The Passion Economy and Libra's Demise?

Off the Blocks | Vol 89, October 15, 2019

At Proteum, we partner with entrepreneurs to develop and deploy innovative products and solutions built with blockchain technology - advising them on building sustainable companies in a rapidly changing investment, regulatory and tech landscape.

Thoughts On The Passion Economy

Online marketplaces have now been around for over two decades. The simplest of these remains Craigslist which started in the mid-90s and surprisingly, without a mobile app, is still around. Over the years, the major service offerings have evolved and entrepreneurs have found ways to unbundle (for example, Airbnb, Tinder etc) and make them available on an on-demand basis (for example Uber, Instacart, Classpass etc). However, most of these services are single-dimensional and it has been hard to align users to share a common platform for multiple services. In the absence of any overlap, the consumers have ample choice but at the cost of curating their preferences across multiple apps. For entrepreneurs, it is extremely hard to break through all the fragmentation and build meaningful, sticky consumer relationships.

One reason is that most of these marketplaces have emulated our analog behavior and conveniently slapped digital tools on top of them. Few businesses come to mind that have embraced behavioral shifts with the Millenials and GenZ customers and proactively built technology to cater to them. For example, 80% Millenials will switch their financial institutions for better rewards. That speaks to their loyalty. Yet, no rewards program comes to mind that is built from the ground up, incorporating tech and business model innovation, that can cater to the demands of these savvy customers.

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Even when marketplaces such as Uber and Airbnb have acquired a sizeable and sticky customer base, their loyalty programs lack meaningful and accretive consumer engagement. Consider Uber’s loyalty program - a mix of old school cash and upgrades from a company that reinvented transportation. Uber’s program does little to drive individual activities that are profitable for the company. When Airbnb shelved its rewards program, it acknowledged:

We decided that it wasn’t differentiated enough, we didn’t have enough community involvement for us to launch it.

Almost all of the 125M service jobs in the US are vulnerable to tech or business model disruption. New tools are emerging every day that allow anyone to be an entrepreneur. Not only that, they can express themselves individually and have a greater ability to build authentic customer relationships. In the process, they are differentiating themselves from the status quo and are finding a loyal base amongst their customers. Welcome to the new Passion Economy.

While the previous generations of marketplaces were focused on physical goods and services, the passion entrepreneurs are already focused on digital goods and services. These digital products and services can be monetized globally - even though they may be preferentially launched for a smaller, local or highly engaged community. In practicing telemedicine, a doctor may never see the patient physically or be in the local area of access. Yet, the service rendered through an entirely digital experience has the potential to create a recurring encounter, transparently keeping track of the sessions and maintaining a trustworthy monetary exchange. This is where blockchain technology is starting to play a big role. The business models associated with customer interactions are undergoing a transformation and would not have been possible without the technology itself.

Traditional reward mechanisms are just cost centers masquerading as building a loyal brand following. Consumers’ only interest is to acquire more of them to get a future discount whereas the businesses running them have a perverse incentive in slowing down the rate of accumulation. There is no intrinsic value to these rewards and are worthless outside of the narrow business interests they support. However, if these rewards are thought of as digital assets, the game can be made far more exciting. For consumers, digital assets imply ownership, a more tangible way to think about their value. For passion economy entrepreneurs, this is incredibly empowering for both their businesses and consumers.

Once inside a valuation framework, rewards can spur whole new marketplaces where the users of services, can tangibly know the worth of these assets. Thus, the one-sided rewards redemption option can now be replaced with a demand and supply based two-sided network. For example, NBA’s Sacramento Kings recently launched the Kings Token, their own rewards program based on digital assets on a blockchain. As a digital asset, the Kings Token can seed entirely new experiences for the asset holders.

In our opinion, the blockchain has a role in the entire event experience, whether it’s a sports game, music festival or Broadway show.

Such tokens inherently allow their token holders an ability to facilitate secure and incorruptible peer-to-peer trades. By providing a way to create, manage, issue, access and trade digital assets that are valuable in a marketplace, this is a huge facilitator for the passion economy. Open marketplaces where these digital assets can be freely traded bring value for these entrepreneurs and creators looking to be discovered. A loosely coupled ecosystem of on-demand partners and integrated platforms will empower entrepreneurs to monetize individuality and creativity. Passion entrepreneurs will create value not by building artificial moats and walled gardens around themselves, but by thriving as interoperable ecosystems. As entrepreneurs unlock unique skills and knowledge, they will increasingly find it beneficial to augment them with a digital token and deliver a new set of experiences to their consumers.

If you’re a founder who is building for the passion economy, we’d love to hear from you. Thanks for reading.

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Now some significant news from the world this week:

  1. GovTech | Blockchain's Effectiveness Relies on Breaking Down Tech Barriers: the challenge with blockchain technology is the potential for the development of “walled gardens,” or closed technology platforms that do not support common standards for security, privacy and data exchange. 

