Ten years ago today, Bitcoin was born while the world was in the midst of the US housing and financial crisis, which lead to the Great Recession. An entity known as Satoshi Nakamoto published a white paper outlining a decentralized alternative to the traditional banking system to a mailing list of hundreds of cryptography enthusiasts. On October 31 2008, the Bitcoin community was born. The Bitcoin network didn’t go live until January 2009. Some say the only way it stood a fighting chance is because the community was created before the technology was launched.
In order for a monetary system—digital or otherwise—to survive and thrive, the people who use it quite literally have to buy into it. They have to believe that it’s worth the agreed-upon value. However, the majority of cryptocurrency projects focus on the technology first, and community second (or as an afterthought in some cases).
This is the tech equivalent of putting the cart before the horse and it is a factor in explaining the high rate of failure among cryptocurrency projects. According to recent research by Boston College, which examined 4,003 ICOs (Initial Coin Offerings), more than 55 percent of those projects failed within four months of launching. That didn’t stop them from collectively raising more than $12 billion USD.
Some startups have found success by focusing on community first. According to Hilary Carter, Managing Director for Canada with the Blockchain Research Institute: “Builders think they have an awesome idea and [being] first to market is meaningful. But money can run out faster than community can be built, so teams with community and a lower-grade technology can outgrow and outlive the best technology in the world.”
BTZ is born
Toronto-based Bunz, an online bartering platform, launched a digital currency called BTZ (pronounced “bits”) in early April. It can’t be purchased, but it can be earned through the Bunz app for doing things like getting others to join the community. BTZ is used to barter (for example to supplement a Bunz trade if there’s a big gap in the value of the items being swapped). It’s also accepted instead of cash at hundreds of local retailers in Toronto, Hamilton, Ottawa, Montreal and Vancouver.
There was a lot of backlash because BTZ was initially marketed as a cryptocurrency, when it wasn’t operating on a blockchain and that didn’t sit well with decentralization purists. Or bartering purists for that matter. “There were a lot of comments,” says Bunz CEO Sascha Mojtahedi. Some of it was nasty. “I don’t want to give them the glory of recounting some of the stuff.” He says it came at a time when there was a lot of hype around crypto projects in general, and Bunz got lumped in with the rest, even though the company chose a path that bucked the trend.
Bunz started out with an established community which has grown 20 percent since the launch of BTZ to 250,000 people. About 70 percent of them are aged 35 and under and they’re mostly in urban centres. Its digital currency now plugs into Ethereum, which is the most popular network in the world for blockchain applications. Rather than taking a fully decentralized approach, BTZ operates as a hybrid—you can move the cryptocurrency back and forth from the centralized app to a decentralized blockchain. “I think we were pioneers of that approach,” says Mojtahedi.
The Bunz community has been slow to come around to BTZ. Of the quarter million users, only 50,000 (or one in five) have activated an in-app wallet which allows them to use and collect the cryptocurrency. But interest is building quickly. In six months, about $350,000 worth of BTZ has been spent at more than 200 participating local retailers. That doesn’t include the transactions happening within the Bunz platform. The number of people who use it every day has grown by 68 percent to 16,000 in the last 40 days. The “daily user” metric is important for a cryptocurrency looking to break into the mainstream.
The Holy Grail of the crypto community is widespread adoption, and daily use is something that even the most successful cryptocurrencies (including bitcoin) have trouble achieving. That’s because many of them are also viewed as a store of value in addition to a medium of exchange and the majority of them are complicated or difficult to spend. Some have very specific uses and aren’t actually intended to replace cash while others have high transaction fees. Mojtahedi says the Bunz hybrid model means users don’t pay to use BTZ.
The “Bunz cult”
The Bunz community is rabid and it’s personified in evangelists like Anatacha Wilks. The 29-year old Toronto resident oversees several sections in the Bunz app (housewares, baking, tattoos, to name a few). She also shows people how to use it and she “helps out when she can” on a very part-time basis. She has opted to be paid for her time and effort in BTZ. She currently has about $700 worth of BTZ in the “wallet” of her Bunz app. She is a real convert.
“When I get someone to sign onto the app for the first time, my takeaway phrase is ‘welcome to the cult of Bunz.’ You will become obsessed, you will become addicted, it will become your life.” Hyperbole aside, she says the community has come to her rescue many times.
When she didn’t have enough money to spare for transportation, she turned the items in her pantry into homemade bread which she bartered for tokens to get to work. She says some of her barters have led to friendships. “I have made some of the most amazing friends I’ve had in my life through Bunz.”
It’s the fact that a real-life community exists that makes the “translation” into a digital forum smoother. Another factor is how easy it is to use. You don’t have to be especially “tech-savvy” to use BTZ, which isn’t usually the case with crypto.
One token to rule them all
Because of its simplicity, BTZ doesn’t face the “conundrum of tokens” as Forrester Research IT industry analyst Martha Bennett calls it. BTZ can be used instead of money to purchase things from participating local retailers, or it can be used as part of a Bunz barter. But there is only one cryptocurrency that users need to deal with.
That is significant in a world with thousands of niche tokens which, 10 years after the birth of Bitcoin, is part of its legacy. “There are far too many out there,” says Bennett. “I can’t see consumers being prepared to handle multiple different currencies to go about their daily lives. Why would anyone want to use a different token for yoga class, dog sitting, sharing a vehicle, being rewarded for sharing medical data or viewing advertising? And those are all real examples.”