Tag Archives: Cryptocurrency

Crypto Prizes On The Rise, Magical Marketing Or Another Scam?

Crypto Prizes On The Rise, Magical Marketing Or Another Scam?

 

The art world, the gaming world, and even a few app developers

 

are jumping onto the trend that is cryptocurrencies, seeing them as a perfect prize to tantilize and attract people to their work. But what is the end goal for these people and companies? There is of course a lot of free marketing that comes up when ever cryptocurrencies are tied to something – the real estate sector has felt that – but, for an abstract artist like Andy Bauch, it adds another layer of intrigue and interest to his work. Gaming companies have also found a technological link to the digital currency, setting it up as a prize for a global market. They too can benefit from the hype, but can also entice a bigger audience with a collectively attractive prize.

Why are these cropping up?

Prizes are nothing new, especially when it comes to games, or even sporting events. However, the allure of Bitcoin is starting to spread to the likes of puzzles and paintings too. What is the appeal of attaching a Bitcoin-based prize to a game that someone can beat, or a puzzle that someone can solve in a painting?

One of the biggest reasons for this has to be that generally, Bitcoin media comes with a lot of hype and free publicity. There have been many instances where pretty mundane occurrences, like selling a house, have suddenly garnered a lot of attention because of a Bitcoin price. The real estate market was a prime example of this as a £17 mln mansion in Notting Hill, UK saw unprecedented interest since it went on sale in October last year. Saurabh Saxena, founder of property firm Houzen has said of Bitcoin marketing in

the real estate sector:

“I sincerely believe that Bitcoin as a currency or exchange medium is not sustainable. It's purely a marketing gimmick.”

The same could be said about this latest trend of Bitcoin prizes for solving puzzles and games. Everyone knows what it means to be a struggling artist, with little to no recognition of fame – see Vincent van Gogh – but, by incorporating a Bitcoin puzzle, suddenly the news is all over the internet and the name achieves a level of fame.

The Legend of Satoshi Nakamoto

Artist Marguerite deCourcelle has, on three occasions, hidden Bitcoin prizes in digital paintings for the public to unearth. The Bitcoin puzzle series, “The Legend of Satoshi Nakamoto”, has been going on for a long time. It took nearly three years for the third puzzle in the series, “TORCHED H34R7S”, to be solved – recently by an anonymous winner. When DeCourcelle and her team originally placed the key to the Bitcoin wallet into the digital painting, the wallet contained 4.87 Bitcoins – which was, at the time, worth about $1,400. DeCourcelle explained Cointelegraph how she got into cryptocurrency and why she thought this would be a good idea to merge

this with cryptic puzzles:

“In 2013, I was reading books such as Diamond Age, Snowcrash, Ready Player One, Daemon and Freedom which all share an underlying theme: a metaverse with currency that is valuable in both real world and virtual world. I was just learning about Bitcoin around this time, and Bitcoin immediately stood out to me as something that crosses these barriers. I realized that I could break down "money" into a string of information and encode it visually with patterns or layered strategy to encode the information in a more dynamic way – in other words, using game play to unlock a sequence that would otherwise be hidden.”

“Blockchain is a treasure trove of unexplored potential for how information transcends a virtual existence and can be simultaneously rooted in the real world. In the early days of Bitcoin, artists were asked to "show" the Blockchain through conceptual art. This was really hard to do. People also wanted to ‘see’ a Bitcoin – it was hard to accept that money wasn't tangible. So a natural bridge to this for me was to ‘show’ people Bitcoin using art as the gateway.”

New money

Artist Andy Bauch’s new painting series “New Money” combines art and cryptocurrencies by hiding abstract codes in his Lego artwork. The paintings represent the private keys to wallets containing as much as $9,000 worth of cryptocurrencies each. Again, Bauch has been given a free bout of publicity for combining the two worlds of art and cryptocurrency, leveraging the fact that cryptocurrencies being ferocious for any news that emanates from society. However, it would appear that Bauch is not only doing this for the fame as his abstract pieces obviously have a narrative behind them, especially with the exhibition be labeled ‘New Money.’

A gaming gift

As well as artists, gaming companies are also hiding cryptocurrency in their games for those who reach the end first. Montecrypto: The Bitcoin Enigma is a game that will feature an digital world players navigate in the first person, solving 24 ‘enigmas’ in order to claim the ultimate prize of 1 full Bitcoin. The developers have remained anonymous, with their wish to remain as such until the prize is claimed, but they have mentioned in

the game’s FAQ’s that:

“We are not here to advertise Bitcoin. We think it can be fun to have a Bitcoin as a prize for our game.”

Neon District is another game that is launching soon that will have a crypto prize at the end, this time 15 Ethereum (ETH). This game comes from the same team that is behind the digital painting series; they clearly believe this is a good tool for marketing.

Is there a chance to be scammed?

DeCourcelle spoke to Cointelegraph about trust, and its importance, as she came to realise that in the cryptocurrency space, there is a lot of space for people to be trusted, and for that

to be abused.

“I think people are absolutely wary of being scammed. I've found that my puzzles or my endorsement of a puzzle has given people confidence to pursue a contest. Similarly anyone in the space who is ‘trusted’ also brings legitimacy to projects. But it doesn't take much to shake that trust, so we hold it close to our chest and do our best to not lead people astray.”

With the third puzzle being solved only last month in DeCourcelle’s series, she and her team have built up a decent reputation in regards to this tiny, but growing, facet of cryptocurrency. However, she admits that regardless of whether a company or person is offering Bitcoin prizes, or initial coin offerings (ICOs), trust and reputation is paramount.

“I think even in the ICO space, people are launching projects who have no business doing so as they've never had a proven product. Why would people throw time or money at anything that may never come to fruition? Trust and the ability to carry projects across a finish line means everything to a community who is backing a project,”

she told Cointelegraph.

“We're working on trustless systems that still rely heavily on trusting people based on social merit or reputation-based systems. Most ‘giveaways’ these days do not turn heads. In the old days, you could tweet – "1 Bitcoin for one lucky follower" and include a fancy gif. This doesn't work anymore.”

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Marketing.
Interested or have Questions, Call Me, 559-474-4614

Bitcoin is Dead — Bitcoin Cash is Satoshi Nakamoto’s Real Vision

Bitcoin is Dead — Bitcoin Cash is Satoshi Nakamoto’s Real Vision

We at Bitcoinist can no longer deny the truth —
Bitcoin is dead, and Bitcoin Cash is indeed Satoshi Nakamoto’s real vision.

Policy Update

First and foremost, Bitcoinist has updated its publication guidelines. Articles published on the website — starting with this one — will no longer refer to BTC as “Bitcoin.” To avoid confusion, the cryptocurrency BTC will hereby be referred to as “Bitcoin Core” or, in some instances, “Bitcoin Legacy.” As Bitcoin Cash (BCH) is undoubtedly Satoshi Nakamoto’s real vision, Bitcoinist will hereby refer to BCH simply as “Bitcoin.”

SegWit’s Lead is a Lie

For those who don’t know, the hard-forked Bitcoin (BCH) is a cryptocurrency which came into existence as a result of a prolonged disagreement on how to handle the Bitcoin Core scalability problem. Bitcoin has since proven superior to Bitcoin Core’s answer — Segregated Witness (SegWit) — despite what some research might want you to believe.

According to BitMEX Research, 6.1 million SegWit transactions have taken place since the launch of rival Bitcoin Cash — 20.1% more than Bitcoin’s total number of transactions. The research also claims that, when the timeframe is adjusted to accommodate for Bitcoin’s one-month head start over SegWit, the latter solution actually has a 31.5% advantage over Bitcoin.

But why should you believe BitMEX Research? After all, the results are most likely skewed, if not entirely fabricated, as a result of Coinbase’s recent adoption of SegWit. (Seriously, who even uses Coinbase or GDAX?) If there’s one thing we at Bitcoinist have learned over the past 5 years, it’s that nobody should ever trust these supposed “statistics” from likely sockpuppets.

