A while back there was a project called the Bitcoin Cash Fund, where the aim was to raise money to support projects that promote Bitcoin Cash. Help designers and marketers to make infographics and videos and other methods for getting the word out. Note that I'm not talking about the recent Bitcoin Cash Ecosystem Fund being run by Bitcoin.com, which is a much larger project to invest in development as well as promotion. The Bitcoin Cash Fund I'm referring to was a grass roots effort that bubbled up out of discussions on r/btc and maybe elsewhere in mid 2018 or so.
So far as I know, the Bitcoin Cash Fund raised a few tens of thousands of dollars, maybe more, and I think they supported a couple projects. Unfortunately, as I remember it, the people running it got bogged down in trying to develop systems of governance to manage the money fairly. For anyone wanting to apply, it was hard to tell exactly how it worked, and the whole thing fizzled out. Their YouTube channel hasn't been updated in a year or so, and, as I type this, when I try to go to the Bitcoin Cash Fund home page, Firefox tells me it can't connect.
To be honest, I don't think it really would have mattered much if the Bicoin Cash Fund had stuck around. I think it's fine if people want to come up with videos and infographics and other media to explain Bitcoin Cash. But I also think that there are diminishing returns on adding more and more different versions of the same examples and demonstrations.
Assuming for a moment you could do what the Bitcoin Cash Fund did and raise a little money for the purpose of promoting Bitcoin Cash, might there be a more effective way to use that resource? And is there any objective reason to believe in another method?
Fortunately, I think there's a real world case study we can turn to that gives us some guidance. I'm referring to the promotion and adoption of cashless payment systems in Japan. In recent years, Japan suddenly pivoted from a consumer culture that was almost entirely cash based, to using apps with QR codes as a matter of course for every day payment. There are dozens of different companies competing to become the standard every day payment system. I think you can see how this has a lot of similarities to the challenges faced by Bitcoin Cash.
Although there were dozens of companies trying to become the de facto standard, only a few rose to the top, and I think we can learn from one of those leaders, a system called PayPay.
Most people outside of Japan haven't heard of PayPay, so they often get it confused with PayPal. With just that one letter on the end being different, it's easy to get them mixed up. So, just to be clear, I'm not talking about PayPaL, the global payment company you've probably heard of. I'm talking about PayPaY, an electronic cash service only available in Japan.
PayPay is the system backed by Softbank, which you may have heard of outside of Japan. They have a lot of investment money that they throw around, such as their recent investment into WeWork, which doesn't seem to be going very well. With Softbank behind it, PayPay had the benefit of a billion dollars, not figuratively but literally, for the purpose of promotion.
It's easy to imagine anyone could succeed with a billion dollars, but keep in mind most of PayPay's competitors have as just as much money, and as much or more existing infrastructure and brand recognition.
Among PayPay's competitors were JR East Rail and their Suica card system, which is slightly different than the others because it's an RFID card based payment system. But you have to include them because they compete for the same electronic payment market share. On top of having plenty of money of their own, and government support, many retail stores operate within JR rail stations or on JR land in general, so they have built in synergies to fuel adoption. Almost every store within a certain radius of a JR station accepts Suica.
Of the systems that are closer to PayPay in terms of the technologies involved, there's ID, which might have rebranded as "d-Harai", I'm not sure. It's a little hard to keep up with the market because things are evolving fast. In any case, it's a system backed by Japan's largest cell phone carrier, DoCoMo, who can offer that you can settle payment with your phone bill. They also offer RFID payment if you use one of their phones.
Probably the biggest success after PayPay, though, is Line Pay, the payment system backed by Line, Japan's most popular text messaging app, with 80 million users. Everybody already had the app, it was just a new part of the interface to include a payment system.
It's worth also noting the huge players in this game who have not succeeded, such as Nanaco. Nanaco is backed by 7-11, Japan's largest convenience store chain. They had the option to launch with their payment system being immediately usable in all their existing stores. That's a huge advantage, and yet, they couldn't capitalize on it. Nanaco is around, people use it, but so far as I know, after two or more years of pushing it, you can only use it at 7-11, and maybe a few other places here and there.
Even Mizuo Bank, Japan's second largest bank and the 18th largest in the world, with plenty of resources, couldn't make their electronic cash system get traction. Ever heard of Jcoin? Pretty much no one in Japan has either.
This game is being played by, and lost by, a lot of really strong contenders. PayPay was never assured success, even with its huge war chest of cash to fuel its ambitions.
All of which is to say that PayPay was in a similar position as Bitcoin Cash is now, where there are countless cryptocurrency projects, and other electronic payment systems, to compete with. And also, some of those competitors came with big advantages such as name recognition or advantageous infrastructure features. Most people outside of crypto enthusiasts probably think of Bitcoin Core when they think of cryptocurrency, and for a long time Ethereum had a monopoly on making tokens.
So how did PayPay overcome similar obstacles to rise to become the most widely used payment app in Japan?
