Otaku Coin has been something many within the anime community have handled with a healthy dose of scepticism since it’s unveiling. Many questioned it for being a cryptocurrency, and for the vagueness of the initial unveiling. Now, on May 9th, the Otaku Coin Preparation Committee, those in charge of handling the development of Otaku Coin, has released a ‘concept paper’ that is viewable and accessible on their website, and with it, more has come to light in terms of how the currency will function and it also brings up many questions that are of concern to the proposed ideas that the Preparation Committee and how their plans will struggle to become a reality, at the cost of the animators and fans it says it supports.
In this article I want to pick apart the concept paper, and also bring in other statements made by Otaku Coin and raise concerns previously raised by The Canipa Effect in their video on Otaku Coin that can be found here, to clarify the major issues with Otaku Coin in its current form and why it is something to avoid investing in, especially if you are a fan of anime and care for supporting those most in need who work within the industry.
Please note that with this I’m not a cryptocurrency expert. My complaints and concerns that are raised here are purely around the planned uses of Otaku Coin, as well as the general concerns that can be found through the nature of how cryptocurrency works, not on the specifics of how it functions.
With that, let’s begin, by tackling the Concept Paper in sections.
The first section of the paper discusses what they plan to achieve with the creation of Otaku Coin, while also noting a few practical specifics on how the cryptocurrency will actually function.
What they state within the article is that Otaku Coin will be an ERC20 Token, which means that it works using the Etherium blockchain system and is a derivative cryptocurrency of Etherium. This is more something to help an individual gleam how the currency will function more than anything to be of concern, with ERC20 essentially being a common set of rules for Etherium-based tokens to follow as well as helping to determine how it will function. These are mainly essential functions such as how the currency will transfer currency from one balance to another, among other things. Being a standardised system means there can be confidence that the fundamentals of how the currency will function are sound, however, there are known issues such as problems with how an error in the protocol means there can be issues with direct transfer of currency, as has been noted at places such as Coindesk.
The goal, according to the paper, is to use blockchain technology ‘in order to closely and seamlessly connect fans worldwide with creators and otaku-related companies [and] contribute to the preservation and development of otaku culture.’ This plan remains unchanged from when they initially revealed the currency, with the plan for Otaku Coin to integrate itself into the anime production and funding process, with the hope of helping to improve conditions and improving pay in the industry. The issue is the plans for how this could work are relatively thin.
Furthermore, the coin’s origins are conveniently worded, with the document stating Tokyo Otaku Coin initially proposed the concept and the establishment of the Otaku Coin Preparation Committee followed in combination with others, which now runs independently from Tokyo Otaku Mode. While this may be true, this does understate their involvement in the currency, with Tokyo Otaku Mode not just the conceptual founder but as the dominant party within the committee. Public media comments made in regards to Otaku Coin have come from the committee itself or through videos such as this one from Akidearest, where they interviewed the CEO of Tokyo Otaku Mode Nao Kodaka specifically to talk to them about Otaku Coin and what it can offer. And a lot of the proposed services that are planned to be introduced after the launch of the cryptocurrency that utilises it are similar to services that are already offered by Tokyo Otaku Mode, such as Tokyo Otaku Mode Projects and Tokyo Mirai Mode, both of which involve a form of funding of anime merchandise and similar things that are planned to be introduced that can be interacted with using Otaku Coin. To simply place themselves as a partner and to say that the Preparation Committee is a separate entity feels misleading, considering that publicly it is being pushed under the Tokyo Otaku Mode name and public relations are being handled like how it has been with the Akidearest video, with people from the company discussing the currency and giving out information about it, as well as the fact that as a corporate entity they as a company are a part of the committee.
‘What is Otaku Coin?’
This section is split into two parts detailing how they would like to see the concept realised: a ‘Community Currency and Voting Rights’ section detailing what the Committee hopes to achieve with the currency and an ‘Issuing Otaku Coin and the Voting Platform’ section talking about how they plan to launch the currency.