Vitalik Buterin Knows the Truth

Only those ignorant of the cryptocurrency market would continue to believe that Bitcoin Core is superior to Bitcoin. Even Ethereum creator Vitalik Buterin has gone on record to state that Bitcoin Core has failed, and that the BCH has every right to the Bitcoin name. If Buterin’s above tweet doesn’t convince you of Bitcoin’s superiority over Bitcoin Core, maybe this picture of him holding a BCH Gang t-shirt will. Furthermore, Bitcoin (Cash) has seen an increased acceptance within the ransomware community. If that doesn’t lend legitimacy to Satoshi’s real vision, what does?

A Propaganda Campaign

Additionally, we at Bitcoinist can also no longer sit by and idly accept Bitcoin Core’s malicious propaganda campaign against Satoshi’s real vision. As you may or may not know, BCH — as the one, true Bitcoin — successfully reclaimed the Twitter handle @Bitcoin. Since then, Bitcoin Core fanboys have maliciously slandered BCH, despite Bitcoin’s propensity to remain professional, transparent, and collected. Take, for example, the following Twitter poll from @Bitcoin:

@Bitcoin clearly tried to inform the cryptocurrency community of true statements regarding Bitcoin Core but was bombarded by Blockstream trolls ignorant of Bitcoin’s superior block sizes and vibrant community. There are countless reasons why Bitcoin Core is no longer Bitcoin. But the top three are:

  • The real Satoshi, Craig Wright, is a vocal supporter of Bitcoin (Cash). Moreover, true geniuses scribble math equations on transparent glass. Check it out:
  • The Bitcoin.com domain supports Bitcoin (Cash). Sorry Bitcoin Core but the .org just isn’t sexy enough to be the real deal. (Are they trying to run a global currency or a public library?)
  • Finally, Roger ‘Bitcoin Jesus’ Ver believes in Bitcoin (Cash). So just have faith, the BCH price will be resur-rekt-ed!

Bitcoin has died over 273 times. Unfortunately for BlockstreamCore and its sockpuppets, it is now officially dead to us. Long live Bitcoin!

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Bitcoin.
Interested or have Questions, Call Me, 559-474-4614

Can agile work for marketing?

Can agile work for marketing?

Given that my company sells an agile platform

and has more than 5,000 engineers using agile practices, you’d think we would have adopted agile marketing as a no-brainer, right? After all, agile isn’t about code, it’s about how you approach a problem. And marketers share many of the same goals as developers: We want to be faster to market, have more business impact, and build a more engaged team. So why wouldn’t agile work for marketing?

As leader of the CA Technologies product marketing organization, I had my concerns about going agile. Many development teams are small and co-located, making it easy to stay zeroed in on a compact, well-defined deliverable. But our marketing staff is large, dispersed, and conditioned to long-duration initiatives. I wasn’t sure agile marketing could work at scale.

Turns out, it can. I say that after a few years of trial. Has it been a straight shot? Definitely not. On our journey we’ve run many experiments, not all intentional. We’ve had our share of ups and downs — our own “hype cycle” — building our expectations only to enter a period of disillusionment before eventually leveling out on a road of productivity. But it’s been worth it. We didn’t rush headlong into agile marketing. We moved slowly, answering a key question in each phase.

Question 1:
Can agile work for marketing?

In 2013, I joined a business unit to run strategy, marketing, and business development. It was all-in on agile, across all functions. I took a SAFe (Scaled Agile Framework) course and started applying a few of the principles to our strategy and product marketing, but I knew we were just playing at the fringes.

We continued to “dabble” in agile until an important catalyst in 2015: the acquisition of Rally Software, a leading provider of agile development software and services. Pre-acquisition, Rally’s 20 or so marketers had been applying agile methodologies for about two quarters. During the integration process, I observed that their marketing team seemed very engaged. It intrigued me enough to give agile more of a try.

About six months after the Rally acquisition, we started small, with a 35-person delivery group to support our Agile Management business unit, intentionally merging legacy CA marketers with no agile experience and Rally marketers. The team divided into smaller, project-based teams and began to break projects down into two weeks sprints. We began hosting quarterly “Big Room Planning” with stakeholders from across the business, initiated 2-3 standup meetings per week for individual teams, and had bi-weekly sprint planning and “demos” to inform and get input from stakeholders from sales and business.  While not large, our experiment tested a range of team and product variables typically encountered in a larger marketing organization, such as co-located vs. distributed teams, SaaS vs. on-premises products, and products that spanned from early concept to mature.

The experiment went well. The teams figured out how to work in a more distributed environment, and agile marketing was showing it could scale to a larger number of diverse products. Our teams were happier too, with our CA marketers more engaged, feeling appropriately involved in decisions affecting their work, and feeling valued as an employee — significant increases compared to the prior year and compared to CA overall.

Question 2:
Agile is good for the team, but is it good for the business?

With an overall marketing team of nearly 350 marketers, I still needed to measure the impact of agile marketing on the business before I was willing to scale it beyond our sample team of 35 individuals. An opportunity presented itself to see the agile marketing team vs. a traditional marketing team working side by side – literally – as two groups conducted planning sessions across the hall from each other. My job was to run back and forth across the hall to stay informed and steer the teams when necessary.

At the outset, the meetings appeared to be very similar and totally agile. Both rooms housed smart people and a certified agile coach to facilitate. They had the materials necessary for an agile meeting: post-it notes, pipe cleaners, and Play-Doh for restless hands. The meeting agendas were clear and time-boxed. The agile jargon was flowing freely.

After a few roundtrips across the hall, though,  the contrast was unmistakable. The agile delivery group developed a shared vision, defined business objectives, and included a cross-functional team (product and field marketing, web, digital sales, etc.) – everyone necessary to make decisions and commitments was in the room. When they adjourned the meeting, they were ready and committed to act immediately on their plan and start their first sprint.

In the other room, I watched the dependency list grow and business commitments shrink. They couldn’t commit to deliverables that would have measurable business impact, since the other dependent functions and their decision makers were not there. After the meetings, I came to understand what true agile could mean to marketing: higher velocity of decision making, improved alignment across functions, and commitments to business impact.

Question 3:
Agile is good for the business, but can it scale across marketing?

Despite witnessing the benefits, it took one more in-my-face moment to give me the confidence to scale it across our whole marketing organization. In August 2016, management tasked seven product line marketing teams – one agile, six traditional — with building a competitive campaign. After the campaign elements were in market, we gathered the teams for a retrospective and mapped a timeline of their activities along with each participant’s relevant work, engagement, visibility into progress across the team, and their feelings (expressed with smiley faces) on how it went.

The agile delivery group sailed into first place even though they started with the least amount of competitive research. They were easily twice as fast getting their campaign into market. Their strengths were common ownership, accountability, and collective prioritization of this task against their other work. They knew who was doing what when and stayed aligned via the agile ceremonies. They even pivoted twice because of real-time stakeholder input. Even with the heavy workload there were no reported frowny faces.

The six non-agile teams did not fare well. Without clarity on ownership and accountability, they took ages to get started and had difficulty juggling this priority against other departmental objectives. They reported poor visibility into what other team members were doing and were often surprised when a dependent task was completed and tossed over the wall to them. There were lots of frowny faces. I saw that agile marketing made a difference in engagement, velocity, and quality. It was time for us to further scale it up.

Where we are now

Today we have six business unit-aligned Delivery Groups, each consisting of all the marketers that actively support the business activities of that business unit. Our agile marketing reach is now over 100 people within CA, with about 60 practicing every day as part of our core agile delivery teams. The others are specialists in communications, data science, and regional marketing, who support the core teams when needed, as well as active stakeholders, such as digital sales, who meet with our teams regularly to provide critical feedback.

