I’ve been getting questions about the “ID Coin” teaser out of Stansberry for several years now, and I did briefly comment on it way back in 2018 when I was buying a stock that I think they were also teasing using this “ID Coin” spiel… but I didn’t get very detailed or write a full teaser solution article about it, mostly because there wasn’t a 100% certain answer, and the questions continue to pile up, fueled by the insatiable greed stirred up by those promos.
And, of course, the wild enthusiasm for all things cryptocurrency-related has caused Stansberry to double down on this promo in recent months, and readers continue to get ever more excited about it.
So… what’s the story?
Well, it’s somewhat of a bait and switch… the implication of the teaser ad is that there’s one “ID Coin,” which you might interpret as being some actual cryptocurrency or blockchain project, and you can buy it to own a piece of this future of better identity management and secure ID cards and a glorious Estonia-like digital life for Americans.
But the “ID Coin” in the pitch, really, is more of a metaphor. It represents the idea that there will be a new identity system for the US, probably based some how on blockchain technology, and that it will replace social security cards and do away with identity theft and modernize data privacy and data access for all of us… as has been done, to some degree, in lots of other countries.
After all, it’s not easy to have a worse system to underly your national ID system than a nine-digit number, assigned at birth and printed on a paper card.
I remember sending my Social Security card through the washing machine when I was a teenager, and I thought my life was over… little did I know, by the time I became an adult there would be thousands of people selling my social security number to anyone who might want it. I could have bought 1,000 new ones for $50 if I had been patient and waited for the internet to be commercialized, and to be quickly followed by the invention of cybercrime.
But anyway, this pitch, though very similar to one I mused a little bit about three years ago, continues to raise questions… so let’s skim through and pull out a few highlights to think about, shall we? This is now an entry-level pitch, befitting its age and mass appeal, and it’s being used to sell John Engel’s Stansberry Innovations Report ($49 first year, renews at $199).
This is from the order form:
“This technology could be 100x bigger than any crypto… token… or similar technology to date .
“That’s why, in the coming months, I predict the news will be full of stories of traders, businesses, funds, and mom and pop investors desperately trying to get a stake in ID Coin technology.
“By then, you could already have had the chance to see hundreds of percent gains on the ID Coin investments we’re sharing with you today – just like with Bitcoin’s astronomical rise from pennies to over $18,000.”
And, of course, the temptation…
“You can invest in ID Coin technology right now – through any ordinary brokerage account….
“The key thing is: You have to get in now.
“Frankly, it’s the next best thing to time traveling back to 2010 and buying Bitcoin for a nickel.”
So what are they talking about? Again, we get a little conceptual in this extended metaphor…
“You see, using ID Coin technology is not the same thing as actually owning a stake in it.
“Just like being an early user of Amazon or Google wouldn’t have paid you a dime.
“But if you understood what was coming… Google shares could have made you more than 30 times your money.
“And Amazon… a staggering 1,600x return – enough to turn every $5,000 into more than $8 million.
“That’s why, once you understand ID Coin’s potential, you’ll realize you still haven’t missed the most important breakthrough in the crypto technology space.”Are you getting our free Daily Update
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OK, so that’s more of a generic “invest in cryptocurrency leaders” notion. What else? Is this a pitch for bitcoin itself?
Not so much…
“The reality is: Governments hate Bitcoin and have tried everything to keep it from going mainstream. It could take away their control of the monetary system.
“But with ID Coin technology – it’s just the opposite. This technology will save them trillions of dollars… and end the threat of cyberattacks from enemies like China… Iran… and North Korea.
“After all, this technology could end hacking and provide a secure identity to every person on Earth in the next 10 years.”
So why haven’t we heard about this mythical “ID Coin?” There’s always an answer to those logical “roadblock” questions, that’s copywriting 101:
“Of course, with national security on the line… the U.S. government is saying as little as possible about ID Coin for now.
“Which is why you’ll rarely see any mention of ID Coin in the mainstream press.”
And the promise of a rapid change is just about the same as the promises they made in the first version of this pitch, three years ago:
“Now, ID Coin is just starting to get more attention.
