Tonality Records saw an immediate boost to its sales after it started accepting payments in BTZ, a cryptocurrency launched by online marketplace Bunz Inc., a little more than a month ago.
Just five minutes after a notification went out through the Bunz app, alerting users that the record shop in Toronto’s west end was accepting “bits,” customers were coming through the door.
Unfortunately for the shop’s owner, Julian Seth-Wong, the benefit – which amounted to roughly $700 in sales in only the first month – was short-lived. Earlier this week, Bunz abruptly announced it would no longer be offering the service to merchants other than those selling coffee and food. The change, it said in an e-mail that went out Sept. 10, was effective immediately.
Julian Seth-Wong, owner of Tonality Records, was stunned when online marketplace Bunz suddenly cut off use of their cryptocurrency BTZ to all merchants but those selling coffee and food.Chris Donovan
“It was a pretty shocking blow that they just cut it off," Mr. Seth-Wong said. “We put a lot of effort into working with them to get it all set up," he added.
In an online post the following day, Bunz chief executive Sascha Mojtahedi apologized for the inconvenience and said the change had to be made on short notice for “sustainability reasons.” He said that the Toronto-based company had also parted with 15 of its employees.
“The reality we face is that it’s expensive to build and maintain a platform that hundreds of thousands of people use every day,” the post reads. “It gets more expensive when you try to ensure those people see material benefits from using it. Reducing the merchant list was necessary to continue Bunz and BTZ for the community.”
Mr. Mojtahedi, who joined Bunz in 2014, said the company had intended for BTZ to be used for small, daily purchases rather than for savings or larger items. He also offered his “deepest apologies” to the business owners impacted.
“We will do our best to ensure that we learn from this and move forward in a way that both secures the future of our community and this new type of profit sharing network,” Mr. Mojtahedi said in an email.
Bunz was started in 2013 by fashion-design graduate Emily Bitze, who was struggling financially and couldn’t afford pasta sauce for her spaghetti dinner. She created a private Facebook group where people could trade unused items with one another, and it quickly grew to thousands of users across multiple cities.
Since then, Bunz has morphed into a business, attracting backers such as Fidelity Investments and luring users away from its own Facebook page and to its mobile app as it looked for ways to monetize its massive following. In April of last year, Bunz entered the virtual-currency space by creating BTZ, pronounced “bits.” Cryptocurrencies, which include bitcoin and ether, are digital tokens that allow users to transact with one another directly, without the need for a third party such as a bank.
Merchants were not the only ones left in the lurch after Bunz’s announcement. Many of the site’s users had been saving up their BTZ for bike repairs, records and other large purchases and were stunned to learn that the tokens were now only redeemable at restaurants and coffee shops.
When Elizabeth Joyce, who is an administrator for several Bunz-related Facebook groups, heard the news, “it felt like a punch in the gut,” the Toronto resident said.
Ms. Joyce had amassed roughly $600 worth of BTZ, much of it by volunteering her time staffing the Bunz booth at various events. She treated her stockpile as a sort of safety net, in case she ran out of money and needed to buy something for her two-year-old son.
“Now, it’s worthless," Ms. Joyce said. “He doesn’t drink coffee.”
Like many other Bunz users and administrators, Ms. Joyce feels that the online, barter-based marketplace has moved away from its anti-capitalist roots in recent years.
“It wasn’t supposed to be about making money,” said Ms. Joyce, who is part of a group of Bunz administrators and users who have splintered off from the company, renaming themselves PALZ. The group hopes to restore the community to its roots as a barter system.
Tonality Records, meanwhile, is still waiting to be paid the $700 it’s owed for purchases that were made in BTZ.
Mr. Seth-Wong said that although he’s disappointed by the development, he’s hopeful that customers who learned about Tonality Records through the Bunz app will return to the store.
“We’re still around," Mr. Seth-Wong said. "We still accept regular money.”
Alexandra Posadzki