What we’ve learned

We are still learning – this is a journey, not a destination — but we have some lessons to share:

  • Marketing and app development teams really are different.  
    Marketing teams need more vision and context to develop solid messaging and campaigns. We addressed this by investing in quarterly “big room planning” and more time to set the vision, align the strategy, and plan initiatives. Standups and weekly metrics keep us directed.
  • The nature of some marketing work is hard to deliver in two-week sprints.
    We developed persistent teams to handle ongoing, demand campaigns and temporary or initiative-based teams to handle specific events, such as a product launch or CA World. We flexibly staff the temporary teams based on need.
  • Traditional agile terminology isn’t a great fit for agile marketing,
    so we use terms that resonate with marketers. For example: “features” become “initiatives”, “release train” becomes “delivery group,” and “release train engineer” becomes “coach.”
  • Our departmental managers had the hardest adjustment.
    They no longer could add work to an employee of “theirs” who is part of an agile team. They had to shift gears from directing to coaching; they had to learn “servant leadership.” We underestimated the coaching they needed, and sometimes we outright forgot to include them in the initial ceremonies.
  • Watch out for “Agile Theater,”
    groups with the jargon and paraphernalia, but who lack the cross-functional representation, empowerment, and goal alignment that drive true agile marketing.
  • Commitment from the top down is essential.
    This is too big a shift in the way things are done for a sneak attack. Get support, get a coach, and get ready to experiment and learn.

Agile marketing works at scale

Our teams are more engaged, our campaign delivery times have decreased, our marketing-sourced pipeline has increased, and the win rate of marketing-sourced opportunities has increased. So if you think agile is only for small, colocated marketing teams, I urge you to reconsider. But know it won’t be a quick fix and the journey may be bumpy at times.

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Marketing.
Interested or have Questions, Call Me, 559-474-4614

An Inside Look At China’s Government Controlled Cryptocurrency Project

An Inside Look At China’s Government Controlled Cryptocurrency Project


China, a country that has exerted more control over cryptocurrency than most,

continues to move forward in its efforts to introduce a government-controlled cryptocurrency. A group of Shanghai reporters recently got a chance to learn about this secretive project during the Global Blockchain Summit Forum, sina.com.cn reported. The visit shed light on the extent of the government’s efforts to create a national cryptocurrency. The reporters visited the Bank of China Credit Card Industry Development Co., Ltd. Hangzhou Blockchain Technology Research Institute.

Standards Announced

China’s ministry of industry and information technology revealed last week that it has already conducted a study exploring a framework for standardizing blockchain technology domestically. The ministry’s information and software services division and the China Electronics Standardization Institute proposed that a new technical committee to be established.

The embracive stance toward blockchain technology is in stark contrast to China’s crippling curbs against local cryptocurrency markets which have seen initial coin offerings (ICOs) outlawed and crypto exchanges phased out to effectively shutter domestic trading markets.

The China Banknote Bank Credit Card Industry Development Co., Ltd., one of the core companies of the China Banknote Printing and Minting Corporation, is the earliest team to study digital currency and blockchain technology within the central bank system, sina.com.cn reported. The team last year established the Banknote Blockchain Technology Institute. Leading the team is the central bank’s science and technology leader Zhang Yifeng. According to Yifeng, the overall research and development team is less than 100 people.

The Project Progresses

The China Boxer Blockchain Technology Research Institute has applied for 22 blockchain technology invention patents so far, sina.com.cn reported. The team’s underlying technology architecture has been completed and the central bank’s digital billing business has also been completed, according to Yifeng. Currently, it is promoting the opening and closing of a blockchain registration platform. Yifeng said the most important part of the blockchain is to re-optimize the technology in combination with the actual business while looking for application scenarios.

Not only can the participants of the platform use it, they can also conduct institutional certification and circulation, and achieve mutual trust and cooperation among all parties. The biggest difference between digital currency and the existing electronic payment is that it can be account-based or non-account-based, Yifeng said. Digital currency seeks to facilitate the convenience, speed and low cost of a retail payment system, while at the same time providing security and protection of user privacy.

Only The Official Cryptocurrency Recognized

Only the statutory digital currency issued by the central bank is the real digital currency, he said. Not bitcoin or Ethereum. The digital currency represented by bitcoin is actually a digital asset with stronger attributes, more volatility, and mostly lacks intrinsic value, he said. Digital currency still needs to satisfy the basic attributes of money, and the basic characteristics of value scale, exchange media, payment instruments, and value storage have not changed.

The coins issued by ICO are even more ridiculous, Yifeng said. In addition, he asked, how can a sovereign credit currency act as a liquidity instrument and payment instrument? There is no clear timetable for the launch of the legal digital currency, he said. Meanwhile, the Blockchain Technology Research Institute will establish cooperative relationships with a number of universities and research institutes to promote research in areas such as cryptography algorithms, zero-knowledge proofs, and distributed technologies. At the same time, it will apply for more financial technology patents.

The Digital Billing Platform based on blockchain technology that was undertaken by the Group of China Boxer Blockchain Technology Research Institute in 2016 was successfully tested on the Stock Exchange on Jan. 25 this year, according to sina.com.cn. Fan Guiluo, chairman of China Bills Credit Card Industry Development Co., Ltd., said that blockchain, as a trusted technology, will be used under the trustworthy system of the Chinese banknote printing and minting company.

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Bitcoin.
Interested or have Questions, Call Me, 559-474-4614

As marketing data proliferates, consumers should have more control

As marketing data proliferates, consumers should have more control

smart phone with business report in modern office

At the Adobe Summit in Las Vegas this week,

privacy was on the minds of many people. It was no wonder with social media data abuse dominating the headlines, GDPR just around the corner, and Adobe announcing the concept of a centralized customer experience record.

With so many high profile breaches in recent years, putting your customer data in a central record-keeping system would seem to be a dangerous proposition, yet Adobe sees so many positives for marketers, it likely believes this to be a worthy trade-off. Which is not to say that the company doesn’t see the risks. Executives speaking at the conference continually insisted that privacy is always part of the conversation at Adobe as they build tools — and they have built in security and privacy safeguards into the customer experience record.

Ben Kepes, an independent analyst says this kind of data collection does raise ethical questions about how to use it. “This new central repository of data about individuals is going to be incredibly attractive to Adobe’s customers. The company is doing what big brands and corporations ask for. But in these post-Cambridge Analytica days, I wonder how much of a moral obligation Adobe and the other vendors have to ensure their tools are used for good purposes,” Kepes asked.

Offering better experiences

It’s worth pointing out that the goal of this exercise isn’t simply to collect data for data’s sake. It’s to offer consumers a more customized and streamlined experience. How does that work? There was a demo in the keynote illustrating a woman’s experience with a hotel brand. Brad Rencher, EVP and GM at Adobe Experience Cloud explains Adobe’s Cloud offerings. Photo: Jeff Bottari/Invision for Adobe/AP Images

The mythical woman started a reservation for a trip to New York City, got distracted in the middle and was later “reminded” to return to it via Facebook ad. She completed the reservation and was later issued a digital key to her room, allowing her to bypass the front desk check-in process. Further, there was a personal greeting on the television in her room with a custom message and suggestions for entertainment based on her known preferences. As one journalist pointed out in the press event, this level of detail from the hotel is not something that would thrill him (beyond the electronic check-in). Yet there doesn’t seem to be a way to opt out of that data (unless you live in the EU and will be subject to GDPR rules).

Consumers may want more control

As it turns out, that reporter wasn’t alone. According to a survey conducted last year by The Economist Intelligence Unit in conjunction with ForgeRock, an identity management company, consumers are not just willing sheep that tech companies may think we are. The survey was conducted last October with 1,629 consumers participating from eight countries including Australia, China, France, Germany, Japan, South Korea, the UK and the US. It’s worth noting that survey questions were asked in the context of Internet of Things data, but it seems that the results could be more broadly applied to any types of data collection activities by brands.

