Whoppercoin: cryptocurrency arbitrage
“Eat burgers today to become financially independent tomorrow!”
Believe it or not, there is such a thing as Whoppercoin.
Financial illiteracy is another thing.
Last month Burger King (BK) launched in Russia a loyalty program supported by a cryptocurrency called “Whoppercoin”.
The Rules
ICO was launched on the Waves platform — coins are distributed via BK loyalty program. If you want to get some whoppercoins, you should:
1. buy something at BK
2. save the cheque
3. scan it
4. send it via email to BK stating you Waves wallet
5. get one Whoppercoin for every ruble in the cheque
“Every ruble spent earns you a Whoppercoin”
Initially the idea was simple.
1700 rub = 1700 Whoppercoins = 1 Whopper
Save 1700 Whoppercoins and buy 1 Whopper.
The price of a Whopper in Moscow BK is 170 rubles, so it follows that every 11th Whopper is free. A simple obvious loyalty program.
However, according to the market exchange it is not the best way to spend your Whoppercoins.
Market says: “You should trade them!”
Whoppercoin arbitrage
Let’s model a situation. There is John.
John has spent 1700 rubles in BK and got 1700 Whoppercoins on his Waves wallet.
In John’s World there are only to commodities rubles and Whoppers. John earn rubles to eat as many Whoppers as possible, as it increases his happiness.
He really likes this new loyalty program, as it increases his happiness.
Now he can eat 110% more Whoppers, so he is 110% more happy.
But, then John meets a cryptotrader named Smith who offers John to pay for all his Whoppers, if only he will bring him cheques.
Smith uses Waves platform to earn money with a simple arbitrage scheme.
He sells 1700 John’s Whoppercoins to get Waves. He trades Waves for dollars, and sells dollars to buy rubles.
1700 Whoppercoins * 0.014 = 23.8 Waves
23.8 Waves * 4.90 = 116.62 USD
116.62 USD * 57.55 = 6711.48 RUB
* transaction costs are 0.003*2 Waves
This time, Smith paid 1700 rubles to John, and saved 5011.48 rubles to buy 29 Whoppers for himself. Everybody is happy.
Wait but why… Demand for this currency is SO HIGH!
Reasoning
Fair price of a Whoppercoin based on its purchasing power is 0.1 ruble.
On the market one Whoppercoin can be sold for up to 3.95 rubles.
“market price is 40 times its fair price”
Either market participants are not very bright or Whoppercoins are used for some illegal matters.
In my opinion, Whoppercoins are overpriced only due to a hype around everything concerning cryptocurrecies. Even if Whoppercoins were used in some crazy money laundering scheme, market price shouldn’t be that high.
Russian authorities are very suspicious to cryptocurrencies. So, consequently, this loyalty program was stopped last week by the Federal Security Service of Russia.
Conclusion
It is easy to price Whoppercoins, as they can be used only to buy Whoppers.
Still people fail to price the cryptocuurency.
In case of bitcoin and etherium it is nearly impossible to price the coin.
However, this example may help you to draw some analogies.
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Originally published at vladrasskazov.com on October 1, 2017.
