The Verge & Pornhub "Partnership": Implications for XVG and Crypto

It has been all the talk throughout the week. The long awaited Verge (XVG) partnership was revealed to be none other than Pornhub.

This announcement had a fair amount of mixed reactions.

There were some who viewed this as nothing more than a paid marketing drive by a privacy coin that was not very private which had suffered a hack only two weeks prior.

There were others who saw this as another potential use case for cryptocurrency. The more people that use cryptocurrency aids in the adoption of blockchain technology in the long run.

So, who is right?

The real answer is both. There have always been legitimate concerns with Verge's technology and marketing practices. These have not changed and continue to attract negative attention to the cryptocurrency.

But there are also benefits for the entire ecosystem for greater adoption and awareness. Despite your views of pornography, it is one of the most innovative industries when it comes to new technology (out of necessity).

We will take a deep dive into the partnership and what it means. But first, let's take a quick look at Verge's crazy month.

The $3m Secret Partnership

We previously covered Verge's fundraising efforts for the potential partnership back in March. The way it was positioned was that Verge needed money in order to pay for integration with the potential partner.

There was a catch though.

They were not going to reveal the name of the partner as they had signed an NDA. Moreover, if they did not raise the funds then the partnership would not go through.

This caused quite a stir in the cryptocurrency community as people saw it as unethical to dangle a potential partnership as an incentive to raise more funds from the community.

Despite these objections, Verge managed to raise the required funds. This was much to the delight of the developer and all the investors. The partnership announcement though, had to be moved back a few weeks to the 17th of April.

The Blockchain Hack and The Accidental Hard Fork

While all seemed to be going well on the fund raising front, there was something fishy working its way through the Verge blockchain. A malicious miner was exploiting a bug in the Verge protocol.

The miner was using this vulnerability to mine millions of XVG over a period of a few hours. This was picked up by a veteran pool operator who subsequently alerted the community on Bitcointalk.

The Verge developers, however, took drastic steps.

The steps were so drastic that they accidentally hard forked the Verge blockchain. This meant that the Verge client was only able to sync only up to a certain block height. This understandably caused a great deal of commotion and the developers had to handle some self-inflicted damage control.

Speculation, Conspiracies & a Rally

After the hack had taken place and the partnership money had been raised, Verge maximalists and Verge sceptics retreated to their own battle stations.

There was a great sense of hubris on the Verge subreddit as people speculated about partnerships as wild and wonderful as Amazon, Microsoft and Github. The result of these optimistic assertions was a rally in XVG.

On the side-lines, the rest of the cryptocurrency community railed against them. They claimed that Verge was about to pull off an exit scam and that the developer was trying to pay his taxes with raised funds.

Of course, the developer did not help himself by claiming that the funds were being used to pay for ledger integration. People in the community reached out to the ledger team and discovered that there was no ongoing communication.

Despite this, the price continued to climb up until the announcement day on the 17th of April. The entire cryptocurrency community was standing in line with baited breath.

MindGeek, a Porn Empire

The partner was revealed to be Mindgeek. The inconspicuous name is actually the owner and operator of the largest online pornography websites in the world. The company owns Pornhub, YouPorn, Brazzers and RedTube.

They are indeed a massive business.

Below are some of the statistics that the company was happy to share. They are a private company so publicly available information is hard to come by. The company is domiciled in Luxembourg with a head office in Montreal. However, it operates through numerous subsidiaries across a range of different jurisdictions.

To get a mere idea of the scale of the business, one need only take a look at the revenue of a mere subsidiary in Dublin. The firm, MG Billing Ireland Ltd had $427 million in 2014 and 2015. One can be certain that this is just one of many such subsidiary firms.

This is the partner that was announced on the 17th of April. There were a number of catchy promotional videos including such stars as Stormy Daniels and Asa Akira. They hired Lamborghinis with the Verge and Pornhub logo emblazoned on the bonnets.

This promotional drive was no doubt highly beneficial to both Verge and Pornhub. However, it is most likely that a large proportion of the cost of this exercise came from Verge holders through the March donation.

But No One Pays for Porn?

Many people have this assertion. They think that because porn is free that there are people who do not pay for it. While it seems logical, it is incorrect. There is massive money behind premium memberships on so called "pay sites".

These pay sites are the likes of Brazzers and Reality Kings. Brazzers is one of Pornhubs premier production companies. They charge users for these premium memberships that gives them access to ad-free premium content that is uncut.

So, just because you won't pay for it doesn't mean there aren't people who will.

As we have seen from the numbers of the Irish subsidiary, MindGeek is processing hundreds of millions of Euros for these premium subscriptions. These were most likely credit card transactions. Hence, is there a need for a private way of paying?

This is where Pornhub and Verge naturally aligned interests. Give the users a chance to pay through an anonymous medium to avoid certain "stigmas" that are attached to paying for porn.

Why Get into Bed with Verge?

This is where many in the community were quite surprised. Verge is not new to controversy. For example, there was the situation at the end of last year when John McAfee promoted the coin. There was a lot of suspicion around this promotion and the subsequent withdrawal of it.

Moreover, the whole notion of using a "private" cryptocurrency that has a public blockchain is quite bizarre. There are other cryptocurrencies such as Monero (XMR) that are known to have the most secure and proven privacy protocols.

So the question is: why Verge?

It is unlikely that any of the other privacy conscious coins such as Monero or Zcash etc. would pay the $3m required for the integration and marketing. Given that Verge was willing to meet this cost, it was a simple economic decision from Pornhub.

The Implications for Verge

While the circumstances around the partnership are suspect, one cannot deny the broader impact this is likely to have on the Verge brand. PornHub is one of the most trafficked websites in the world and people will constantly be reminded that they can pay with XVG.

Moreover, if people truly do start paying for their subscriptions in Verge then it is likely to increase adoption. If they know that they can use Verge to pay for something like a porn subscription then they will no doubt use it for other goods and services.

Was this worth the 75 million XVG?

That is up to Verge holders to decide. There are still many issues that are plaguing Verge and it has to develop bulletproof privacy technology if it is to really be taken seriously as 100% secure privacy coin.

Beneficial for Cryptocurrencies?

The only way in which cryptocurrencies can truly overtake centralised money systems is through wide scale adoption. The more that people use cryptocurrency in their daily life, the more likely they are to resist pressure by the centralised authorities.

The porn industry was known to be one of the most eager adopters of VHS, DVD and the internet. If the Verge partnership is another way for adoption to be accelerated then it is no doubt a positive outcome for the ecosystem.

There is also the chance that PornHub could later decide to integrate other cryptocurrencies upon requests from their users.

“The Future has Cum”

So in the end, Verge did not pull an exit scam. They used the money that they raised to secure a partnership with one of the largest web based companies in the world.

There are problems that they need to address and the Proof of Concept of paying for porn with Verge needs to be fully tested. Indeed, the performance of XVG post announcement shows that there are many that are unconvinced.

The cryptocurrency world will remain sceptical of the coin and the debates will often rage back and forth. Yet, this is another notch on the belt of crypto vs. fiat.

If cryptocurrencies can eat into a large chunk of Visa's processing fees on premium porn, that is a victory worth taking.