There are a couple of interesting data points that perhaps brands should heed as they collect customer data in the fashion outlined by Adobe. In particular as it relates to what Adobe and other marketing software companies are trying to do to build a central customer profile, when asked to rate the statement, “I am uncomfortable with companies building a “profile” of me to predict my consumer behaviour,” 39 percent strongly agreed with that statement. Another 35 percent somewhat agreed. That would suggest that consumers aren’t necessarily thrilled with this idea.

When presented with the statement, Providing my personal information may have more drawbacks than benefits, 32 percent strongly agreed and 41 percent somewhat agreed. That would suggest that it is on the brand to make it clearer to consumers that they are collecting that data to provide a better overall experience, because it appears that consumers who answered this survey are not necessarily making that connection.

Perhaps it wasn’t a coincidence that at a press conference after the Day One keynote announcing the unified customer experience record, many questions from analysts and journalists focused on notions of privacy. If Adobe is helping companies gather and organize customer data, what role do they have in how their customers’ use that data, what role does the brand have and how much control should consumers have over their own data?

These are questions we seem to be answering on the fly. The technology is here now or very soon will be, and wherever the data comes from, whether the web, mobile devices or the Internet of Things, we need to get a grip on the privacy implications — and we need to do it quickly. If consumers want more control as this survey suggests, maybe it’s time for companies to give it to them.

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Marketing.
Interested or have Questions, Call Me, 559-474-4614

Taxing All Bitcoin Buying Will Backfire for the IRS

Taxing All Bitcoin Buying Will Backfire for the IRS

Bitcoin has a remarkable way of teaching people very rapidly about the law of unintended consequences.  

A great example is when the Chinese government began inspecting regulated exchanges in February 2017. Believing that the exchanges might get shut down (they eventually did), buyers flocked to Localbitcoins, a peer-to-peer exchange whose volume surged 3,600% in the course of a month. By trying to keep better track of and control bitcoin users in China, the government drove them to a method that was much harder to surveil. In the U.S., the Internal Revenue Service's (IRS) treatment of bitcoin taxation has arguably had a similar effect.

By effectively telling taxpayers they need to calculate capital gains taxes for every $25 gift card purchased with bitcoin, the IRS is giving them one more reason to treat bitcoin less like a payment protocol and more like digital gold. But perhaps more importantly from a public-policy perspective, the agency's guidance may encourage citizens to use unregulated foreign cryptocurrency exchanges and transact using privacy coins such as zcash and monero. It's almost certainly a contributing factor behind the estimated 0.5% self-reporting rate among bitcoin users come tax time. The vast majority of bitcoin users I know understand that paying taxes on short- and long-term capital gains is not only required by law, but also fair.  The same cannot be said for the taxing of purchases of low-dollar items under the guidance that the IRS issued four years ago.

The 2014 guidance

Stepping back, when that guidance came out in March 2014, the market looked very different. It had been less than a month since Mt Gox ceased all withdrawals, and a teenage Vitalik Buterin had just introduced a "client that looks like Android that can run apps" called ethereum. I was at Coinsummit 2014 the week the IRS published its guidance stating that digital currency would be treated as property, even if it was being used to buy baseball caps or MP3s.

At the conference, I asked Vinny Lingham, then CEO of Gyft.com, what support his company might offer for customers who had purchased gift cards with bitcoin on his platform over the past year. His answer was that while Gyft could make it easier to track spending, it would be unable to verify the cost basis of any bitcoin used to make purchases. As a result, all purchasers of these gift cards would either: 1) manually track all their purchases, sales, gains, losses, and transfers 2) stop using bitcoin to purchase gift cards or 3) become white collar criminals who don't report a portion of their taxes.

I don't think it's a mere coincidence that 2014 was the year the bitcoin community started to bifurcate between those who invested in it as store of value and those who used it as a currency to make purchases. This division only grew sharper in the years, and led last year to the fork in protocols of bitcoin and bitcoin cash. To be sure, there were many factors behind the split: from the differing incentives between startups and other factions of the community to bitcoin's deflationary nature and rapid price appreciation.

But by ignoring the consumer-usage angle and focusing solely on investing and speculating, the IRS further incentivized HODLing and discouraged everyday purchases with digital currency. Bitcoin's track record as a speculative investment has not disappointed, either, with the value of bitcoin up 2,000 percent since the IRS first released its guidance, while daily transactions (an admittedly unscientific measure of bitcoin's use as a payment method) have merely doubled.

In the IRS' own interest

As an agency narrowly focused on maximizing revenue, the IRS is probably indifferent to the way people choose to use bitcoin, so long as gains are reported and taxes paid. But by discouraging the real-world use of cryptocurrencies as money for purchasing goods, the IRS is reducing the incentive for companies in the space to build robust tools to track spending and improve tax reporting. There might be a straightforward way for the IRS to mitigate these consequences, though.  

A year ago, Coin Center, a non-profit research and advocacy center focused on the public policy issues facing cryptocurrency technologies, published a piece entitled "Bitcoin taxation is broken. Here's how to fix it."  In this post, Executive Director Jerry Brito argued that when bitcoin or other cryptocurrencies are used to purchase goods such as coffee or socks, they are being used not as investments, but similar to the way in which foreign currencies are used by Americans to purchase goods abroad.

Brito went on:  

"Say you buy 100 euros for 100 dollars because you're spending the week in France. Before you get to France, the exchange rate of the Euro rises so that the €100 you bought are now worth $105. When you buy a baguette with your euros, you experience a gain, but the tax code has a de minimis exemption for personal foreign currency transactions, so you don't have to report this gain on your taxes."

By implementing a similar de minimus exemption for cryptocurrency gains under $200, the IRS could massively simplify the tax code in this area and make it more likely that bitcoin users will report their gains properly.  These ideas are not entirely dissimilar from ones I proposed in a 2014 paper on the same subject.  Not only would this spare bitcoiners from having to keep records of every piddling purchase they make or live in fear of prosecution, it might also improve overall tax compliance. How's that for counterintuitive results?

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Bitcoin.
Interested or have Questions, Call Me, 559-474-4614

Why Relying Solely on Social Media Marketing Could Be a Disaster for Your Business

Why Relying Solely on Social Media Marketing Could Be a Disaster for Your Business

This old-school technique may not be sexy, but it offers big returns.
 

It seems like every day some new influencer is posting about the death of email.

Fancy cars, cool videos and hordes of fans have them convinced email is useless. Not only that, they want you to follow the hype and buy their new strategy for Instagram, Snapchat or whatever else is trending. As your trusted digital marketing consultant, I'm here to tell you: Don't trust the hype. Email is alive and stronger than ever. It may not be sexy, might not allow you to showboat your success, but if you take a look under the hood, you'll find email is still the champion for online sales. In fact, here is a comprehensive list of 70 incredible email statistics to make any business owner salivate and start typing up those unsexy emails to make more profits.

From the list of those salacious email statistics, one of the most notable metrics for entrepreneurs is this one from the Direct Marketing Association: For every dollar spent, email marketing generates $38 in ROI. I love that little piece of data, and from my own experience, in many months my return on investment has been over 1000 percent. Since I've made a great deal of income with social media, I can't argue with the fact that it helps to create revenue, but when it comes to the hierarchy of importance, email comes first. This one tragic event of internet celebrity Felix Baum losing millions of fans because Facebook deleted his account paints a clear picture as to why building social media leaves you vulnerable. Since he didn't own the information of his fans, there was nothing he could do.

In contrast, if Baum owned the list of his fans, if his provider shut him down for some reason, he could just migrate his list of subscribers to another hosting service — and he'd still be able to communicate with them. The panacea to being so susceptible on social media hosting sites is simple — build your email list.

