Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


The Most Valuable Unicorn That You Have Never Heard of

A somewhat obscure payment processing company based in the tiny European nation of Luxemburg could be the most valuable unicorn that you have never heard of. Bitcoin processor Blockchain has released what could be the biggest open-sourced software solution since Google’s Android.

The Thunder Network is an open-sourced payment processing platform that could be capable of processing up to 100,000 financial transactions per second if fully implemented. The network is potentially revolutionary because all those transactions will be fully encrypted and authenticated.

More importantly the cost of payment processing is supposed to be far lower than traditional solutions like Visa and MasterCard’s systems. Unfortunately, Blockchain does not give any figures on the cost of processing with Thunder. The high cost of payment processing has long been a serious bone of contention between retailers like Walmart (NYSE: WMT) and processors such as Visa (NYSE: V).

Fear of processing costs is probably one of the factors scaring big retailers; like Costco Wholesale (NASDAQ: COST), away from Apple Pay and Android Pay. Another fear is security, which the Thunder Network claims to rectify. On its website, the Thunder team is bragging that payments will be sent over encrypted routes and through payment channels that can be opened and closed at will.


The Next Big Thing in Payment Solutions

Thunder’s developers claim that the network could be scaled up to a high capacity fairly quickly. Just a few thousand of what they call Nodes could be used to process up to 100,000 transactions a second.

In contrast; Visa’s network the world’s biggest, can process between 57,000 and 65,000 depending upon who you ask. It should also be noted here that such capacity is necessary because Visa’s network only processes around 2,000 payments a minute.

Such technology looks designed to help any organization quickly create its own encrypted payment network. It would be an ideal solution for both banks and retailers and there could be a huge market for it.

Is There a Market for Thunder?

A good way to think of Thunder would be as a Linux for financial transactions. Linux is a free operating system that anybody can install and modify. It provided the basis of the world’s most popular mobile operating system Alphabet’s Android.

Whether Thunder can be as popular or as widely accepted as Linux remains to be seen. There are some huge regulatory hurdles; not to mention popular prejudices, to overcome to get Bitcoin widely used.

The demand for new payment solutions is certainly great and growing. RE/CODE reported that the volume of transactions processed on PayPal’s (NASDAQ: PYPL) social media money transfer solution Venmo, grew by 154% between first quarter 2015 and first quarter 2016. What’s intriguing here is that Venmo cannot even be used for commercial transactions – yet, although PayPal is working on that.

There is also a strong demand for such solutions in the banking industry; several hundred banks and credit unions in the United States are now using Apple Pay. My guess is that these institutions see Apple Pay as a means of reducing costs from checks and debit cards.

How Thunder Based Solutions could generate a lot of Money

Demand outside the United States could be higher privately held Ant Financial; the Chinese company behind Ali Pay, has 450 million users or nearly four times as many as PayPal, The South China Morning Post reported. Ant Financial is reportedly worth $60 billion and has been able to get $4.5 billion in venture capital money. It could also be the fourth largest bank in the People’s Republic according to some reports.


PayPal; which had 179 million users, reported revenues of $9.655 billion during first quarter 2016. Those revenues grew by $407 million during first quarter and $1.223 billion during 2015. PayPal also reported $1.338 billion in net income in March 2016, and it added $419 million in net income during the first quarter.

If that was not enough PayPal also reported having $14.57 billion in the bank on March 31, 2016; and making $2.953 billion in cash from financing and $2.74 in cash from operations. Payment processing is big business and that business is highly lucrative.

If Thunder works as advertised, it could provide the basis of payment processing solutions as profitable as PayPal. Even though Blockchain is a modest operation it is company to watch, because it could make a lot of money someday. That could make Blockchain which currently offers the world’s most popular digital wallet; MyWallet, the next big unicorn.