    Leaving the walls in place would limit the growth and availability of a competitive marketplace of diverse, interoperable solutions.

    - William N. Bryan Senior Official, DHS

    The Science and Technology Directorate (S&T), the science adviser and research and development arm of the Department of Homeland Security, is pursuing two broad courses of action to encourage an open and inclusive future for blockchain technology, and paths that can be followed by any agency:

    1. We actively work with and support DHS component agencies to understand their potential use cases and help them achieve their outcomes with the necessary research and development expertise and technologies.

    2. And we support the development of globally available specifications that are open, royalty-free and free to implement to ensure interoperability across systems and prevent vendor lock-in.

      [… Read more on Fed Tech Magazine]

  2. FinTech | Vanguard Developing Blockchain Platform for $6 Trillion Forex Market: Mutual fund giant Vanguard has partnered with Nasdaq Ventures-backed blockchain startup Symbiont to develop a trading platform for the $6 trillion currency market. The new platform is part of the fund manager’s commitment to lowering the cost of investing for all investors. New York-based Symbiont actually worked with Vanguard on a project related to its index funds before the currency trading platform, helping the fund manager in 2017 streamline its index fund data collection process with its patented smart contract technology. The blockchain firm is focused on its smart contracts platform for institutional applications of its blockchain platform Symbiont Assembly to help build networks where multiple independent entities can share data and logic in real-time. [… Read more on CoinDesk]

  3. Regulations | SEC Stops Telegram's $1.7 B Token Offering: The U.S. Securities and Exchange Commission today filed an emergency action and obtained a temporary restraining order against Telegram and its subsidiary, TON Issuer Inc., halting a token sale that has raised more than $1.7 billion globally since January 2018. Telegram, a U.K.-based instant messaging platform, sought to finance the creation of the Telegram Open Network (TON) blockchain by selling digital tokens called Grams. The SEC says this represents the sale of an unregistered security.

    We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token. Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.

    - Steven Peikin, co-director of the SEC’s Division of Enforcement

    […Read more on DeCrypt]

  4. Libra | Libra Loses One More Member As Its Council Becomes Official: Facebook couldn't avoid losing another Libra Association member before it formalized the cryptocurrency's council. Booking Holding, the company behind, Kayak, and Priceline, has withdrawn from the Libra Association just before the organization's members signed the council charter, elected its Board of Directors and appointed executive team members. The move leaves 21 initial members, including Facebook's own Calibra wallet as well as Lyft, Uber, Spotify, and telecoms like Iliad and Vodafone. PayPal, eBay, Mastercard, Visa, and Stripe were some of the most prominent companies to pull out, each of them leaving within days of each other. Not that Facebook is deterred. Libra Association policy head Dante Disparte told Reuters that the departures were a "correction" and "not a setback." The outfit also touted the number of potential members that could fill the exiting partners' shoes, noting that about 180 entities met the initial membership requirements. […Read more on Engadget]

  5. Automotive | BMW, General Motors, Ford to Start Testing Blockchain Payments in Cars: Five major automakers — BMW, General Motors, Ford, Renault, and Honda — will start testing a blockchain car identification and payment system next month in the United States. The partnership aims to test the vehicle ID system developed under the Mobility Open Blockchain Initiative. As part of the project, cars are assigned digital IDs linked to ownership, service history and a wallet allowing the vehicle to automatically pay fees without specialized hardware. The alliance reportedly envisions the system being applied to connected electric vehicles so tolls, maintenance, and rest stop purchases, for example, can be recorded and paid automatically when the car is plugged in to charge its battery. […Read more on CoinTelegraph]

The Final Word | Blockchain developers announce OpenLibra, a permissionless alternative to Facebook’s Libra

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The co-founder of blockchain startup Wireline, Lucas Geiger, announced Tuesday “OpenLibra”, a permissionless fork of Libra, the controversial crypto network led by Facebook. Geiger announced the project at Devcon 5, Ethereum’s annual conference which was held in Osaka, Japan this week. The developers released a virtual machine that runs a permissionless version of Libra, called Movement, built on the Tendermint blockchain protocol. According to the firm’s website, OpenLibra is

An alternative to Facebook's Libra, that places emphasis on open governance and economic decentralization.

Amongst the issues the founders of the OpenLibra project have with Facebook’s network is that it is “distributed, but not decentralized,” that it is not permissionless, that it is without privacy guarantees, and this it is run by a “plutocracy”—a network of 27 ultra-rich companies including Mastercard, Visa, and Uber. By comparison, the OpenLibra project is run by “a loose collective of individuals.” including several employees from Wireline and Cosmos. It has no "association members", "partners", neither "employees" nor "leaders" it reads. [… Read More on DeCrypt]

About Proteum
Proteum is a global blockchain investment and advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their ecosystem and unique capabilities so that they can own and control their future. ProteumX, our accelerator program, invests in and accelerates the time to market for startups and emerging ideas based on blockchain solutions. |  | Twitter: @proteumio | ProteumX

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