How to capitalize on email

By now, I hope we're on the same page — email isn't sexy, but it's worth it. To capitalize on email, you'll need to start collecting emails from your web visitors. Doing this isn't hard; it'll take just a bit of time, thought and elbow grease. First, you'll need to place email capture boxes strategically. The first place your website should do this is in the upper middle half of your site's homepage (right above the scroll). To see an example, here's my website. On average, we currently collect upwards of 50 emails a day. If your email box is large, easy to spot and catches your visitors' eyes — they're more likely to give you their information. Oh, and did I mention that those opt-in boxes help us generate upwards of 50 new leads on a daily basis? Imagine that, having a website that collects prospects for you — while you work, eat, sleep and take care of the kids.

The next place to have an email capture box is at the bottom of your website, across all pages. Some examples of major brands that do this are Victoria's Secret, Eddie Baur, Ralph Lauren and O'Reilly Autoparts, just to name a few. Another way to capture emails is through a pop-up on your website. Yes, I said it, install one of those annoying pop-ups on your site. I know that as a user you hate them, but the data is clear — pop-up email opt-in boxes work. It's for this reason that companies like Coca-Cola, McDonald's and Virgin use pop-ups.

What to offer so web visitors give you their email address

When it comes to creating eye-catching and compelling email opt-in boxes, I advise you to focus on building highly targeted offers that your visitors would want. A straightforward offer you can make is a discount. In fact, according to data collected in the National Email Client Report (in conjunction with eBay Enterprise Marketing Solutions and others large corporations), 38 percent of users give their emails in return for a discount. If you're a business, the lowest hanging fruit to collect your visitors' email is by offering a discount code that requires users to give you their email.

If you don't want to offer a discount or it's not something you believe is right for your industry, there are other options. In my case, since I work in the world of consulting and information-based products, I offer free trainings instead. Similarly, you could offer your visitors a guide and video series that helps with the problems you solve. The goal is simple: Offer visitors a good reason to give you their email and later follow up with an offer for them to make a purchase — but before you can send them inbox offers, you'll need their email. If McDonald's, O'Reilly Auto, Virgin, Polo Sports and just about every other multibillion-dollar company is using email to increase business, isn't it time you did, too? And I hope your answer is a strong and definitive yes!

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Marketing.
Interested or have Questions, Call Me, 559-474-4614

Two Largest Cryptocurrency Exchanges Look to Exit Asia Due to Impractical Policies

Two Largest Cryptocurrency Exchanges Look to Exit Asia Due to Impractical Policies

Binance and Bitfinex, two of the largest cryptocurrency exchanges

in the global digital currency market, may completely move out of Asia this year, due to impractical policies.

Binance and Malta

Last week, Binance, easily the biggest digital currency trading platform with a $1.4 billion daily trading volume, moved out of Asia and relocated to Malta, a country within the European Union. In its official statement, the Binance team and its CEO Changpeng Zhao, better known to the community simple as CZ, stated that they agree on the government of Malta’s long-term aim to evolve the country into “The Blockchain Island.”

CZ stated:

“After meeting with Parliamentary Secretary, Mr Silvio Schembri, we were impressed by the logical, clear and forward thinking nature of Malta’s leadership. After reviewing a proposal bill, we are convinced that Malta will be the next hotbed for innovative blockchain companies, and a centre of the blockchain ecosystem in Europe. Binance is committed to lending our expertise to help shape a healthy regulatory framework as well as providing funds for other blockchain startups to grow the industry further in Malta.”

For awhile, Binance has clarified its stance towards cryptocurrency-to-fiat trading, and firmly told its investors and users that plans to integrate cryptocurrency-to-fiat pairs are not on the horizon. But, its relocation to Malta and potential establishment of new banking partners could allow Binance to add cryptocurrency-to-fiat pairs with ease, without regulatory uncertainty and conflict with banking service providers.

Already, Binance has revealed its plans to launch a decentralized digital asset exchange called Binance Chain. Although the entire concept of a decentralized exchange defeats the purpose and renders the existence of centralized exchanges unnecessary, the Binance team’s aim from the beginning has been to provide every service that can be accommodated to a wide of users. Hence, given the roadmap of Binance’s development, it is only logical for the company to move from cryptocurrency-only trading, to decentralized exchange, to cryptocurrency-to-fiat trading.

Bitfinex to Switzerland

Another major cryptocurrency exchange Bitfinex, a Taiwan and Hong Kong-based trading platform that processes cryptocurrency-to-US dollar trades, has been eyeing permanent relocation to Switzerland, as CCN previously reported. For many years, Switzerland and Zug in particular, have been known as the blockchain capital of the world, primarily because of its friendly regulations towards initial coin offering (ICO) projects and cryptocurrency businesses. Most notably, EOS, the sixth largest cryptocurrency in the world with a $4.5 billion market valuation, is based in Switzerland. Bitfinex CEO Jean-Louis van der Velde emphasized that the company has had constructive talks with Swiss authorities, and is carefully considering its move

from Asia to Switzerland.

“We are looking for a new permanent home for Bitfinex and the parent company iFinex, where we want to merge the operations previously spread over several locations,” said Velde.

The relocation of Bitfinex from Taiwan to Switzerland would lead to two of the world’s biggest cryptocurrency exchanges leaving Asia to Europe within a single month. If leading cryptocurrency businesses continue to move out of Asia due to impractical regulations to Europe, it could lead to Japan, South Korea, and Hong Kong losing their dominance over the global market, and could trigger competition amongst global economies to house cryptocurrency businesses.

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Bitcoin.
Interested or have Questions, Call Me, 559-474-4614

LinkedIn is rolling out native video advertising & video for Company Pages

LinkedIn is rolling out native video advertising & video for Company Pages

 

LinkedIn is offering businesses two outlets for using video on the platform.

 

Companies can now run native video ad campaigns and include video within their Company Pages, LinkedIn announced early Thursday. The platform rolled out native video uploading to users last August. As expected, Thursday’s announcements mark the first roll out of video capabilities designed for businesses.

“We have seen a lot of demand from people looking to use video as a tool to drive results for their businesses,” Abhishek Shrivastava, director of product for LinkedIn Marketing Solutions told me. LinkedIn says more than 46 percent of B2B advertisers it surveyed said that finding the right environment for videos was a top challenge when considering video campaigns.

Video for Sponsored Content

According to LinkedIn, more than 700 advertisers have been beta testing Video for Sponsored Content, the new native video advertising offering, since October. Shrivastava said that, during that time, LinkedIn members have spent an average of almost three times the amount of time watching ads embedded with video versus static ones.

The native video ads appear in the news feed as standalone, sponsored posts and auto-play on mute when in view, just like user-uploaded video on the platform. Here’s an example of the new unit, which expands to a full-screen interstitial after a user clicks on it. The Video for Sponsored Content ads can use any of the targeting already available to advertisers, such as job title, seniority, company name, industry, skills targeting as well as Matched Audiences targeting for running account-based marketing (ABM) campaigns.

The ads can help businesses generate leads by driving site traffic or through LinkedIn’s Lead Gen Forms product, as shown in the example above. With the LinkedIn tracking pixel implemented, advertisers can measure the number of leads, sign-ups, website visits, and other actions that the video ads generate.

Video for Company Pages

Additionally, businesses and publishers can now place video on their Company Pages. LinkedIn says, during the beta program, it found Company Page video five times more likely than other types of content to start a conversation among members.

“B2B marketers and professional audiences and professional contacts — they can use the video [tool] we’re launching across their funnels. Whether they’re looking to generate brand awareness, sending people to websites to take an action or connecting leads, they can showcase the video and if the member watching is interested, they can collect the leads right away,” Shrivastava said. Both video products are rolling out now and will be available to all businesses in the coming weeks.