“But the biggest breakthrough will come when the U.S. government officially adopts ID Coin technology and rolls it out to every American citizen as a new and better form of the Social Security number.
“The process is already underway. Although most people haven’t noticed yet.
“In September 2020, Congress moved forward with a bipartisan bill aimed at ‘improving digital identity.'”
Wait, something real is happening now? What do they mean?
“It gives the Treasury Secretary, Homeland Security Secretary, and the Commissioner of Social Security less than a year to come up with a plan to fix our identity theft crisis and quite possibly get rid of Social Security Numbers altogether.
“In short: To begin rolling out ID Coin to every American.
“It got lost in all the chaos of the pandemic and the election, but make no mistake:
“Congress is telling us exactly what it plans to do.”
Really… “lost in the chaos,” you say? I guess that’s one way to describe a bill that had just four sponsors and didn’t go anywhere… and wasn’t much more than a toe in the water, anyway. Here’s some more from the pitch:
“… the Treasury Department’s website has called ID Coin ‘one of the most disruptive innovations since the advent of the internet.’
“But the most important catalyst could be House Bill 8215, which I mentioned earlier.
“Feel free to jot that number down and keep a close eye on what the new Congress does.”
That number no longer means anything, of course, numbers reset with a new Congress and that was from the waning days of the 116th Congress. We’re moving on in the 117th Congress, and this specific bill has not yet been introduced again — maybe it will be, but not yet. The original sponsor was Bill Foster, from Illinois, and he was reelected but has not filed a new bill on this matter. He did sponsor H.R. 2211, to direct the Fed to study central bank digital currencies, but there hasn’t been much that’s ID-related or cryptocurrency-related yet in the new Congress — and most ID or blockchain mentions in bills so far seem to relate to the latest fights over voting that typically follow close elections — requiring IDs, vote security, voting technology, federal oversight of state elections, etc.
There’s some more chatter from the pitch that makes it seem like a solution to our identity theft and cybersecurity problems is just around the corner, awaiting a stroke of some government pen…
“As Bob Stasio, former chief of operations at the National Security Agency’s Cyber Operations Center told Bloomberg:
“Your digital DNA fingerprint will be “mathematically impossible” to duplicate.
“Even the U.S. military’s ultra-secret research arm DARPA (inventor of the Internet) is planning to use this same technology to secure our nuclear arsenal.”
That quote comes from a 2017 article in Bloomberg, which is worth a read, and is really mostly about the risks of continuing to rely on Social Security numbers, with the angst and the Congressional hearings at the time inspired by the big Equifax hack. It’s a good article, and it does mention the possibility of using some kind of blockchain-based cryptographic hash number to replace the social security number and give users some control over what information is made available to various people, including a mention of the oft-cited ID technology used by Estonia, but that’s not at all a way to say that there’s a particular existing cryptocurrency or technology that would take this role — there isn’t.
Maybe there will be someday, but government moves SLOW… and imagine what the debate would be like if the President today proposed a new national ID card that provides access to all of your information — even if it would be safer and better, we all know that trust in government has been declining precipitously in the past few years and a technically complex and long-term thing like revamping national ID systems would almost certainly create a HUGE battle. Then imagine what would happen if management of this new ID system was granted as a sole source contract to some IT company. I don’t even know what side I’d be on in this theoretical future debate, but I’m sure I’d be manipulated by social media, my friends, and the news to care very deeply and believe that the other side, whichever one it might be, is a bunch of jack-booted authoritarian thugs.
So that’s the general promise of the ad… blockchain technology is going to lead to better ID management, and a new ID system for the US (or in the extreme visions, a whole new infrastructure for the internet that does away with hacking and cybercrime), and it’s going to sneak up on us before we see it coming, and somehow that will make you rich.
And we’re told that you don’t have to buy any cryptocurrencies or set up one of those inscrutable digital wallets, or anything like that… you can do it through your broker.
So yes, as was the case back in 2018… the heart of this “ID Coin” pitch is really probably as simple as, “Buy shares of something that will benefit from the rising use of blockchain.”