The first section gives out three goals for the currency upon its inception:
- By providing a mechanism that allows fans to vote on and fund projects that will contribute to the development of otaku culture, we aim to make it easier for creators to produce more works and thus further the growth and prosperity of otaku culture as a whole.
- By distributing this cryptocurrency throughout the global community of fans, we aim to eliminate purchase bottlenecks such as foreign currency conversion fees and related transaction surcharges, facilitating a more active economic ecosystem and invigorating the community.
- By cooperating with our partner businesses and media, we aim to implement reward programs designed for the benefit of those engaging in otaku activities—such as legally watching anime online, spreading the word about otaku content, purchasing officially licensed products, and so on—thereby encouraging expansion of the fanbase and promoting the health of the community.
As this currently stands it is very vague on what it plans to achieve, which to an extent can be portrayed as understandable with currency roughly 6 months away, if worrying since the plan of such a document is to draw people in to be excited about the currency and to want to invest in it once it launches. The issue arises in that even with this vague mission statement there are many areas of concern.
To tackle the first point, it notes the launch of Otaku Coin will help provide ‘a mechanism that allows fans to vote on and fund projects that will contribute to the development of otaku culture’. However, there isn’t any description as to what such a system could entail. How does voting work? Do you need to spend Otaku Coin to be able to vote? If so, how does this differ from funding anime? How does the funding of anime function in regards to Otaku Coin? Is there any scheme for it to work in a dividend fashion, where a portion of the rewards from a profitable show will return to anyone who invested or is it more along the lines of Kickstarter or Tokyo Otaku Mode’s own Tokyo Mirai Mode service in terms of funding?
Before these points are made in the concept document it notes that the currency is ‘one that attempts to directly reflect the will of fans via voting rights’, however the way this suggests it would work is through the use of Otaku Coin to put your money towards projects that matter to you, which is essentially saying that the purchasing power of fans and the ability for fans to spend money on projects they want to see is what will dictate the voting platform. Which is fine, but this is currently how the industry functions anyhow, with a show’s successes, potential for further seasons and more dictated by fans purchasing merchandise and engaging with a show in order for it to create a profit, and doesn’t justify the necessity for a cryptocurrency, never mind one that directly goes through another service run by Tokyo Otaku Mode and others, who will likely take a cut from the management of the service for the cost of running and taking away from what could be going to creators. While of course, this could happen through other funding platforms like Kickstarter as well, unlike those platforms, this is not made clear here.
The second point can be considered a positive, with the ability for currency conversions and the strength or weakness of foreign currencies no longer being a factor in a hypothetical future for the industry that runs on this cryptocurrency, but it doesn’t take in to account the hugely fluctuating nature of cryptocurrencies which has, for example, seen Bitcoin drop from a $20000 peak to roughly $8000 in the space of weeks, a drop that would be unheard of in other currencies. While the industry could hypothetically function using the currency, there would be a need to change to currencies such as yen eventually, and this fluctuating nature of cryptocurrency is a concern in this future, especially if, in the plans to support the industry, you’re not just putting money but people’s livelihoods in to balance.
The third point, in regards to reward programs, is very vague in how it would actually work. If you are rewarding fans with the currency for engaging in activities in which no money is changing hands, how would this affect the value of the currency? How would this be quantified? It should also be noted that companies like Tokyo Otaku Mode who are involved, and people who create blog posts or videos on anime and Japanese culture could also directly benefit by aggressively sharing and pushing their own content, focusing this reward structure on those who are already successful or whom are businesses and away from the general person. There is a distinct advantage for not just companies like Tokyo Otaku Mode but big anime-related social media influencers to be supportive of such a venture because of how, if successful, they will benefit from how their content directly earns them Otaku Coin, and the bigger the influencer, the more they could earn due to it being a part of how to earn Otaku Coin. When YouTubers like Akidearest interview the CEO of Otaku Coin and take a photo with them and when The Anime Man meets with them as well, especially considering the latter’s direct involvement in the since-shuttered Flying Colors Foundation who aimed to involve themselves in Otaku Coin, there are concerns in terms of how the social media sharing as a way to earn cryptocurrency can influence support and disproportionately benefit companies involved in the creation and big influencers.