Paypay's strategy was pretty simple and proved to be quite effective. First, they took some of the billion dollars they had, and went to stores and offered them some of that money to finance discounts for customers. How it worked was, let's say you wanted to buy a new phone or laptop. Which, by the way, I did. An electronics shop would offer a 20% discount. The difference in price was made up by PayPay, so for the store, they get full price. But the store sold more product because customers were incentivized to take advantage of the discount.
The 20% cash back was deposited into my PayPay app. So, at first, I didn't have to figure out how to put cash into PayPay, it was just given to me. I had to download the app, and then at the counter, the store would scan a QR code when I made my purchase. An amount equivalent to my discount was now in my PayPay wallet.
The next part is where I think there's some simple but clever strategy. Consumers didn't get access to the money they got from that 20% discount right away. If they did, they might have simply turned around, used that amount to buy something else in the store on that same day or soon after, to ensure they get their full value, and then forget about PayPay.
The amount that consumers earned from the in store promotions was not spendable until about three months or so after. They had a set date, I think the beginning of March 2019, where all PayPay balances would then be usable for purchase. What this meant was that at the end of 2018, when the first initial promotion ended, there were hundreds of millions of dollars worth of PayPay points sitting in consumer's phones. PayPay then went around to merchants everywhere and said, "hey, come March, there are going to be all these customers looking to unload all that money, don't you want to get in on that action?"
Many merchants did. And to just sweeten the deal a little more, PayPay used just a little more of their war chest to offer a little more discount to consumers who started paying with PayPay. These second stage discounts were not as big as the ones when they first put PayPay onto my phone, but still worth it. Especially since I was only paying with money from my previous kickback.
That approach turned out to be a huge win for Paypay. They rocketed up to being one of the top cashless payment systems in Japan.
So, how can Bitcoin Cash learn from PayPay's example?
I think the key learning point, the core of the winning strategy, is that PayPay did not rely, as many of their competitors did, and as the Bitcoin Cash community often seems to, on simply explaining their product. Yes, Bitcoin Cash is easy and cheap and fast. So is everyone else, so what?
I use PayPay almost daily now, and it's not because it's that much better than Line Pay, the other one I frequently use, or any of the two dozen other ones I don't use. I use PayPay because they gave me tangible benefits, things I bought at noticeably cheaper prices, that motivated me to start using it. By the time all their promotions cooled down and I'm now no longer getting significant discounts, using PayPay has just become normal for me.
Bottom line, people like getting stuff, not explanations. PayPay gave away stuff, while competitors tried to show how they were the better service. You can see who won.
Bitcoin Cash is unlikely to have anyone willing to pump a billion dollars into a promotion, but we have seen that people are willing to set up funds of at least a few thousand dollars in order to further adoption. So, the question is, how can that money best be used to emulate the success of PayPay?
I propose the following strategy, inspired in part by PayPay's, but modified to what Bitcoin cash could potentially do. There are some technical aspects to this that might need tweaking, but I'm fairly certain the necessary features all currently exist, it's just a matter of how they're presented in terms of interface.
First, assuming there's an available fund, give some amount of money to a shop that is, or willing to be, Bitcoin Cash friendly. For small shops, it only needs to be in amounts of hundreds of dollars, or maybe a thousand or two at the most.
Second, set up a token just for that shop. This is where there are all kinds of options, and I think people are likely to come up with a wide variety of creative approaches. I bet before you finish reading this, you'll imagine a few of your own unique ideas. For now, though, to keep it simple for the purpose of explanation, let's imagine a coffee shop. They create a coffee token, where each token is worth one coffee.
Using the money they've been given, the shop sells their token so that a customer discount is built in. For example, the coffee shop sells a set of 6 coffees for the price of 5. The price of the 6th coffee is covered by the fund, so the coffee shop is not losing any money. From their point of view, they've sold six coffees.
If a coffee costs five dollars, and you give the store even just a hundred dollars from the fund, that's twenty potential customers who might take up the offer, which is pretty good value for the money. I'm definitely sure that even twenty new users along would beat the amount of people who have started using BCH because they saw a "BCH accepted here" sticker at a cash register.
Now, the customer can go in and use those tokens back at the shop and redeem them for 6 coffees. Done and done. A little bitcoin cash went round and round a few different wallets, and that's nice, it's all transactions that boosts activity on the network. More importantly, a bunch of consumers now have a BCH wallet on their phone when they otherwise wouldn't have. And they're going to interface with that wallet at least a half dozen times to claim all their coffees, so they're easing into using the wallet. If they go into another store also using the same system, the familiarity with the app gets that much more embedded. It's all about just getting people to use the apps and the system over and over until it's normal.
Imagine that the price of BCH goes up significantly. That means the value of BCH the customer is holding in the form of tokens is worth more than redeeming them for coffees. That's fine, because the customer should be able to exchange for the BCH value of those tokens if they want. Ideally, in their wallet interface, they can "cash out" their tokens for BCH easily, and in the process, they'll be learning a lot about what BCH is by actually dealing with it. Way better than just having someone explaining how it's all so amazing.