Let’s dip our toes a little further into the pitch, just to see if there’s anything else to note:
“Hacking will be a thing of the past… thanks to a brand-new crypto-based innovation I call “ID Coin”… with a massive, $6 trillion market potential.
“Incredibly, ID Coin is built on technology that already exists.
“As Jerry Cuomo, a vice president at IBM working on ID Coin technology, put it:
‘Imagine a world where you are in direct control of your personal information; a world where you can limit and control how much information you share… This is self-sovereign identity, and it is already here.'”
That’s actually a quote from a Techcrunch article that cites some good reasons why there won’t be a single ID platform that uses a public blockchain, it’s worth a read.
And it’s also a reminder that most of this pitch is old… it started circulating back in 2018, most of the articles cited or quoted are from 2017, though they have gone in and updated some things (the charts they show for gains in Palo Alto Networks (PANW) and Fortinet (FTNT) go into the Fall of 2020).
My conclusion the first time I looked at this pitch was that they were very likely teasing shares in Okta (OKTA), a cloud provider of “Identity as a Service,” as their primary play on this metaphor of an “ID Coin.” Self-serving, since that is also a company I was starting to build a position in three years ago, too, and I could be wrong — they do also include Okta now in the example charts of past winners that are “first generation” programs, and say this about Okta and the other companies popped in as examples…
“ID Coin and its sophisticated, hacker-proof cybersecurity technology will do far more than any of these “first generation” programs.
“It will essentially make passwords, databases, and traditional cybersecurity obsolete.
“Maybe that’s why 61% of companies say they plan to use some form of ID Coin technology.”
So that indicates maybe they’re not highlighting Okta as a pick for this theme any longer. I don’t know when Stansberry first recommended Okta, but it’s cited as one of their holdings in free commentaries as early as February of 2018, so they bought it before I did (I started buying in March of that year). If they bought it in, say, late 2017 to give six months or so for the stock to settle after the IPO, then yes, they would have big gains and also could have been stopped out at some point. This is a quote from the ad:
The simple reality is: We believe one early investment in this trend could make you substantial money in the coming years.
In fact, my firm’s very first recommendation for investing in this space has already shot up nearly 585% – before any of this information has even gone mainstream.
OKTA would be sitting on roughly 585% gains as of last Fall, if you had bought it in the fall of 2017. I paid a little more, my first buy was around $37, so even after the stock has surged quite a bit higher over the past several months I’m still “only” in the neighborhood of those 600% gains, too. It’s quite an incredible company, specializing in identity management that can help connect people through all the different products and services they need through a single login, and their Okta conference, including some additional cybersecurity product introductions, particularly access for privileged users, was well received this week and helped to boost the shares a little more… but it sure ain’t cheap. The company should become profitable probably next year, if all goes to plan, but currently, with a $34 billion market cap, is valued at 40X trailing revenues… even with 40% revenue growth, it could take time to “grow into” that kind of valuation. At this point, I’d need to see a big dip to buy more — we almost got there last month, but it bounced back pretty strongly.
So what else might they be talking about?
They still pull out the example of Estonia, which not only has a universal ID system that attaches to all their key records (health, voting, ATM, land titles, etc.), but also sells these IDs (which are just cards and a couple pin numbers, not anything specifically blockchain-driven) for people who want “e-residency” in Estonia and the EU….
“95% of Estonians file their tax returns online each year. It takes exactly three minutes.
“All thanks to ID Coin.
“It’s all they need, and it can’t be hacked.”
So it’s very clear, this is a pitch about the concept of higher-security and perhaps blockchain-enabled IDs and identity security and management… it’s NOT a pitch of a particular “ID Coin.” There is no “ID Coin” as they tease it, it’s more of a metaphor. A way to make the complicated technologies and competing systems that aim to provide better and more secure identification seem like they’re as simple as a “token” that you can buy to get rich. That’s not how it works.
