My Research on MobileCoin , last year!

MobileCoin is a cryptocurrency that aims to be a digital currency on the phone , making instantaneous transactions possible. It uses the Stellar consensus protocol , for scalability and speed. It has been designed to work with mobile messaging apps like Whatsapp or Signal, allowing for users to sending assets like MOB,USD,mUSD,mEUR while the recipient can choose among the same assets , if the assets chosen are different the platform will allow for immediate conversion while taking a transaction fees .

This project has been designed and planned with a thinking that digital currencies would dominate the payment scene in the coming time, a narrative that has been lost to the store of value narrative of BTC. It uses a system of trusted enclaves and Intel’s SGX(Software Guard Extensions) for enhanced security and privacy.

The below figure shows the general flow of Mobile Coin Platform:

Financials and Funding rounds:

This is a $100 million round with a post money valuation of $1 billion, which is almost 10x of the last round which valued the project at $100 million,not long ago. The reason for this raise is to get the product rolled out , hire engineers and coders for that, plus expand their team for any regulatory hurdles they might face. The project is pre-revenue, but given the exclusivity agreement with Signal it would not be a bad assumption, to consider that the Total Addressable Market(TAM) would be a subset of Signal users in the next few years.

Signal had a real burst of growth recently as the new Whatsapp privacy policy caused concerns and support from celebrities on social media , with the number of users going from 0.5 million in Dec 2019 to 40 million in Jan 2021[ source:TechCrunch]. Using Whatsapp growth numbers of 49% growth in MAU(Monthly Active Users) for first 5 years, by 2026 Signal can be expected to have around 300 million users.

Now for people to use MobileCoin, there are 2 caveats: 1. They should be interested in making a transaction 2. They should be comfortable making a transaction with cryptocurrency. Plus thinking that every country where Signal operates would allow MobileCoin is an overstatement .If we consider US as our representative set in terms cryptocurrency adoption, only 10% of the population holds cryptocurrency , leading to a market of $30 million Signal users in 5 years. Now , it will be very convenient for an average user to use apps like Venmo or Cashapp , so it is going to be difficult for MobileCoin to differentiate itself as a wallet. But I won’t underestimate the fuss it will generate on social media after launch and people would want to try it, but eventually it will come down to the costs.

Now based on Cashapp’s number, the average transaction size per user is $140(estimated), giving total transactions processed by MobileCoin as $4.2 billion. If MobileCoin charges a transaction fee of 1.5%(Cashapp’s Instant Transfer), the revenue is around $63 million. Now discounting it at 35% since it is a digital currency initiative , we get present value of revenue as $14 million, it is not unusual for technology companies to be valued at 15–20 x of revenue multiples , meaning $300 million million is close to an expected fair valuation. In that sense , at $900 million the company is probably overvalued 3x. Though our calculation does not include any adoption by merchants.

Valuation Metrics used:

1. Revenue(2026,forecast):$63 million
2. Discount rate:35%
3. Present Value of Revenue:$14 million
4. Valuation/Revenue:65x

Comparison to closest possible competitors :

1.Venmo:

Owned by Paypal, it has seen phenomenal growth in the last few years , with monthly active users over 50 million. Apart from a P2P payment solution, it allows users to buy Bitcoin. The estimated revenue for Venmo currently stands at $450 million, coming from total payments processed of around $160 billion. The major revenue source is the US , with no international presence.

2. CashApp:

Owned by Square, it has rivalled Venmo in growth with Monthly Active Users around 40 million, also allowing its users to buy BTC, which is responsible for not only additional revenue but has been very profitable. The impact of the bitcoin feature has been so great that around 75–80% of Cash App revenue is estimated to come from BTC trading.

SWOT:

Strengths:

1. Launching on Signal, along with exclusivity agreement gives it a good market penetration for at least next couple of years.
2. Promises privacy and security , through a series of trusted enclaves and Intel’s SGX.
3. Early adopter in a fast growing space, especially if it can expand its services beyond P2P transactions/transfers.

Weakness:

1. There is no revenue or cash flow, it won’t be wrong to say that it is pre-product, with final launch susceptible to delays.
2. Cash App allows its users to not only transfer money but also invest in different products through its platform and is also connected to their bank accounts, which looks difficult for MobileCoin to do at least for next couple of years , given scrutiny around digital currency projects and lack of support by other platforms.
3. The team is only advised by Moxie Marlinspike, but it seems he would not be involved with running directly for the foreseeable future.

Opportunities:

1. With digital currency adoption on rise and people willing, if it can deliver on its promise of instant transactions,this is a cheap opportunity in the long term.
2. There is a chance that MobileCoin can be adopted by multiple messaging applications like Whatsapp , Telegram apart from Signal, which can give total market size a big boost.

Threats:

1. No differentiation from other giant players for an average user as such.
2. Similar experiments of payments in digital currency in the past haven’t particularly ended well with regulators.
3. Depends on Intel’s SGX(Software Guard Extensions) for its technological architecture, adding a layer of centralization and dependence.

References:

1.https://www.wired.com/story/mobilecoin-cryptocurrency/

2.https://www.businessofapps.com/data/signal-statistics/

3.https://www.theblockcrypto.com/linked/97856/crypto-project-mobilecoin-advised-by-signal-creator-raises-11-35-million-in-series-a

4.https://techcrunch.com/2021/03/09/mobilecoin-a-cryptocurrency-involving-signal-founder-moxie-marlinspike-just-raised-venture-funding/

5.https://mixin.one/assets/MobileCoin-Whitepaper-EN_FINAL.pdf

6.https://www.businessofapps.com/data/cash-app-statistics/

7.https://www.businessofapps.com/data/venmo-statistics/

8.https://beebom.com/whatsapp-vs-telegram-vs-signal/

9.https://www.youtube.com/watch?v=Hwf_Q31woLo

10.https://techcrunch.com/2021/03/09/mobilecoin-a-cryptocurrency-involving-signal-founder-moxie-marlinspike-just-raised-venture-funding/

11.https://www.coindesk.com/secure-messaging-app-signal-reportedly-toying-with-crypto-payments

12.https://www.coinspeaker.com/mobilecoin-mainnet-mob-ftx/

13.https://research.ark-invest.com/hubfs/1_Download_Files_ARK-Invest/White_Papers/ARKinvest_050120_whitepaper_%20Cash%20App%20vs.%20Venmo.pdf?hsCtaTracking=41185d8d-21ac-455a-af53-f586a4d7d290%7C127af989-ffac-4053-b633-fa5cadc276aa

14.https://www.stilt.com/blog/2020/08/squares-cash-app-is-more-popular-among-low-fico-user/#:~:text=Like%20in%20the%20above%20analyses,by%20October%20of%20that%20year.

15. https://www.prnewswire.com/news-releases/mobilecoin-raises-66m-to-scale-its-simple-safe-and-fast-payment-technology-301357389.html