HTC’s blockchain-powered Exodus smartphone is a risky bet that needs to pay offJuly 11, 2018
In May, HTC first announced that it was working on a blockchain-powered smartphone called the Exodus. The news came as one of the company’s more intriguing projects after a poor start to the year. Last year, HTC shipped over 2 million products in Q1. This year, it shipped only 630,000 products in Q1, according to numbers from IDC.
HTC is in pretty poor shape after a round of layoffs last week where the company laid off 1,500 employees in Taiwan in hopes of becoming profitable. Sales in June were down 68 percent, according to the company. Its latest flagship, the U12 Plus, has received largely negative reviews over its odd solid-state buttons and software bugs.
It’s a less than stellar time for blockchain, as well. Cryptocurrency prices are low, and last month, bitcoin was tied to price manipulation in a report from researchers at the University of Texas at Austin.
Considering HTC’s financial situation, there’s a lot at stake with the Exodus phone. Now we have details from HTC’s Phil Chen about when we can expect the phone to be released and an estimate on how much it might cost. Although Chen was vague on specifics, he told The Verge that we can expect the phone around the end of this year and we can expect a price announcement by the end of Q3. When I mentioned that the world’s first blockchain-powered phone called Finney, created by Sirin Labs, costs $1000, Chen said the price of Exodus would be “comparable.”
Exodus will have global availability once released and Chen says, “I want to say it will be available definitely everywhere outside of China.” He elaborates that it will be more difficult to bring Exodus to China as “China has different rules, everywhere from regulations to how Android even works in China.”
When Chen announced the Exodus phone back in May, he said, “We envision a phone where you hold your own keys, you own your own identity and data, and your phone is the hub.” Now Chen tells me that a phone where you can own your identity is a little further in the future, while the one coming by the end of the year will be a phone with a wallet and a partnership with CryptoKitties. Details on the device’s specs aren’t available yet.
In the long term, he hopes to find a more efficient way to mine cryptocurrency on mobile, by consulting with “famous” experts under HTC’s employment. Mining on mobile efficiently will take time to figure out, but HTC is already looking at different consensus protocols that might make that happen and Chen says the company may release a white paper this year with more details.
Chen credits himself as the one who initially raised the idea of a blockchain-powered phone to HTC executives, after watching ethereum and the DAO closely since 2015. He floated the idea, and by the end of last year, as bitcoin prices were rising rapidly, the idea appeared more attractive to HTC and quickly grew into a strategy.
In early 2018, developers got to work coding. And “come March and April, it became clear that somebody needed to run this thing,” says Chen. That someone was Chen, who was named chief decentralized officer, a nod to the emerging technology he would be overseeing.
Within the last year, however, cryptocurrency mania has died down and the frequency of cryptocurrency scams and hacks has become a cautionary tale. A partnership to be the sole company to bring digital cat trading to mobile and for users to hold their own cryptocurrency wallets could potentially fall or at least appear to fall into the category of scams and gimmicks.
In response, Chen claims that the phone with a cryptocurrency wallet will be “the most secure hardware wallet out there.” He also hopes that trading virtual cats will encourage gamers and people who are less familiar with cryptocurrency to try out the Exodus phone. “Gaming is the most approachable thing on mobile, for the non-crypto crowd,” he says.
Chen sounds as if he’s just hoping the Exodus phone will appeal to somebody. He’d like a phone that appeals to non-cryptocurrency enthusiasts, but he’s also targeting a “niche market,” in his words, of 30 million bitcoin wallet users looking for a device to access and manage their coins. But even companies like Google can’t sell fantastic products like the Pixel at that volume in a world dominated by Apple, Samsung, and Chinese smartphones. And here’s HTC betting on a niche-by-design device.
“It seems to me that they’re almost grabbing things that aren’t really there. Blockchain doesn’t make a sense to a lot of people,” Will Stofega, program director at IDC for mobile and drones, told The Verge. “With the Exodus, [Chen] is hoping he’ll get people to be each node, as each Exodus device will form one node in the blockchain. But the problem is, does anyone want to be in that chain?”
Over the past year, smartphone shipments have stalled for most companies, with China’s Xiaomi being a rare exception. “There’s very little they can do right now. The refresh cycle has slowed down. Everyone pretty much has a smartphone.” For a new phone to compel everyone to purchase it, “it has to be real magic. It has to be incredible.” Stofega mentioned Samsung and other companies’ patents of foldable phones. “That sounds exciting, but I’m not sure that’s even good enough, that that really adds any value.”
Still, Stofega said that the fact that tech giants in the smartphone industry like Apple and Samsung haven’t yet thought to make a blockchain-powered phone bodes well for HTC. Making such a move first could pay off for HTC. And if there’s anyone who can make a dismal company story sound positive, Phil Chen seems to be the guy. When I ask him about HTC’s recent layoffs, he says: “I think that signifies a change in the company’s strategy, so I see it as a positive change: focusing on what’s next instead of keeping its legacy.”
He reasons that a blockchain-powered phone for HTC can’t be a cheap gimmick to raise funds for a struggling business because the technology isn’t even there yet. “I think most of us would agree that blockchain and crypto are still super early. HTC’s direction in crypto is definitely an investment. To say that doing a crypto phone is going to help HTC get in the black or stay in the black wouldn’t be correct since it’s a very niche market. It’s definitely a view in the future.”
That’s what makes HTC’s blockchain-powered phone a risky bet that could pay off. Stofega quips, “If this is the future and HTC has latched onto it first, then they’re ahead of everyone else. But the future comes when it comes and not when HTC needs it to come.”