3 Pre-Bitcoin Virtual Currencies That Bit the Dust

The history of the Internet is filled with examples of individuals or teams trying to bring characteristics of physical currency to the digital realm.

Until bitcoin, nearly all prior attempts either failed or fell pitfall to issues related to centralization and crime, among others. Yet despite their stumbles, the examples outlined below may serve as a reminder that, like bitcoin, other concepts were able to attract significant media attention, a number of users and, in some cases, significant investor capital.

Above all, the efforts demonstrate that the desire to create native currency systems for the digital world are almost as old as the Internet itself.

Flooz

Flooz.com was a poster child of the late 90s tech boom that ultimately soured by 2001. Pitched as a digital tool for merchants accepting payment on the still relatively young Internet, Flooz was compared to coupons or airline miles that could be accumulated either through promotional campaigns or purchased directly from Flooz’s central platform.

During the three years Flooz was in business, the company raised as much as $35m in venture capital, betting on demand among merchants for new and exciting payment mechanisms. Flooz spared no expense on its media campaign, even enlisting comedienne Whoopi Goldberg for a series of TV advertisements.

Despite the momentum, however, Flooz reportedly failed to attract high numbers of users and merchants, and criminal activities taking place on its platform would ultimately prove too much for the company.

By August 2001, a mix of dwindling investor support and allegations of criminal activity on its platform accelerated its downfall. According to a 2001 report from The New York Times, Russian criminal groups are believed to have used stolen credit cards in order to purchase the online currency and launder illicit funds, prompting a federal investigation. A Flooz source told the Times that an estimated $300,000 was stolen.

After failing to find a buyer, Flooz closed down shortly after the fraud claims came to light.

Beenz

Using digital currency as a reward mechanism for online behavior – whether it means clicking a link, reading an article or watching video – has been pitched as a potential use case and has seen activity in this area before.

The concept of using a native online currency for this purpose stretches back to at least the 1990s, when a company called Beenz could be accrued for taking part in the activities listed above, among others, and then spent at merchants taking part in the program.

Beenz notably attracted significant investor attention, raising as much as $80 million. Compared to online loyalty points at the time, Beenz inked a deal in 2000 that connected its network with that of MasterCard’s and seemed primed for success.

Like for many startups at the time, the souring of the tech bubble proved harmful to the company's bottom line. Reports from March 2001 point to rising financial problems for the company, and after a promising start, Beenz began to publicly explore the idea of restructuring.

According to CNET, Beenz was ultimately forced to cut costs in August 2001 and closed down later that year. Final efforts to continue the project included merging the concept with a separate marketing platform, but these initiatives did not prove viable.

DigiCash

A digital currency company from the 1990s called DigiCash came, by all accounts, within close range of achieving a global level of success. However, it fell prey to a mixture of internal strife and lack of ignition that stopped it from becoming a widespread online payment mechanism.

Creator David Chaum is a pioneer for cryptographic protocols, having also invented the ecash system. DigiCash, founded in 1990, supported a digital currency called cyberbucks that provided both anonymity to the users that spent it and security to the merchants that accepted it. According to a 2003 report by The Guardian, DigiCash enjoyed support from libertarians and others who supported an international online currency that could transcend government control.

DigiCash was notable for its facilitation of a wide range of payment size options, especially micropayments. The system utilized an email mailing system for currency trading and reports indicate that off-market exchanges took place between traders.

The reasons for DigiCash’s failure were mixed, according to reports from the time, including a lack of cash flow and friction between the company’s employees and its leadership.

Despite promising high-level conversations with major banks and credit cards, the venture failed to sign a major deal ensuring its survival in an increasingly digitized financial sector. Notable examples include Citibank, which engaged in long-stand negotiations about an integration project, though the bank ended up shifting away to other ventures.

Chaum exited the company in 1996, and the company filed for bankruptcy two years later.

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