Russia's Largest Social Network Vkontakte Embraces Bitcoin

As of January 2014, VK.com had at least 239 million accounts. VK is ranked 8th (as of August 1, 2014) in Alexa's global Top 500 sites and is the 2nd most visited website in Russia, after Yandex.

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Russia's Largest Social Network Vkontakte Embraces Bitcoin

This year, at Riga’s International Economic Forum, CoinTelegraph had the chance to catch up with Yuri Ivanov, Head of Partner Relations at Russia’s largest and most popular social network, Vkontakte (VK.com).

As of January 2014, VK.com had at least 239 million accounts. VK is ranked 8th (as of August 1, 2014) in Alexa's global Top 500 sites and is the 2nd most visited website in Russia, after Yandex.

Yuri has more than 10 years of experience in IT sphere and has a background in managing development projects and deploying information systems for some of the largest companies across the electrical energy industry in Russia.

As the head of partner relations at VKontakte, Yuri is responsible for cooperation with all technological partners such as payment systems providers, mobile operators, SMS aggregators, producers of mobile devices, and software.

CoinTelegraph took this opportunity to get some insight on the potential relationship between emerging payment technologies, namely Bitcoin, and Russia’s most popular social media platform. 

Yuri Ivanov, VK.com

-Yuri Ivanov, Head of Partner Relations, VK.com 

Vkontakte Background

VKontakte was incorporated on January 19, 2007 as a Russian LLC. Founder and CEO Pavel Durov owned 20% of shares along with a few other Russian investors, Vyacheslav Mirilashvili and Lev Leviev, who owned 60% and 10%, respectively. The original founders then sold a stake of 39.99% to the Mail.ru Group.

On 29 May 2012 Mail.ru Group announced that it has decided to yield control of the company to Durov by offering him the voting rights on its shares. Combined with Durov's personal 12% stake, this gave him 52% of the votes.

In April 2013, United Capital Partners bought 48% of VK shares from Vyacheslav Mirilashvili and Lev Leviev for US$1.12 billion to the Russia-focused fund managed by Ilya Shcherbovich, a board member at oil giant Rosneft, Transneft, as well as the FGC UES (Federal Grid Company of Unified Energy System).

In January 2014, Durov sold his 12 percent stake to Ivan Tavrin, the CEO of major Russian mobile operator Megafon, whose second-largest shareholder is Alisher Usmanov, one of Russia’s most powerful oligarchs, a man who has long been lobbying to take over VK.

Then, in April 2014, Durov stated he had sold his stake in the company and became a citizen of St Kitts and Nevis back in February after "coming under increasing pressure" from the Russian Federal Security Service to hand over personal details of users who were members of a VK group dedicated to the Euromaidan protest movement in Ukraine.

CoinTelegraph: What is your opinion on Bitcoin?

Yuri Ivanov: I wouldn’t call myself an expert in Bitcoin and cryptocurrencies, but I am certainly familiar with it. When we experienced the ‘informational boom’ when Bitcoin was trending at the beginning of this year, we saw many new outlets and government agencies etc. zeroing in on cryptocurrencies.

During that time, we had serious discussions on integrating Bitcoin at our company, but unfortunately, this was not in the cards as Bitcoin has not gained much popularity amongst our audience.

So right now, we can’t view it as a fully-fledged payment system in comparison to those already established. Additionally, there are also risks due to the government’s proposed regulations, which I think everyone is aware of.

But if we’re talking about our employees, many of our colleagues did indeed buy some bitcoins then and some have even got into mining; I even saw these so-called farms that mine not only Bitcoin but other cryptocurrencies as well.

“[M]any of our colleagues did indeed buy some bitcoins then and some have even got into mining.”

-Yuri Ivanov, Head of Partner Relations, VK.com

CT: So Vkontakte employees are mining bitcoins?

YI: I won’t speak for all Vkontakte employees but I have one colleague, he’s our system administrator, who has his own miner at home with 4 graphics cards and a cooling system, with which he mines cryptocurrencies. This is something he does in his own time and on his own computer, but yeah.

CT: What will you do if Bitcoin is banned in Russia?

YI: I think if it reaches that point, then obviously no one including my colleagues would deal in Bitcoin. But right now, it is not illegal as far as I know.

CT: Do you think Bitcoin can become a weapon against the dollar’s supremacy?

YI: Well, it depends by what we mean when we say ‘dollar supremacy,’ namely the dollar being the main reserve currency of the world. Just today, I read the news about the Central Bank of Russia changing its main reserve currency to Euros. So, maybe there is no dollar supremacy – maybe it is Euro supremacy, who knows? So we will not see this in Russia because of the regulator’s policies. But as a whole, if we look at Bitcoin as a global phenomenon, I think that the potential certainly exists.  

CT: Bitcoin cannot be created out of thin air like governments have been doing with fiat currencies, particularly the US. Why do you think Russia is reluctant to use this potentially useful weapon i.e. cryptocurrency against the dollar?

YI: It’s hard to say. I think that considering what you said about Bitcoin being capped unlike the dollar, the US regulators also have a lot of questions regarding Bitcoin just like the authorities in Russia.

In whole, Bitcoin is something that poses a challenge to the established monetary policy that we’ve become accustomed to, be it in the US or Russia. So regardless of the political differences between the two countries, the principles shaping their economies are the same, and these governments see Bitcoin as a threat.

But I don’t think that we have these goals to counter the west. I’m more focused on building relationships. So while the conflict rests on the political level with our president and politicians, these sanctions along with the back and forth threats do not benefit anyone – not us, not our western partners.

In fact, building closer ties is the key to success so I don’t think we need to seek any weapons but a consensus instead. If we can use cryptocurrencies as a way to facilitate and strengthen these ties then yes, but they should not be as an instrument of coercion against other nations.  

“[R]egardless of the political differences between the two countries, the principles shaping their economies are the same, and these governments see Bitcoin as a threat.”

-Yuri Ivanov, Head of Partner Relations, VK.com

CT: Do you think Bitcoin can become a tool for either improving or exacerbating the situation with political corruption in the world?

YI: We all know about Bitcoin being used to finance online dark markets where one can buy illegal drugs, weapons etc. as we often hear in the press…

CT: But, as you know, fiat currencies are used for these purposes just the same and in larger quantities.

YI: Absolutely, fiat currencies are used for this a lot more. But I’m not sure if Bitcoin can be an effective means of battling corruption. Instead, we should emphasize the anonymity of payments as well as security, privacy etc. when it comes to Bitcoin.

CT: Have you heard of the blockchain?

YI: No.

CT: This is the technological backbone of Bitcoin as well as any other cryptocurrency. It’s a technology that allows storing of information publicly in a transparent, open format regarding all transactions and payments. It is only possible to view the public ledger since no one can change or modify its contents due to its encryption. Do you think this technology could be useful to Vkontakte in any way?

YI: I’ve heard about the technology on top of which Bitcoin operates though I haven’t heard of it being referenced by that name. But for Vkontakte, I currently don’t see any applications ….

CT: Well, for example, what if you want to implement your own payment system in Vkontakte, which can make your platform more transparent and secure for your users.

YI: Well, for best or for worst, we operate under Russia’s legal framework and there is an already established payments and electronic-payments system. Plus the given market is so regulated that I think it will be impossible as there are specific laws and specific protocols in place that would prevent us from integrating Bitcoin.

CT: Do you think there is a future for Bitcoin and blockchain technology in Russia?

YI: I think so. I’m very optimistic. And I would like to see the shift from paper to electronic continue as I hope traditional payments systems will be eventually replaced by more technologically advanced solutions. 


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