Harriet Howard Heithaus
| Naples Daily News
Gardner’s transaction was done with IDON, the invisible notes of a digital currency formally known as Idoneus.
If that brings a headshake, it did to Gardner, too, the first time she heard of it. But she has embraced this format of exchange known as cryptocurrency, which operates with units of monetary value that are passed back and forth without paper or coin and which are held, encrypted, by their owners in blockchain «wallets» online.
Checks, credit cards, cash and the need to convert from one currency to another as with foreign purchases, aren’t necessary. Neither are banks.
The Idoneus currency works exclusively in the high-end luxury market, making it a niche phenomenon among digital currencies. It was founded by partners who were already in the luxury item trading business and found both traditional currency and barter unwieldy.
«Our CEO and myself we come from the tangible asset, luxury asset trading world,» said Timothy O’Leary, vice-president of portfolio development for Idoneus. Its CEO, Jarrett Preston, he said, has 20 years experience in the business. «What we would do is we would trade private islands for boutique hotels. We’d trade aircraft for precious metals. It was luxury goods.»
Those kinds of trades are in an extremely small pool, he acknowledged. Idoneus was born to offer an international currency that could be used for such transactions, and banked in one’s personal blockchain wallet.
You probably won’t ever buy a cup of coffee with IDON. The vendors who currently accept it deal in such goods as cut diamonds, jewelry, vacation homes and yachts — the mouthwatering «Best In Show” from the 2019 Fort Lauderdale International Yacht Show is in its portfolio. Its vacation homes are outside your typical club offerings; the beachfront villa in Bali it advertises has its own helicopter pad and goes for $10,000 a week rent in hard currency.
Idoneus (I-DOH-nee-us) has focused on its market, offering a portfolio of luxury asset owners that accept it. That now includes art, and Gardner is functioning as the company’s art adviser — not, she emphasized, as an investment adviser.
The selling price of the Picasso sold in Naples — titled «Danse du ventre devant homme impassible» — was unavailable.
«There is push in the crypto world to start accepting currency for all kinds of different items, whether it’s clothes or cars or art or property. It’s quick. It’s easy. You can bypass all the intricacies of taking your fiat currency like dollars or pounds and converting it into a different currency. It’s the same the world around.»
«It’s not worldwide,» Gardner warned. «It’s like I go to a company to buy something and pull out my American Express. Not everyone takes American Express.»
A simplified version of its process could be likened to those casino night fundraisers at which you bought chips that were your currency for roulette and other games. At the end of the evening you could bid on an inventory of prizes with your accumulated chips.
In the case of IDON, however, the prizes have a set price and you’re assured of getting them if you have the currency.
Further, its founders say, this currency has a floor. Whatever casino night chips you didn’t use to bid on prizes at the casino night were worthless after you walked out the door. If you decide to exit the IDON currency, its digital «tokens» have a floor value of $10 each in public exchange trading, according to O’Leary.
So it won’t sink below $10. And it does have the potential to rise; privately buyers and sellers can set whatever value they want. It can also rise as the currency joins cryptocurrency exchanges, which function much like stock exchanges. Boutique currencies without a set floor, conversely, have the potential to crash and burn, as holders of Spacebit and Dogecoin learned.
The IDON is by no means the only niche cryptocurrency out there. There were, as of January, some 2,000 privately founded currencies.
Bitcoin, the most familiar digital currency, has become accepted enough that it can be used by at least one consolidator company, Qeeq, for car rentals in Southwest Florida. There are at least a half-dozen bitcoin ATMs listed around Naples by coinatmradar.com, and one condo complex will let you pay your rent in bitcoin.
What’s the appeal?
Tom Smythe, professor of finance at FGCU, sees at least three:
Stability. There’s no central governmental monetary authority, such as the Federal Reserve. «As a result, you don’t have the bodies that crypto folks would argue can be influenced politically in a way that distorts the value of the currency,» Smythe said.