Really, what we’re dealing with is the potential for the government to help coordinate a system that is less dependent on (extremely insecure) Social Security numbers as a national ID, and for business to improve technologies for identity verification. This is all happening pretty constantly, in a continuum of advancement (going from PIN codes to double verification to authenticator apps and one-time codes and biometric confirmation from face ID or fingerprints), and no one company or person owns it.
And, not to put too fine a point on it, but Estonia didn’t really use blockchain much for its e-Estonia projects, and most of the technology underlying Estonia’s emergence as a technological utopia of sorts predated Satoshi Nakamoto and Bitcoin. Well, OK, some of the things going on in Estonia do use blockchain technologies, or similar cryptographic systems, to help various Estonian databases talk to each other… but it’s not like all of Estonia lives harmoniously using a single blockchain crypto network to protect all their individual data.
It’s not just Estonia, of course, pretty much everybody has better ID systems than the US government..
“India has four times the population of the United States… and less than one-eighth of our per capita GDP.
“Yet India has already rolled out its version of ID Coin to more than 1 billion people, including 99% of adults over the age of 18.”
That’s a reference to Aadhaar, India’s first national identity card program. Yes, it has been a huge success in that it has brought IDs to hundreds of millions of people who didn’t have them, tracking welfare and government service payments, bringing the very poor into the economy and eventually the banking system, and help to shrink public benefit fraud and “theft by bureaucracy.” It’s basically just an ID card like any other, though the ID number is connected to biometric data (iris scan and/or fingerprint) that can verify individual IDs. It has nothing to do with blockchain.
There are indeed lots of experiments underway to see how blockchain-inspired or blockchain-enabled ID systems might work, though, again, we’re not talking about a public ledger blockchain or the use of any current cryptocurrency system or token — we’re talking about new systems, built by governments and banking systems, that use blockchain technology.
Blockchain and most cryptocurrencies are not secret, they are for the most part open source software that nobody owns, not even the people who use them or buy the tokens (that’s part of what makes valuing them a challenge, at least for fuddy-duddies like me)… and we don’t need blockchain to make our current national ID system dramatically better or less hackable — technology for improving and verifying IDs in a way that surpasses the Social Security number has been around for generations now, and, frankly, even a simple credit card-like device with a pin, like Estonia uses, would be a vast improvement. That doesn’t mean it has to use blockchain specifically (it might, it might not, I have no idea, but blockchain is not the only path to better security and better ID management).
But we’re talking about money and investments here, so what on earth does John Engel think you should buy?
One last bit of info…
“Keep in mind: You can buy into ID Coin technology through any regular brokerage account. You don’t need to go anywhere near a confusing crypto exchange.
“Best of all… you don’t need to jump through any hoops to invest, like you do with Bitcoin.
“In a moment, I’ll show you how to get in… and why it’s so much easier (and safer) than typical cryptocurrencies.”
So what’s being pitched here? There are really no clues, other than that this is an equity investment — buying Google in 2004, not buying “the Internet” — and we do get some confirmation that Okta (OKTA) at least was their “ID Coin” idea back in 2017 or 2018. But what else might they be recommending as a play on advancing blockchain technology and cryptocurrencies?
I suspect that they praobably are pitching Ethereum and probably some DeFi cryptocurrencies as speculations in some of their “special reports,” those things often leak through to lower-cost newsletters and Ethereum is the first logical step into cryptocurrencies as tokens that enable new technology and do things, that aren’t primarily envisioned as just a “store of value” like Bitcoin is.
But really, absent enough clues from the Thinkolator, my guess (and this is a guess) is that they are either pitching Okta and a couple other companies that could be involved in blockchain projects for the government, with Accenture probably the most logical single idea there… or, more likely, that they are continuing on with the big picture pitch and recommending not a stock, but a fintech ETF that touches on a lot of these blockchain and next-generation finance ideas.
