VK Coin and Russia’s new blackmarket

More than 10 million people are already using VK Coin, a new virtual currency that was rolled out only a few weeks ago, according to VKontakte , the so-called “Russian Facebook.”

The social network was founded in 2007 by Pavel Durov, CEO of the messaging service Telegram, which—along with Facebook itself—is expected to be launching its own cryptocurrency.

VK coin has been such a success that users have reportedly created their own black market to exchange VK Coin for the rouble  and vice versa.

The virtual currency was intended to help users manage payments within the VKontakte  ecosystem. VKontakters  “mine” coins by playing a game and tapping a virtual button on the site. They can purchase boosters to accrue more coins, and compete for a place on the leaderboard of wealthiest users. The coins can be exchanged between users and spent on special offers from partners.

However, some VKontakters  soon realized that the coin could be better put to other uses, Ivan Gusev, Head of VK Coin told Decrypt .

“Since day one, VK Coin was a game where the users dictated the course of events,” Gusev said. “They banded together in teams, built an economy around VK Coin and its own community.”

Teenagers began using VK coins among themselves to buy things in the real world, such as lunch, homework or a ride, he said.

VKontakte  claimed that, within ten days following the launch, the total amount of coins in circulation exceeded an astounding 2.8 trillion. Though Etherscan doesn’t record any value for the coin yet, Coinlib.io has it listed at $0.000200. The most wealthy user earned more than 47 billion coins.

Far from being alarmed that VK Coin was triggering a black market, the company seemed to be proud of its achievement. VKontakte  said that the black market demonstrated the success of the project and it is not planning to stop these activities, which are “a form of a contract between two individuals,” per Cryptobit.  

In fact, though VKontakte  is now planning to put the brakes on minting new coins, its planning to open up its API so that third parties can transfer VK Coins and integrate payments into their apps and websites, for promotions and special offers from partners, such as food delivery service Vsemayki.ru.

Said Gusev: “Now we want to allow users the freedom to determine the value of the virtual currency on their own.”

VKontakte , which means “in contact,” is valued at $3 billion. In 2014, Durov was forced to flee Russia and sell his VKontakte  stock after refusing to hand over data about Russian and Ukrainian political activists to Russian security agencies.

Facebook has also announced plans to create a cryptocurrency––a “stablecoin” for payments between users.

The VK Coin is, of course, not a cryptocurrency per se, as there is no real mining involved. But the fact that Russian authorities––who would reroute the very internet to rid themselves of Telegram––have allowed VKCoin to be a success speaks volumes about their stance towards a project that they control.