A smart cryptocurrency company does regulate it, however, Smythe said: «At least with bitcoin, the amount of currency, or the amount of crypto that’s out there has a predetermined growth rate through time, and that’s 3 percent per year.»
Compare that to the U.S. currency supply, he continued: «In the United States in the last six months, the growth of the money supply has been at a rate of 20 or 30 percent, because of the stimulus and all that kind of stuff. And next week, they could be pulling money out of the system.»
Universality. The seller and buyer are operating in a currency that is the same all over the world. That’s particular important in the high-end art market.
«There’s a consortium that is pushing this (for) works of art — in trying to create a value where you don’t have to worry about hard currency transactions, because these are large dollar items,» Smythe said.
Anonymity. «Each person is assigned, for lack of a better word, an account number, and it’s randomly generated. To use that account you have to have a code,» Smythe said. It’s known as your private key.
«That appeals to a lot of people,» Smythe said.
It’s like having a bank at home. You have the private key, or code to your digital wallet. Your transaction is made in codes that keep the seller and buyer from knowing who the other is. The only way you even know the IDON have been added to your account is through the fee-based services of «crypto miners,» the independent verifiers of transactions who can crawl into block chains, shine a virtual flashlight around and verify that, yes, indeed your currency is in there.
Still, there are a number of things people should know about investing in and selling with cryptocurrency, he continued:
It’s taxable. Smythe said cryptocurrency is taxed as an asset, similar to stock. If you hold it, you pay capital gains; if you use it you pay tax on the crypto-income it produced for you.
How to calculate your cryptocurrency transactions for federal tax purposes
Here is a breakdown of the IRS guidelines for taxing cryptocurrency.
There are downsides to the investments
«From the IRS’s perspective it’s like buying any other investment,» he said.
No guarantees of stability. «The smaller the currency, and I’m talking about the amount that’s out there in circulation, the greater the likelihood for that crash. It’s very much like developing market currencies,» he said.
All currencies that are not back by some other medium, like gold, are operating on the faith of the users that it has value, he explained. That includes the U.S. dollar, which ended its final ties to the gold standard in 1973. Idoneus does have an IDON token value of at least $10 U.S when purchased on public exchanges.
The values vary. Exchanges have sprung up that treat cryptocurrencies like shares of stock. That may be harder for the person buying IDON tokens, bitcoin or any other alternate currency on the open market if values rise.
Unanswered questions. «There’s somebody out there that has the keys to the candy store. I’m a little bit skeptical,» Smythe said. «They talk about not having any one person to have the power. You still have to turn on the computer. Are we saying once cryptocurrency was turned on, nobody can get in there and mess with it? I just don’t buy that yet.»
But he added that cryptocurrencies will likely be a big part of the future of finance: «My prediction is that in the next 10 years, you’ll start hearing the U.S. start talking seriously about digital currencies. In fact, I think if they don’t it would be one of the largest strategic blunders in American history. You gain more power if you’re sort of out front.»
That, in fact, is what has excited Gardner and the other early innovators with this currency.
«I reached out to some experts in the crypto world, people who have done speeches, and conferences and they’re leaders in the crypto world,» she said. A financial industry friend flew in from England to help her interview the leaders of Indoneus.
«He told me ‘This is really forward thinking. It’s really cutting edge,'» she said. You really think you want to be a part of this.» So, she learned, did her client.
«We finished that transaction and I’ve never seen someone more excited. He said, omigod, this was easy, this was seamless.»
Was she convinced? Just as important, she said, her client was. The word has spread enough that she is working with the sale of seven more works via IDON. Among them, potentially, are a Chagall and a Pino Daeni and another Picasso.
«All of sudden my phone’s ringing off the hook.»
Harriet Howard Heithaus covers arts and entertainment for the Naples Daily News/naplesnews.com. Reach her at 239-213-6091.
There’s a tutorial about bitcoin and other forms of blockchain currency at: support.blockchain.com