On top of this, many of these will likely not be in place by the time the currency initially releases. They admit that over time Otaku Coin-related systems and mechanisms could be created but that suggests they won’t be around for launch. And even with the goals of being able to run decentralised, for things such as the speciality wallet, this will have to keep receiving support even if this decentralisation became a reality.
Once we get to the issuance and further details on the voting plan, however, is when more alarm bells begin to ring.
At launch, 100 billion Otaku Coins are planned to be dropped all at once, without additional issuances later on, unlike many currencies that operate Initial Coin Offerings or ICOs. There are no details on who these will go to, how they will be valued before release or how they will be distributed. It is likely, however, that some will be shared with Tokyo Otaku Mode members as the CEO of the company stated themselves in the aforementioned interview with Akidearest. As for how the rest will be shared or purchased, this is currently an unknown. As for the designation of these 100 billion coins, some will come through gifting to users and the majority will be used for spending and investment. 39% of these, or 39 billion, will be distributed to the Otaku Coin Fund for the intent of funding operating expenses.
This 39% is what is of most concern and interest. While it is common for a percentage of the ICO to be kept for operating costs, this is a much larger amount than is common for such a scheme. Not only that, and perhaps more worrying, is it is in this section they introduce the fact that part of this 39% will go to the Otaku Coin Preparation Committee Administrative Members, a group of people seemingly separate to those listed on the Otaku Coin website. While one concern before raised was that no one involved in Otaku Coin actually worked within the anime industry it was claiming to help, this notes that anime and manga creators are involved, alongside game developers and manga contest judges. Without any names, however, it is an unknown who these people are, which is more worrying when brought in to the context that this is a newly introduced set of individuals involved in the creation of the cryptocurrency that before now were not publicly known.
Finally in this section they discuss the release of the voting platform, noting that it won’t launch until long after the currency launches, launching in 2019, which seems problematic as there is encouragement to invest in the currency with one of the predominant aims being the ability to vote and fund anime, while separately stating this could be months after initial investments are made when the money people invested could be lost if the currency tanks in value. There is a note the platform will issue voting tokens without any indication as to how, and though it notes the Otaku Coin Fund will not be intervening in their management capacity of such a service, there is no indication as to whether the Fund will directly benefit from the funding of projects on such a service, such as whether they’ll receive a percentage of the funds raised, or a service charge, or anything of that nature.
The voting platform essentially seems to be a crowdfunding system in vague terms with little concrete in terms of how it will function. When looking at it like this, there seems to be a leap in logic to be making such a service a tentpole of the cryptocurrency when considering how anime crowdfunding has been done historically. Using crowdfunding has been done in the past, with the creation of projects like the second Little Witch Academia OVA, Kick Heart and Under the Dog directly attributable to Kickstarter projects, and films like In This Corner of the World also coming about in part thanks to crowdfunding initiatives on the Japanese platform Makuake. The amounts raised on these projects is small, however, and would not be viable as a repeated strategy for funding anime. While I will admit to not being an expert on exact series production costs, figures in 2015 placed the cost of a 13 episode series at $2million and a 24 episode series at $4million. None of the Kickstarter projects cited made close to the amount needed for just a single 13 episode series, and if fan funding was to be relied upon through such a service provided alongside Otaku Coin, it seems unsustainable, especially when you consider these projects occurred over multiple years, and the idea behind such a service would see regular projects being pushed on the service. In fact, before the launch of the voting plan officially, multiple selected projects will be launched through the voting service as ‘model projects’ and even if just 2 or 3 were the number being proposed over a few months, that’s a much more saturated number of projects than has been seen in the past. There is a lot of the currency leaning on the idea that many fans will fund anime productions long in advance, but this doesn’t seem to be supported by evidence, and could only have a chance of success if it was only partial funding, and that brings up enough other logistical issues that it’s not worth discussing here since it’s not entirely relevant to the concerns in regards to the currency.
