Digital currencies

Bunny wants to create a crypto to bypass banks, make shopping for pornography anonymous

The company seeks to build an alternative payment network for the $103 billion industry on the ethereum blockchain

PUBLISHED : Friday, 30 March, 2018, 8:03pm
UPDATED : Friday, 30 March, 2018, 8:44pm

Bunny Software, a company founded by porn entrepreneurs, is raising funds through an initial coin offering that promises to build a blockchain-based global payment network to supplant old-fashioned money and make remittances anonymous for the US$103 billion adult entertainment industry.

The Seychelles-based company, which has raised US$3.17 million in pre-initial token sales as of this week, is issuing 1 billion tokens known as Bunny, aiming for them to be used as the de facto currency for the entire porn industry, according to a white paper outlining the scope of the coin offering (ICO).

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The month-long public sale starting on April 25 will involve 70 per cent of the tokens, according to the offerer. Each Bunny is equivalent to US$1.43, or 0.000100 ethereum, with the price increasing by 1 per cent every day from March 13, rising to 0.000207 ethereum by May 25 at the end of the sale. Unsold tokens will be burnt, Bunny said.

Bunny is the latest among thousands of companies piling into the vast unregulated market of cryptocurrencies, getting ahead of financial regulators and central banks to raise capital from investors who’re eager to chase after the next bitcoin. There are 1,500 different types of cryptocurrencies in circulation with a combined valuation estimated at US$600 billion, of which bitcoin - first released in 2009 - is the best known and most heavily traded.

Cryptocurrencies, created through the use of blockchain technology, have a mixed reception in Asia. Bitcoin and other cryptocurrencies are accepted as tokens of exchange in Japan and Hong Kong, while China has banned banks from dealing with any form of digital currency.

Bunny, co-founded by Russian porn entrepreneur Alexander Maslov, is seeking to build an alternative payment ecosystem that skirts around conventional banks, where he claims that companies, actors or photographers employed in the adult entertainment industry are often barred from opening bank accounts, or face higher-than-usual costs to maintain their accounts.

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“Performers struggle to maintain a bank account which receives unidentified money from a profession they cannot disclose because banks can shut down their accounts and freeze their money,” Bunny said in its white paper.

The payback could be lucrative. As many as 28,258 people watch some form of pornography every second around the world, with US$3,075.64 spent on adult content, product or service every second, according to the white paper, without disclosing the source of its estimates.

So far, Bunny has not disclosed how it would prevent organised crime, money launderers, terror financiers, paedophiles or criminal syndicates from using Bunny to skirt legal sanctions and compliance rules.

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Bunny will “ensure all our clients are legal and produce ethical content which does not include any harm to individuals, under-aged performers, human trafficking or illegal acts of any kind,” Bunny said.

The company will need to be conscious of complying with Hong Kong’s legislation, since it’s also selling the token to Hong Kong residents, said Duncan Watt, a consultant at the law firm Eversheds Sutherland.

“This includes taking steps to avoid dealing in property which it knows, or holds reasonable grounds to believe to be the proceeds of crime,” Watt said. “However, the anonymous nature of dealing with digital tokens may make it harder to achieve.”

Bunny’s website lists four porn actresses and a photographer as advisers. Maslov, who co-founded the company with Vasilisa Yakubo and Andrei Kazarin, started his career in 2011 with a video distributor called Energyporn, responsible for marketing and business development. Yakubo, who has a Havard MBA on her resume, worked at Citigroup in credit cards and at Directpay before becoming chief operating officer at Bunny. Neither could be reached for comment.

Ethereum blockchain in particular, which features smart contract technology, or self-executing, digital contract embedded within the distributed ledger that enforces contract performance through cryptographic codes, is increasingly being used by the entertainment industry and content providers alike, such as photographers, artists, singers who tap on the technology to protect their copyrights associated with selling their work.

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To be sure, ethereum blockchain may not be completely anonymous, said David Tang, managing director of Standard Kepler, a Hong Kong-based advisory firm on initial coin offerings.

“Transactions are still traceable on the ethereum blockchain, such as fund flows and interactions related to blockchain addresses, although the owner of that address may not be visible,” Tang said.

In the final analysis, the success or failure of the Bunny depends on its liquidity, or how easy it is to buy or sell, or for a token holder to cash out. Bitcoin and ethereum are the world’s two biggest, and most liquid cryptocurrencies.