The store also wins in that scenario, because if the customer trades away their tokens, then they no longer have them for use at the coffee shop. The coffee shop sold 6 coffees worth of tokens, but didn't actually have to provide all 6 coffees, so all unclaimed tokens now represent pure profit. Everyone's happy.
What if the value of BCH goes down? Well, the customer is fine, because they can still exchange their tokens for coffees, and they're still getting a deal, 6 coffees for the price of 5. And the store is no worse off because they got the value for 6 coffees from the customer and the fund, so it's just business as usual. The store is actually a little better off because these sales might not have happened if the customer hadn't been incentivized by the discount.
This would work way better than just going into a store and convincing them to have a little sticker on their cash register to say "BCH accepted here." Under my proposal, the focus for the consumer is, "get a sixth coffee for free." That's a way bigger incentive to download an app. That's how PayPay won.
Now, the technical details. One is, there needs to be an app that can trade in tokens with an easy enough interface so that a consumer can download the app, and have the store send them their coffee tokens, or whatever, without a lot of fuss. I've seen some apps are set up for handling tokens, but I haven't actually used or experienced that myself, so I'm not sure how user friendly they are. I believe that's mainly just an interface design problem, though.
The store needs a wallet of some kind with an interface so they can mint their own tokens on demand reasonably simply. It all needs to happen fast enough so that an owner can receive BCH and mint tokens before volatility rears it's ugly head and changes any fiat equivalent values. The value of what the store receives needs to match the discount they will be offering in fiat terms, otherwise they could potentially lose money. Again, I think this is more of an interface problem than anything else.
I'm pretty sure it's standard behavior of tokens that you can restrain who has the ability to mint coins, so that only the store can mint their own coins. You wouldn't want people making their own coffee coins.
Tokens could expire, like reward points, to ensure the store gets the business it's trying to generate within good time. However, unlike standard reward points, if they expire, the customer is still left with the value of the BCH contained in the token. Ideally, expired tokens automatically dissolve into BCH. In that scenario, the store wins again, because they sold a coffee they didn't have to provide. But also in this case the customer at least doesn't lose as bad as they might with a normal point reward system. An expired paper point card simply becomes worthless. Expired BCH tokens become BCH, and the consumer could still conceivably win in the long run if the price of BCH at some future time beats what they bought the tokens for.
Probably the biggest issue is ensuring that the store is actually offering the deals they were funded to provide, and not just taking in Bitcoin Cash and keeping that money. However, although you might be able to work out some tracking of the tokens on the blockchain to see what's going on, I don't think this is really a technology problem. It's more about vetting and trusting the store. Most BCH enthusiasts who convince a store to accept BCH have at least some personal connection.
And hey, we're probably only talking a few hundred dollars per campaign for any one store, so, it's a little too low level for anyone to really get into some kind of con game. If a store does takes some funding, but it's unclear if they're actually distributing tokens in a fair manner, then they lose out on potential future funding. A good way to set up funding a store would be to release amounts in increments, where they get a new amount upon successfully distributing past amounts.
On the topic of tracking, though, with this system in place, you would be able to actively see how many people actually used the tokens, giving you at least some idea of how much adoption might have been generated. I realize there are ways in which this system could be gamed or the metrics might not have direct correlations. It's not perfect, but it's something. As opposed to making an infographic or video that goes out onto the net, and there's no way at all to objectively measure if it's had any impact.
A system like this could even potentially work without anyone backing it with a fund. There's a place I go to for lunch, and a while back, they offered me a package of 10 lunches for the price of 9. Or was it the price of 8? I forget, but I did buy into it. Anyway, My guess is that they did the math, and perhaps the reduced profit on 10 lunches was worth the cash flow of having 8 or 9 sales right this moment. Or maybe it was a loss leader type of promotion. I don't know enough about the economics of that kind of business to guess at what the ultimate benefit is. But in any case, that kind of offer seems to be viable.
But, in terms of promoting Bitcoin Cash, some kind of financial incentive for the store is probably necessary, because otherwise, why should the store use BCH tokens and not, say, a paper card and an ink stamp? That's what the store I bought the lunches from did. If the store is going to use BCH as the basis of their points and rewards and promotions, in the short term, the Bitcoin Cash community has to make it more appealing than other options. Immediately financially appealing, not just appealing in terms of enthusiastic explanations.
Bottom line, if we're serious about wanting people to start using Bitcoin Cash, we need to recognize that describing BCH in ever more clear terms and pretty graphics only goes so far. If you want people to get excited, we need to offer up some kind of tangible incentive. It's a strategy that's been tried, and worked, and we should learn from it.
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Never heard of PayPay before. Totally unaware of the payment processors market in Japan, but really surprised to see that many. Is all for the best, many countries are in the middle age comparatively regarding digital payment massiveness and acceptance.