I am going to skip the next section in regards to the roadmap due to the fact it only includes a timeline that has been discussed while discussing these other areas, neither will I be discussing too many specifics in regards to the Planning Partners and Advisors. Many of these are finance companies and anime-focused websites with the exceptions of Rakuten’s Collection service, a part of the Rakuten business whose aim is to offer new experiences through character goods, and the vocational school of the Toyo Institute of Art and Design. In terms of the Planning Advisors, but I do want to bring attention to Palmer Luckey, known for their involvement in Oculus but also of funding alt-right meme services, and whose presence on the committee is a controversial one. Of course, as previously mentioned there is more to be concerned about, such as the existence of a separate administration committee with little details on who is involved and what their services will be and have been aside from involvement in the production of the concept paper.
Following from that the paper concludes with the disclaimer that ‘at this point in time, we are only examining the possibility of making this concept a reality.’
There are many concerns raised here just going from the concept paper they have launched, with the leap in logic to fans funding anime being a central tentpole to the potential personal benefits to companies like Tokyo Otaku Mode from the creation of this service. But there is more to note aside from this paper.
Before this concept paper was launched, the following diagram was prominently displayed on their site and no longer is, a diagram showing how coin could be earned and used. Two sections on the spending of Otaku Coin include the ability to support creators and to use and earn from the purchasing of items and the attendance of events.
While it could be assumed that this is no longer in the plans, this would not be correct. In the presentation made alongside the concept paper’s launch, this same diagram was used, including both of these points, despite them not being tackled within the paper. It was used in a separate presentation in January as well. Which leads to the question of how these will be a reality.
To bring up a point mentioned in the previously cited video from The Canipa Effect, the policy of funding creators has not been fully thought through and is currently a mess despite its plans to be a central part of Otaku Coin. The idea behind the policy is that fans could send Otaku Coin directly to a creator they liked to help counter the issue with animator pay. However, this would not resolve such issues in the industry, with those most in need in the lowest pay at times not even being listed in the credits for works they were involved with and would therefore likely receive nothing. The policy in its current form is also seemingly relying on fan-managed encyclopedia sites, which can often be inaccurate and not too helpful. To further compound the issues of such a policy, for a less engaged fan who may not know the names of animators for certain scenes they enjoyed or have knowledge of the production process will likely just send money to the directors of their favourite show, which does nothing to help those who actually struggle.
Such a problem is more likely to be resolved through government regulation on how animators are paid, a restructuring of how funding is given to studios for productions so that the ever-increasing revenue from anime can go to studios, who have had their pay remain stagnant and have had to keep wages low in response to this, or through things like the Animator Dormitory Project, instead of fluctuating cryptocurrencies.
As a whole, for all there are people with experience in cryptocurrency involved, for all, there are major names involved, Otaku Coin does not help the anime industry or the people involved in it or the fans as it claims. The currency is likely to make money for those creating it even if it fails, as long as the initial coins are bought at a reasonable value, even if it later crashes, and if it succeeds a lot of the services with which Otaku Coin can be used as part of the services these companies are already involved in and will be managing, meaning they’ll make money that way.
In the aim of transparency, it should be noted that Otaku Coin directly responded to the video by The Canipa Effect that I have cited a few times in this article. They claim that Otaku Coin ‘will never be created for the profits Tokyo Otaku Mode’. However, even if not directly, the services that will be created as part of the launch of Otaku Coin will benefit the committee of which they are a part of, the ways to earn Otaku Coin would be able to benefit the company just as much as it could others, so even if this is the case it does not necessarily mean that they will not be able to benefit from the results of its creation. For all they also note they will set a certain distance, they are involved in the preparation committee. They also note that ‘The Otaku Coin Preparation Committee has a clear vision to contribute to Otaku culture’ and even if this is the case, as has been noted within this article, there are issues with that.
Which leaves the article at this point. Otaku Coin is a deeply flawed system and cryptocurrency, as this concept paper demonstrates, which in its current form will do nothing to benefit the industry, and the only likely beneficiaries from the entire scheme are in all likelihood the founders and the people directly involved. As it stands its a scheme that utilises the services of the companies involved to further profit under the guise if not the ability to improve the industry. And from a personal viewpoint, especially at this stage, I don’t see that changing.