The most likely targets in that case, are ARK Fintech Innovation Fund (ARKF) and the somewhat lesser-known Siren Nasdaq NexGen Economy Fund (BLCN). Those are both actively-managed ETFs, meaning they choose stocks based on the research and strategy of the manager, not based on an index or an automatic quantitative screening methodology (BLCN follows an index, but they made up the index), so they are inherently more volatile and higher risk, and Cathie Wood at ARK is, even after a rough month, probably the most ardently followed growth investor out there at the moment…
… but if we’re talking specifically about leverage to cryptocurrencies and stocks that have some heavier “blockchain” exposure, I’d say that Siren probably has the edge at the moment and is a slightly more likely pick. BLCN is more specifically designed to bet on blockchain, while Cathie Wood’s ARKF is more generally focused on “Financial innovation.”
This is how the Siren fund is described:
“The investment seeks long-term growth by tracking the investment returns, before fees and expenses, of the Siren Nasdaq Blockchain Economy Index. Under normal circumstances, at least 80% of the fund’s assets, will be invested in component securities of the index. The index is designed to measure the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their proprietary use or for use by others”
And BLCN has the advantage of being a little bit less volatile and a little less well-known, so it feels “special” to get that idea from a newsletter — you might be a little grouchy if you paid for a tip and they said “go buy one of the ETFs that everyone is already talking about.”
Here are the top weightings of those two ETFs, by the way — this is ARKF:
And this is BLCN:
Both have done very well, though ARKF is much more concentrated (the top holding, Square, is 10% of the fund — BLCN’s largest weighting is about 2%), and has clobbered BLCN over the past couple years:
But you can also see that they missed out on some of the wild volatility of the ARK funds this year, so year-to-date BLCN has been maybe a little less stress-inducing:
So there you have it… “ID Coin” is the idea that blockchain will help to build new identity systems, and therefore you can invest in either some companies that provide identity security services, as they recommended Okta in the past or, perhaps, companies that might contract with the government for future advances in digital identity security like Accenture… but really, it’s most likely that for this metaphorical “ID Coin” investment what they mostly mean is “invest in the idea of blockchain becoming a big deal”… and for a passive and semi-diversified bet on that theme, my guess is that they’re recommend the Siren Nasdaq NexGen Economy ETF (BLCN), which is new and largely unproven, but is invested in a variety of companies that are either direct bitcoin/blockchain players, like Canaan and Galaxy, or big diversified companies (yes, like Accenture… but also JP Morgan, Microsoft and others) that are somewhat more quietly looking to build and profit from blockchain projects.
There are other ETFs in this space, too, of course — another candidate that’s more aggressively cryptocurrency focused is Amplify Transformational Data Sharing ETF (BLOK), which focuses a bit more on the direct Bitcoin/token plays like Microstrategy (MSTR), Marathon Digital (MARA) and HIVE Blockchain (HIVE.V). That’s generally more levered to Bitcoin prices and more volatile than BLCN.
You could do worse than these ETF investments, particularly if you just want to position your portfolio in such a way as to benefit a little more directly from a variety of potential blockchain projects that might make a big difference in the real economy over time. These aren’t likely to provide super-sexy returns, nothing at all like going back in time and buying Bitcoin for a nickel, but sometimes it’s best to focus on the broad theme and leave the wildly speculative ideas and company-specific risks for the next guy.
The soothing chart? That’s BLCN compared to Bitcoin — if you bought the ETF you clearly benefitted from the surge in Bitcoin over the past few months… but when Bitcoin crashed in 2018, dropping by 75% or more, BLCN was mostly pretty flat and, at its worst moment, was down about 20%.
Not the kind of strategy everybody would love, of course, but a lot less volatile than dabbling in cryptocurrencies themselves, or even focusing on a few of the more direct crypto plays in the stock market — and volatility, if we recall, is only fun on the way up.
Sorry we don’t have a lot of definitive comments for you on this “ID Coin” stuff, dear friends, but that’s what I can parse out of the ad for you… and I thought I’d better jump in and at least share what thoughts I have, imprecise though they are, given the wild numbers of questions popping up.
If you’ve got other ideas in this space you’d like to chat or ask about, feel free to use our happy little comment box below… and, as always, thanks for reading!
Disclosure: Of the companies mentioned above, I own shares of Okta, Amazon, Galaxy Digital, and Google parent Alphabet. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.