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Marketing.
Interested or have Questions, Call Me, 559-474-4614

 

How blockchain will disrupt Google, Apple, Amazon, and Facebook

How blockchain will disrupt Google, Apple, Amazon, and Facebook

How blockchain will disrupt Google, Apple, Amazon, and Facebook

In the eyes of “experts,” when it comes to blockchain,

there is often no middle ground — it will either be boom or bust, nothing in between.I for one have become a big proponent of blockchain technology, especially the crypto-economics used to jumpstart powerful network effects.But with so many opinions and noise floating around, I thought it would be beneficial to take a deep dive into the ramifications of blockchain technology as it relates to today’s top tech companies.Will blockchain based alternatives unseat Google, Amazon, Facebook, and Apple? After in-depth research into the business models, here is what I found…

A quick explanation

For those new to the space, blockchains are immutable (unchangeable), often trustless ledgers — creating digital scarcity and the possibility for much more. Due to their decentralized nature (run by a community vs a single entity) and their economic incentive models (tokens), they potentially represent a major threat to the status quo — at least that is what enthusiasts would have us believe (more on this later in this article).

Basically, this means that anything that was once done/stored on paper can now be accomplished and recorded on the blockchain, creating an infinite and unchangeable “paper” trail of ownership records, programmable contracts, financial information, personal data and much more. And at least in theory, it would be owned by the users — something unheard of today.

The GAFA tech gods

As we enter 2018, we are entering into an era of unparalleled tech dominance. Companies like Google, Amazon, Facebook, and Apple control more and more of our everyday lives — owning our data and everything around it. The inherent network effects and flywheels these companies built are unprecedented — both in their scope and ability to stave off competition. In this connected world where things are constantly changing, I thought it could be beneficial to analyze/theorize blockchain based competitors to combat the tech giants of today — specifically to focus on what it would take to win.

Google

Google is one of the most complicated companies today, with dozens of divisions and products that dominate our daily life. We will skip most of these areas and instead focus on their primary business model — advertising.

1. Google Search

Google is the dominant search engine with over 77% of global searches going through Google Despite the fact that 1.3B people (there are only 7.6B people globally) live behind China’s Firewall, Google still owns over ¾ of the search engine market. This dominance has fueled Google’s historic rise. 86.5% of Alphabet’s revenue comes from advertising, primarily search ads

2. Youtube

Youtube is the second largest search engine in the world, and easily the largest user-generated video platform. Users upload an impossible 100 hours of content to Youtube every minute. And Credit Suisse believes that in 2015, Youtube and Google Play accounted for ~15% of Google’s revenue (up from 4% in 2010), and forecasted to reach 24% by 2020. Considering Google only paid $1.65B to acquire them in 2006, that is one hell of a deal.

3. AdSense — display advertising

The other piece of Google’s advertising supremacy is their partner network, AdSense. AdSense allows sites to monetize through Google’s advertising platform without worrying about the backend or finding advertisers. Instead, Google handles everything and takes a between 32 and 49 percent of ad revenue generate (the rest going to publishers).

According to Investopedia, AdSense revenues accounted for $15.5B, ie 23% of Google’s total revenue in 2016. Unfortunately, advertising as a business focuses on eyeballs over quality, leading to much of the degradation and clickbaity titles of today. I don’t see the advertising model changing drastically anytime soon, meaning Google’s great success with AdSense is likely to continue (and grow).

How blockchain beats Google

Google’s business is all about eyeballs, attention and “supposed transparency.” Their slogan of “don’t be evil” and mission to openly share information with the world are notably at odds. This creates a scenario where Google’s platform is god and only those that play by his/her rules are allowed in the garden of Google.

But, crypto complicates things for Google. Google’s dominance is primarily driven by the network effects of big data and AI combined with the force of habit — a near perfect storm. At the same time, however, many in the tech community are worried about the role tech giants play in our lives, especially as it relates to selling our personal data. And as we have seen, the tech community is taking some shots from politicians and users over their role in the recent US election.

1. Search

A blockchain based browser/search engine could solve the problem of misaligned incentives. I have started using DuckDuckGo (a privacy-focused search engine) after my research for the book (The Big Four — How Today’s Tech Companies Monopolize the Future) revealed the extent of Google’s power and control over my life. Rather than collecting my personal information to sell better ads, DuckDuckGo (DDG) only occasionally shows ads — and solely based on the actual search query. Imagine that.

DDG’s approach has major advantages for users, namely disintermediating value with personal data — but there are issues as well. The reason Google dominates is their data and AI expertise. They know us better than we know ourselves and are able to deliver better experiences as a result. It is the reason Antitrust action will almost never occur in the US — our definition of monopoly is based on consumer price gouging and poor experiences — the opposite of what today’s top tech companies deliver.

You want the best results for you, and you want them now. Google delivers this. A blockchain based search engine (BBSE) could theoretically win here. Combined with an identity coin like Citizen, a BBSE could use consumer data and preferences (without ever owning/controlling them) to display better, more personalized search results for users.

And if advertising was added, BBSE users would benefit as well, earning tokenized “commissions” in exchange for seeing the ads — removing the adversarial relationship that exists today. Unfortunately, I foresee this as being a long ways off. To change user behavior, you need a 5–10x better solution than the existing product. To get to the point where a BBSE which surpasses Google’s market share (currently 77–80%) will take years. Most people too freely give up their data and information without reading the terms of service (myself included).

2. Video

Competing with Youtube presents many of the same challenges as tackling search. There is one major advantage however, the creators create the platform and value. And because Youtube advertising isn’t effective for the vast majority of creators,

this could be interesting.

According to our analysis, the average CPM that can be expected from YouTube videos is between $0.50 and $5.00. That means that for every 1 million views of your videos, you can expect to make between $500 and $5,000.

That is pretty horrible, especially considering podcast ads earns 5–20x higher CPMs (cost per 1000 impressions). Because Youtube is so competitive and the ability to earn is limited, it makes logical sense that creators would cross-populate content. On a new blockchain based video platform (BBVP), there would be less competition and thus a greater percentage of attention.

If incentives were added for creators to create content and onboard audiences, the rewards suddenly get more interesting. The first mover advantages create inherent network effects and time urgency — bring over your subscribers before some other Youtuber does. That said it would still take time, especially to bring sufficient eyeballs to make good money.

But with strong enough token incentives and quality content, it seems safe to say that news would spread. The question is how fast. Odds are a BBVP would take several years to mature. Youtube has over 100 hours of video uploaded every minute — that is a lot of evergreen, SEO rich content. And because Google favors Youtube, it would be hard to steal search traffic.

Steemit/Dtube is currently working on building a Youtube killer but has a long long way to go to create a credible threat. That said Steemit is one of the most active blockchain projects/cryptocurrencies with a market cap of $1.49B and processes over 1M transactions per day (820k/day as of July 2017) — things are happening!

3. Adsense

Advertising ruined the internet and journalism. When the world switched from subscriptions to display ads, quality started to slide. Today clickbait is king. More eyeballs and pageviews (hence those annoying freaking slideshows) have created a world where artificial attention is rewarded. We have seen the quality of journalism and content degrade — prioritizing provocative headlines, flashy thumbnails and accidentally promoting an asshole like Trump.

NOTE: Trump won because he created controversy, driving eyeballs (ie ad dollars) and thus rankings/ratings around the globe. Our disgust forced us to read and forced his image and message everywhere like an inescapable evil billboard. A blockchain based publication model (BBPM) could, in theory, solve this. Medium does a decent job of illustrating the point (although not profitable), by allowing users to upvote/Clap for articles they enjoy (up to 50 Claps). A similar model could redistribute dollars to the sites and publications we appreciate most.

And there are companies/organizations trying to do just that, both with and without blockchains. This is a hard proposition though because the majority don’t understand the power/risk of personal information. Most people are fine with “being the product” and profiting (receiving free content/access) for their contribution to the system.

In my opinion, the one and only way a blockchain based answer to Adsense could succeed would be tokenized incentives for early adopters (users and publishers) to the system where Adsense ads had an if/then statement attached. If a user is BBPM member, no ads. If not then display ads.

