Apple Pay and Bitcoin have a Common Problem… and Solution

Bitcoin and Apple are both communities with a zealot-like following. To the dismay of both communities recent attempts by each at catalyzing mobile point of sale have resulted in lackluster levels of adoption from both consumers and merchants. This is a shared problem from opposing groups that I believe will also have a shared solution.

The Common Problem: Lack of Adoption

For Apple Pay, announced by Tim Cook at their September 2014 keynote, it was the promise to “transform mobile payments with an easy, secure, & private way to pay”. The numbers show that these features may not be enough to swell the tide of adoption. Despite a promising initial list of accepting merchants, as of June 2015 only 13.1% of eligible users had even attempted to use Apple Pay. It could be argued that from the perspective of the average consumer Apple Pay appears to be nothing more than a high-tech gimmick.

For Bitcoin challenges abound with respect to both user and merchant adoption. Despite the incentive of reduced transaction fees merchant adoption is fledgling at best. Having trooped through San Francisco (Bitcoin Mecca), New York, Denver, Boston, and more in search of accepting merchants… I can attest that the struggle is real. Look no further than Bitcoin Maps or similar services offered by Blockchain or Airbitz and you will note the lack of establishments accepting Bitcoin. A “chicken or the egg” problem is ever present and these transactions only appear to occur when merchants and users share ideology rather than see real benefit in the form of payment.

For mobile point of sale payments the value add (for both Apple Pay and Bitcoin) simply isn’t enough to catalyze significant waves of adoption by either merchants or consumers. The key to solving this problem and catalyzing mobile point of sale payments is to add more significant value.

Understanding the Problem: Give them Value and They Will Come

When I check out at the Whole Foods down the street Apple Pay is always available. Despite my enthusiasm for technology I never feel inclined to use it — it’s easier to just swipe my credit card like I always do. I’ve also considered using bitcoin (via Gyft) to make a mobile payment but again this requires added steps with little benefit to me the consumer.

Despite my unwillingness to engage with the available mobile payment options – I’m always sure to swipe my rewards cards with similar merchants at the point of sale. Why? Because it means I’ll likely get a discount on my purchase and possibly earn credit towards future purchases. This is actually of value; enough so that I even keep a tiny bar code on my keychain. As consumers we are willing to go the extra mile as long as there’s value in it for us.

The Common Solution: Blockchain Enabled Digital Tokens & Assets

The solution to this problem is the transformation of loyalty rewards, coupons, and discounts into digital assets (tokens) that are stored on a blockchain. What the digitization of assets allows is the seamless flow of value between suppliers, merchants, and consumers. In a world where my purchase of a Coca-Cola at McDonalds earns me not only micro-rewards at McDonalds but also universal micro-credit towards Coca-Cola I could now apply this micro-credit to my next purchase of Coca-Cola products at the supermarket.

In a world where I am accumulating loyalty rewards and credit for every product I purchase at every merchant I shop with I would be quick to adopt mobile payments. In the same way that I always swipe my rewards card at the supermarket, whether I know of the discount or not, I am always sure to do so for no other reason than I know that I “might” get a discount. Similarly, in a world where I am amassing digital token rewards for all the products I purchase, I will always be sure to use my digital wallet at mobile point of sale terminals … who knows what I might save or earn!?! There’s real value in that.

There are currently a number of startups in the blockchain and bitcoin space building this future. It will be exciting to watch startups such as Chain and Tokenly as they move forward … Apple fans and Bitcoin zealots alike may all have to thank them in the near future.

Apple Pay and Bitcoin Share a Common Problem ... and a Common Solution

Apple Pay and Bitcoin Share a Common Problem … and a Common Solution


The Monetization of Centralized Bitcoin Services

The Bitcoin industry continues to pick up steam as startups gather round after round of Venture Capital funding. To date over $317 million has been raised by startup companies in the space. The lions share of funds have gone to the biggest players that focus on universal bitcoin services (Coinbase, Circle), wallet services (Blockchain, Xapo), exchanges (Kraken, Bitstamp), mining (KNC Miner), API developers (Chain, Gem); the list goes on… Despite the tremendous amount of investment most companies are currently offering their services at little to no cost whatsoever… this has left many asking themselves; “how will these organizations eventually monetize their business?”

This conundrum is further instigated by Jeremy Allaire, CEO of Circle, who was quoted earlier this month by stating:

“If you go on social media sites like Reddit, there are a lot of users speculating. But right now, possible business models are not things that we’re going to talk about, or have really given that much thought to.” – Jeremy Allaire

When the first unpaid mobile applications (non-bitcoin) were released for smartphones in the late 2000’s many consumers were equally as dumbfounded. How will these developers pay for their costs let alone make a profit? In the era of multi-billion dollar mobile acquisitions (WhatsApp: $19 billion, Instagram: $1 billion) it has become clear that the value of any application is access to the user-base and their information. In many ways the era of bitcoin related services is not much different.

When considering centralized startups in the bitcoin industry one thing is clear – it is a race for the user-base where quarterly earnings are not of any concern for the time-being. As exposure and adoption grows it is not hard to imagine an increasingly competitive landscape where free may not be cheap enough. To help understand the “state of monetization” for these organizations I’ve provided a table below (click to enlarge) to summarize the current and speculative methods of monetization. It should be recognized that many of these service providers are in direct competition that could lead to a battle of attrition or a windfall of mergers and acquisitions. Additionally, I would encourage viewers to please leave comments and help build this table as you view.

A summary of major bitcoin startups. For each the existing revenue streams have been defined as well as speculations on potential future methods of monetization.

A summary of major bitcoin startups. For each the existing revenue streams have been defined as well as speculations on potential future methods of monetization.