Humint Hopes to Custom-Build Altcoins for Brands
We’ve had peercoin, feathercoin, worldcoin, and a host of others. How about WholeFoodscoin, CocaColacoin, or McDonaldscoin? A group of social entrepreneurs is hoping to bring branded coins into existence, and is chasing unidentified potential partners as we speak.
People might be forgiven for thinking that the whole altcoin scene is getting a little silly. In a world where dogecoin – a six week-old coin launched from a dog joke – has a larger hash rate than Litecoin, things are clearly moving in a strange direction. And we’re already starting to see coins trying to capitalize on existing brands. For example, Kanye West recently squashed a coin that tried to cash in on his name.
Wendell Davis, CEO of recently-formed crypto currency marketing and consulting company Humint, thinks that the time is right for custom coins developed for specific brands.
The case for branded coins
Why would a company want its own coin? Davis gives a grocery story as a hypothetical example:
“There’s a 40% pre-mine of this coin. 20% of that goes to you, and you’re going to give this away to your customers for free with every purchase that they make,” he suggests.
Humint takes some of the coin as its fee, because it doesn’t charge the brand to create the coin. Another fraction is distributed to people in the grocer’s supply chain, including the food producers, in emerging countries. “Maybe you give the rest away to some causes that you want to support.”
The rest of the coin is then mined, in the traditional way, and is then traded by the miners.
“What happens of course is that once this thing hits the market, there is a value that is assigned to this coin that was previously generated from nothing,” Davis predicts. “In that moment, what happens is that the entire supply chain, the causes that they want to support, the customers, and the company, are all enriched.”
A brand’s customers wouldn’t need to understand cryptocurrency (thankfully), or to trade it. The coins would be awarded, like loyalty points, when they purchased items, just as conventional points are today. They wouldn’t have to do anything with the coins, Davis argues, until the cashier told them that thanks to an increase in market value, the coins on their loyalty card just paid for their week’s groceries.
That assumes that market value will increase. Which assumes that there’s a market. Which means a trading platform, which the miners would use. “The way I see it is that they should all be fungible,” Davis argues.
Quite how that will pan out, Davis isn’t sure, but it’s no coincidence that one member of his team is Jesse Heaslip, co-CEO of Vancouver-based Bex.io, which has written its software enabling companies to create their own crypto currency exchanges. Davis also openly admires Ripple, a payment network (not a trading exchange) that enables currencies to be sent easily between members.
CoinDesk generally tries to steer away from vaporware. Everyone in the crypto currency world has a neat idea, but few have the commitment to execute them. However, this team has a track record in getting things done. Heaslip recently scored $525,000 in funding for Bex.io, and has beta code running. And Davis is no dilettante, either. He is CEO of Hive, which has a beta version of a OS X-based bitcoin wallet with embedded links to a variety of online cryptocurrency services.
But the idea has its critics. One of them is serial bitcoin entrepreneur Erik Voorhees, who labels himself ‘highly skeptical’ of the concept.
“Why would someone want a Whole Foods coin? If I received such a thing when I shopped there, I’d instantly convert it to bitcoin,” he says (these are hypothetical examples – there’s no suggestion that Humint is working with any of brand names mentioned in this article, or that any of them are developing coins).
“Money competes with money,” Voorhees asserts. “Why would I want to hold a Whole Foods coin when I could instead have the equivalent value in bitcoin, which is accepted all over the world?”
On the other hand, just look at dogecoin, which hoisted itself up by its own bootstraps and became its own phenomenon, with no cohesive brand to speak of, and no apparent reason for there to be a demand. If memes are powerful, then so are brands.
There’s also the loyalty point argument. Gabe Zichermann, chair of the Gamification Summit and an expert in social marketing and loyalty rewards systems, thinks that altcoins trading as loyalty points could satisfy a strong demand among brands.
“There is market demand for alternatives to the dollar on the one hand, and alternatives to walled garden loyalty programs on the other. There’s a demand that something is convertible, and adopted by lots of peers, but isn’t tied to a company or a country,” he says.
Once scenario could see, say, a Whole Foods coin and a Lulu Lemon gymwear coin (both hypothetical examples) traded on the open market, possibly paired with an independent asset such as bitcoin, says Zichermann. Imagine an urban hipster receiving an altcoin reward for buying yoga pants, and then trading or converting them to the other’s altcoin, to get discounts on their groceries with.
Presumably, in that ideal world, there would also be room for complementary brands to partner with each other on campaigns and award each other’s coins.
If coins could be traded like loyalty points, it may give them more liquidity, and create demand, but it needs that framework. “If an ecosystem develops then value will be created for both the buyer and the seller. Until then, nothing really happens,” posits Bill Warelis, VP of marketing for loyalty points service LoyaltyMatch.com. The company recently launched a bitcoin-based loyalty service, which awards points for purchases made in bitcoins.
There are inertial challenges, says Zichermann. Getting brands to accept this might be difficult. Someone has to take the plunge – and companies with control over their own deeply entrenched loyalty programs might be hard to shift.
One concern is whether the current uncertain regulatory landscape would scare off companies with a lot to lose.
“They’d either put so many restrictions and terms on the coin that it became pretty useless, or [they] would risk becoming a money transmitter,” Voorhees says. “That is not their business.”
Davis admits that this is a potential problem. But then, half of the bitcoin world is currently traversing a landscape where regulations are uncertain. He says that he’s already negotiating with multi-national brand customers.
Smaller companies, daunted by the cost and complexity of launching and managing a loyalty program, might like the idea of a quick on-ramp, especially if outsourced to an expert firm, Zichermann suggests.
Something else is going on at Humint, connected to this, but they’re not telling. It’s some kind of platform, and it will open up the concept of coins to non-brands. That’s all that sources are saying at the moment. You’ll know when we know.
Would you mine or trade a branded altcoin?
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