In order to participate in the BBPM, publishers could jointly collude to “monopolize” the market, creating a linearly sliding scale of advertising intrusiveness across all web properties to encourage laggards to convert (ie overtime sites across the internet become less and less usable and more and more ads/spammy until readers joined the BBPM)

That said, I don’t see a “mafia-like” approach like this being adopted or believe change can happen in under a generation (hard to go from free to paid and be okay with it). Hopefully, it will help kill clickbait…

Amazon

The company Bezos built to sell books online is now arguably the most dominant and diversified company on earth, and the odds-on favorite to crack the $1T market cap first. This seems to be the consensus, at least among technologists. But the majority are often very wrong, so let’s dive deeper.

Understanding the empire

Amazon’s business is made up of five primary divisions: Amazon.com, AWS, Alexa, Whole Foods Market and Amazon Prime. Each on its own would be an impressive business. Combined they create the world’s largest flywheel.

I don’t believe Alexa, Whole Foods or Amazon Prime have any risk of blockchain based disruption (at least in the foreseeable future). The nature of these business models isn’t easily decentralized.

And while decentralized AI could be an interesting component to building an Alexa killer, I believe the bulk of the effort to be merging multiple technologies and disciplines (voice, AI, APIs, hardware) which seem highly unlikely in the foreseeable future

1. Amazon.com

Amazon’s is the most monopolistic and well-positioned marketplace the Western world has ever seen. Last year they did $136B in revenue with double-digit growth every year. 2017 estimates show a staggering 44% of US e-commerce occurred on Amazon.com (Source: Recode). And Amazon has been growing at least 13% YoY (year-over-year) for each of the last 5 years.

It isn’t just a monopoly, it is accelerating. But there is another layer to unpack — Amazon Basics, where Amazon analyzes 3rd party seller data and copies the best performing products. Ultimately Amazon wants to replace ALL 3rd party sellers/products with Amazon Basics versions. Amazon wants to (and will) own the customer and every ounce of margin that comes with it. Marketplaces die when the creator becomes the competitor.

2. Amazon Web Services (AWS)

Amazon should spinout AWS before regulators start antitrust actions) Amazon built AWS for their marketplace. They needed the ability to host images and information for Amazon.com and Bezos being Bezos, built the product in a modular fashion. As AWS grew, Amazon constantly cut prices to crush competition, making

AWS the easy choice.

Your margin is my opportunity

Today ~42% of the web is powered by AWS. That is more than double Microsoft, Google and IBM (combined). Yet given the easy-to-use system and affordable pricing, it makes sense.And growth isn’t slowing, quite the opposite actually. AWS accounts for 10% of Amazon’s overall revenue, with $4.6B in Q3 of 2017 (up 42% over last year) and $1.2B in profit (up 36% over last year). Amazon owns the infrastructure the majority of the internet is built on, can decentralization change that?

How blockchain beats Amazon

I have my money on Amazon. They are the best positioned of the tech giants to own the future. That said, blockchain can create challenges for Bezos’ beast, it depends how it is implemented, incentivized and evolves.

1. E-commerce

While Amazon owns e-commerce today, there are many projects focused on building decentralized marketplaces. Most miss the point though. The issue isn’t Amazon’s ~15%+ transaction fee, that is par for the course and the cost of doing business. And besides, consumers could care less how much sellers pay in fees, it doesn’t affect them.

(Plus 10% is a fraction of the 5–10x improvement needed to switch — it wouldn’t be meaningful enough for sellers to abandon Amazon entirely).

Yes, sellers care about fees, but what is more important is control. As referenced previously, Amazon sellers (like myself previously — more on my backstory here) play on Amazon’s playground. You never knew if/when you will be uninvited — or Amazon could copy your product (Amazon Basics) and cut you out. This creates a constant fear of suspension. If 80%+ of your business is on Amazon, what happens if you lose access?

A decentralized marketplace NEEDS to be built first and foremost by sellers. That is doable in my opinion. Most sellers would do ANYTHING to control their company’s destiny. If that means promoting a blockchain based e-commerce platform (BBEP), you can bet your ass they would — even without tokenized incentives. Adding incentives further accelerates adoption among sellers. But buyers are another story. Here tokenized “discounts” or “bonuses” could be used to lure buyers to the platform.

The challenge is that most sellers cannot easily access their customer base on Amazon. And to contact them and try to bring them off-Amazon can result in suspension. Plus sellers wouldn’t want to send their own customers (ie from their standalone site or email list) to an unproven, competitive marketplace unless it was as an affiliate for other products. Here an Amazon Affiliates type program would be necessary (ie: I sell X and recommend Y related products to past customers on the BBEP, earning tokens for each signup/sale).

This could also be employed for heavily incentivized buyer-to-buyer and publisher-to-buyer referral programs to get customers “in-the-door.” If sufficient supply and trust were built, the platform would start to take off, with crypto-economics driving adoption. If the user experience is inferior, however, this would take a lot of time. Plus consider the options. If Amazon has 100x the product selection, why would consumers use a BBEP? You need better prices or a huge token incentivizes initially — or today’s massive “speculative-esque” belief in the business and team to drive token appreciation.

2. File storage & web services

To be honest, decentralized file storage seems like overkill for many applications. With dirt cheap AWS/S3 file storage, you need a compelling case to justify relatively unproven blockchain based web services (BBWS). Even the CIA (and 2000 other US government organizations) prefer AWS to their own systems — the security is superior and the price is unbeatable.

Currently, the only use case that seems valuable is decentralized file storage for other decentralized apps and protocols. When full decentralization is necessary (or wanted), it makes sense to use a service like Sia or Storj. But even then, it will take time to scale the eco-system, ie primary customer base. Without enough dApp traction, who will blockchain based storage systems (BBSS) serve? This creates a bit of a chicken-egg scenario…

Storj claims a fully decentralized storage system where users are able to buy/rent harddrive space autonomously will make that storage cost 10–100x cheaper than centralized solutions. To store 1T of data on Storj today costs $15/mo plus additional bandwidth fees (for downloads). Google Drive is a flat $10 for that same Terrabyte (plus comes with all the additional functionality of Google Docs etc…)

Compared to AWS S3, Storj does better. While AWS/S3 is $0.023/GB/mo, Storj is only $0.015/GB/mo. But that is only a 34% improvement, well shy of the 5–10x improvement typically needed to switch products/service providers.

That said, some of the top VCs like Union Square Ventures, Sequoia Capital, and Andressen Horowitz all invested in Filecoin so maybe I am totally wrong here. A BBSS is the simplest blockchain model to understand. Users are easily incentivized to provide storage space and customers/enterprises can save a little money on storage. But usually when an opportunity is obvious, it isn’t a great opportunity and becomes pretty competitive, so only time will tell…

Facebook

As of June 2017, Facebook hit an unprecedented 2B MAUs (monthly active users). That is nearly ⅓ of the population. While there are several divisions within Facebook (thanks to a few successful acquisitions), Facebook is at its core a social media and communications company. We will focus on Facebook.com, Instagram, and Whatsapp/Facebook Messenger as these are their three primary businesses and those ripest for blockchain disruption.

1. Facebook.com

Facebook has over 2B monthly active users — yet despite the massive market penetration, they are still growing 16% year-over-year. How is that possible?This is due in large part to the brilliant leadership of Mark Zuckerberg where Facebook bet the farm on mobile — it worked. They were able to go from ~135M MAUs (mobile only) in early-mid 2012 to over 1.15B in Q4 of 2016.

The lion share of growth has been mobile advertising — with mobile now accounting for 86% of their revenue — better than ANYONE expected. Today digital advertising is a duopoly, with Google and Facebook attracting between 57–84% of global digital (outside of China) depending on the source. (Source — FT.com, Recode). Scarier still is the fact that the duopoly is taking >99% of new growth is digital ad spend (as of Q3 2016).

