to exchange for goods in the WaBi ecosystem, so people using and scanning products are actually incentivized to keep buying labeled products due to effectively getting discounts from their scanning activities.
Even ‘spam scanning’ can be valuable in this system, as it ensures there are not significant gaps in between when a vendor receives a product and when it is bought. As the verifications are geo-tagged, it would not be possible for a bad actor to take a product off-site and continue scanning it themselves, as this would leave a clear trail of where the product had been taken when it shouldn’t have been.
However, Walimai will presumably have to incorporate some mechanism that prevents ‘spam scanners’ from acquiring an inordinate amount of WaBi just from going round shops or warehouses and scanning everything continuously. There will also presumably be different rewards for those who scan a product and don’t buy it, and those who scan a product after or before an actual purchase. At the moment we are not sure exactly what the distribution of WaBi for scanning is, though the company has said it would certainly be less than 1 WaBi given current market prices.
In addition, WaBi can be offered as rewards by merchants depending upon the amount of WaBi-related products sold by the merchant, or based on participation of consumers in marketing activities.
Receiving WaBi in such ways again incentivizes users to stay within the WaBi network. By using WaBi tokens they are receiving discounts on products (having received WaBi coins for free), just like a loyalty rewards program. However, given that such rewards are rarely going to be sufficient to pay for a full product, consumers will further be incentivized to purchase WaBi coins to make up the remaining price of the sale (this would only be the case if users cannot split a payment for a product between WaBi and fiat, which sounds like what the company is intending. It seems that Walimai plan to facilitate purchases in WaBi by having a real-time exchange possible even at the vendor, so that a customer can trade fiat into WaBi to complete a purchase, though this is not entirely clear).
In a nutshell…
WaBi coin functions as an incentive that ensures consumers will keep the system updated by scanning products. At the same time, the rewards received function like a loyalty program and provide customers with a reason to stay with Walimai-backed products and to purchase WaBi coins if this is necessary to complete a purchase. Hence, a demand for the coin is also ensured.
The team
The Walimai/WaBi co-founders are Alex Busarov and Yaz Belinskiy. Both of these are young entrepreneurs, which some may consider risky, as neither appear to have been involved in leading a multi-million dollar venture previously. Indeed, the whole team is quite young. However, all have a transparent online presence and the founders have strong educational and work experience (e.g., consultancy positions at major firms). It should also be stressed that they have been leading Walimai for several years already, with considerable success and recognition for their innovations.
From a cryptocurrency perspective, the advisory board may be seen as slightly weak, as it lacks any heavy-hitting ‘crypto’ advisors. Yet, the advisors do appear to have solid backgrounds in consumer goods, loyalty program development, and commerce that will be vital in building the Walimai product and loyalty program system – without which WaBi coin will lack any real backbone.
Risks
We have seen that Walimai have produced a novel technology with a real use case, and a coin that functions as a major part of the overall ecosystem. As with any cryptocurrency, there are risks.
One thing that stands out to me is that it is unclear how a loyalty program will function when linked directly to an exchange in which prices can fluctuate significantly due to speculative investors and general market forces. Given major swings that are common in the cryptocurrency sphere, and that most cryptocurrencies fluctuate partly in parallel with such major assets as Bitcoin and the overall sentiment towards cryptos, consumers may find the price of their reward points to be highly volatile. Is it possible that a small amount gained from scanning products may become worth enough to buy a whole product one month, and then suddenly drop 50% the next week?
It isn’t known how risk-averse consumers (for example, young mothers, a major target audience for initial Walimai product offering) will react in such an environment. Consumers may wish to unload earned coins onto the market immediately after earning them to reduce exposure to risk, creating greater supply than demand.
On the other hand, it is also assumed that once a large enough number of people enter the ‘loyalty program’ and are purchasing Walimai products that volatility will be reduced. Trading of WaBi for actual products could in fact outweigh transaction volume among speculative investors and buffer the currency against wild swings that are often seen in crypto markets when big investors (‘whales’) unload large numbers of coins, or when sentiment about crypto markets in general changes.
A further risk comes with the label itself. Walimai labels are clearly a big step-up from QR codes and holograms, but cannot be seen as invulnerable. Attempts to block counterfeit products are like an arms race. Those who stand to lose out from increased consumer protections typically do not simply give up in the face of innovative technology, but rather innovate themselves to come up with new means of beating the technology. It is possible that there are ways to tamper with a product that do not destroy the label, for example.
In addition, as Walimai-backed products rely on a trusted origin for a product (where the label is first applied, the product must be authentic), consumer confidence in the authenticity of products could be massively shaken by even a single scandal regarding fake goods at a point of origin.
Finally, we are not aware whether the innovative technology of Walimai is fully patented, or whether similar labels might easily be produced by competing companies. With any powerful new technology, one can expect competitors and copycats to spring up. If such companies are more effective at marketing their technology or at rapidly expanding its applications to a range of different markets before Walimai, this might also affect the long-term scalability of Walimai-backed products, and hence the demand for WaBi coins.
Summary
WaBi coin is novel among young cryptocurrencies in being paired with a physical product offering that has a real, ethically admirable use case. Walimai products are already being stocked in shops in China, and the company has recently announced it is already acting upon plans to expand into alcoholic and cosmetic products. The coin functions not only as a speculative investment, but as a means of ensuring the security of physical products, and encourages users to stay within the Walimai-backed product system and potentially incentivizes a healthy and continual demand for WaBi coins. As with any investment, however, there are risks. For example, only time will tell how consumers will respond to the WaBi loyalty program, even if they are very positive about the trustworthiness of Walimai products.
Invest sensibly, and never more than you can afford to lose!