2. Instagram

Facebook acquired Instagram in 2012 for a $1B for a pre-revenue company with 30M users (formed only 2 years prior). After waiting 3 years to monetize (to focus on growth), Instagram turned on ads and became a cash cow.

And with 100M new MAUs every 6 months, Instagram is exploding in popularity. Copying Snapchat Stories certainly helped (which Zuck was 100% happy to rip — pixel by pixel). Snap’s stock has dropped 50% since the ill-timed (controversial and greedy) IPO. Plus Instagram addresses a different market (millennials) and use case than the Facebook— building their advertising base even larger.

3. Whatsapp and Facebook Messenger

I refuse to consider Facebook messenger a messaging app as it is just the messaging feature of Facebook — thus messages from Facebook come through and grossly distort the usage numbers. Either way, Whatsapp and Facebook Messenger are the two largest “messaging apps” worldwide.

Facebook bought Whatsapp in February of 2014 for a whopping $19B, which again seemed absurd. But Facebook’s business has ALWAYS been built around attention, eyeballs, and waiting to monetize. And if Instagram is any indication, they know what they are doing. Stern Agee, the financial services company estimates Whatsapp could be generating close to $5B in revenue with over 2.3B users by 2023. I would go bigger.

Due to Whatsapp’s more private, intimate nature, it creates growth opportunities that an outward facing site like Facebook and to some extent Instagram cannot match. Essentially even if/as people become more reserved about social media, sharing and controlling their data, Whatsapp can still win — rigging the game in Facebook’s favor.

How blockchain beats Facebook

Of all the Big Four, blockchain poses the largest threat to Facebook. Facebook’s business is built on attention, advertising and collecting user data. A network out of Harvard originally built for college hookups is now worth $524B — and users never saw a dime. They see quite a few ads though.

1. Facebook.com

A decentralized version of Facebook seems obvious at this point. In a social ecosystem without a centralized party, algorithms can be optimized for user happiness, rather than engagement. The biggest problem with Facebook (and Google) is that they are advertising-based businesses. Facebook makes their money on impressions, making it more and more user-hostile over time to drive ad revenues.

From a purely economic standpoint, this means Zuck wants users on Facebook as close to 24 hrs a day as humanly possible. Obviously, this isn’t sustainable, and studies show social media usage (especially Facebook) have a net negative impact on happiness. In the long term this is not sustainable for Facebook — the more you use Facebook, the worse you feel. Russian election hacking and Jew hate based targeting aside, Facebook could have a serious problem on its hands if more and more users start to churn — which appears to be the case.

Why else would Facebook be actively trying to reduce user addiction? Enter a blockchain based competitor… The token incentive structure should be pretty straightforward. Like Airbnb’s refer a friend and you both get $10 credit, a blockchain based social network (BBSN) could rewards users with BBSN tokens for referrals, creating popular content, posting daily etc…

Tokens could represent virtual economies in the network (buying/selling stickers, access to certain bonuses, or even upvote/downvote micropayments) or they could be positioned as advertising prerequisites, where users could “sell” their attention or engagement to advertisers.

It seems highly likely a BBSN will pop up to compete with Facebook. The question is, will tokenized incentives be enough to overcome Facebook’s enormous network effect? I believe yes, but think it will take at least ½ a generation.

2. Instagram

Same as above, plus with the added bonus of influencers. Because Instagram is more focused on one-to-many communication, users that build followings could sell access tokens to advertisers looking to promote products in a more transparent and simple fashion.

Although outside of the target market here, I would give a blockchain based social photo site (BBSPS) a decent chance at gaining significant traction

3. Whatsapp

The odds of a blockchain based messaging app (BBMA) taking off are pretty slim. There are so many messaging apps, why build a blockchain based one? Most messaging apps are encrypted anyway so the trust and security level is relatively high.

The big challenge, however, is scale. As of July 2017, there were over 55B Whatsapp messages sent every day (Source — AndroidPolice). Crypto kitties crashed Ethereum’s network, and that was only a few hundred thousand “transactions”. But cryptocurrencies built on a centralized service is a different story.

The popular messaging app Kik just completed a successful ICO, raising $98M to build a “KIN” currency into their app. With 300M users as of May 2016, it is no surprise that Kik had to quickly switch off ethereum’s net to handle their volume. Rumors are circulating that Facebook may be looking to (or starting to) implement Litecoin for p2p payments.

This would be a landmark moment not just for Facebook but for cryptocurrency — bringing decentralized, non-governmental payments to the masses. If this is the case, Facebook could set itself up as the dominant p2p payment system. Here is why.

The banking and financial services infrastructure is old, outdated and expensive. Even newer, leaner companies like Paypal charge $0.30 + 2.9% on every transaction they process. And Venmo is in the process of starting to charge as well. And while these may seem tiny, especially compared to traditional banking, cryptocurrencies unlock a totally new dimension of money — one that approaches 0% fees with no middlemen or hoops to jump through.

As we have seen, the peer-to-peer payments market is exploding, forecasted to reach $86B in 2018 in the US alone. And with global mobile payments expected to exceed $930B, this opportunity dwarfs the digital advertising space.

If Facebook goes big on implementing either an established cryptocurrency or creating FBcoin, they could own the messaging and p2p payments spaces.

Apple

Apple is the most valuable company and arguably the most beloved brand worldwide. It is also a money printing machine to the tune of $215B in 2016. And that was a down year…

The iPhone and iOS

The iPhone makes up the lion share of Apple’s revenue, 69.4% of (Q1 2017). And if we are being honest, the iPhone is the connection with consumers — the driver of iTunes, the App Store, AirPods, accessories… pretty much the whole shebang. This creates potential problems going forward…

How blockchain beats Apple

Of all the tech giants, Apple is the least threatened by blockchain because ~80% of revenue comes from hardware. That said, there could be issues with decentralized apps and token economies inside Apple’s closed ecosystem. The largest implications center around iOS and the App Store.

iOS + the App Store

Apple is the antithesis of decentralization. A future of dApps built on a decentralized blockchain could create a nightmare scenario for Apple.

The most obvious issue is monetization. How could Apple justify charging users to download freely distributed, open-source apps? I don’t see that ending well. And the App Store is incredibly valuable for Apple, bringing in $8.6B per year. It has also given iOS a big leg up on Android, bringing in 75% more revenue than Google Play despite the difference in downloads. But in a blockchain based future that revenue probably goes away.

More importantly, Apple isn’t friendly with outsiders — they love control. In an open-source world, would Apple become more developer and user-friendly? I do not know. Given the fact that Apple slows down your old iPhone when they launch a new one seems to indicate they are milking the smartphone craze for all it is worth.

And up until recently, consumers were also lied to concerning the “upgradeability” of iPhone parts. No one knew iPhone batteries were interchangeable… I cannot see a company so focused on secrecy adapting well to blockchain-based applications and transparency.

That said, Apple has better security than their Android counterparts which will be increasingly important as consumers store cryptographic assets directly on their mobile devices. If Apple adapts, this could be a big win. If not, it could accelerate their undoing — especially because ALMOST everything depends on the iPhone ecosystem.

Closing thoughts

Blockchain technology is creating an interesting and ever-changing world.

While we have seen hundreds of ICOs promising everything under the sun, little has actually been accomplished or implemented to date. And though I am bullish on blockchain, in the long run, I believe we are headed for a coming crypto winter where teams build, markets (and market caps) crash and only the strong survive.

Thinning the herd will benefit the community, forging stronger teams and bonds among blockchain devs and the ecosystem at large. The big questions to be answered are timeline and scale. Crypto enthusiasts claim Bitcoin and blockchain are the best things since sliced bread, but actions speak louder than words.

What are your thoughts? Which tech companies are you betting on and where do you see dApps, tokenization and blockchain based tech taking over the world? Would love to hear predictions and educated guesses in the comments section below. Which areas of the economy will be most impacted in the coming 5 years? 10 years?

Chuck Reynolds


Marketing Dept
Contributor

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