Currently, to participate in the ‘crypto’ economy, a consumer needs to either sign up for an exchange account (and get KYC’d), or have a friend send them some cryptocurrency. This works fine if cryptocurrencies remain as currencies, however what about emerging use cases such as non-fungible tokens (NFTs) such as Cryptokitties? In those cases, having a consumer step through the hoops of acquiring and securing a cryptocurrency, then purchasing the NFT, is a point of high friction and slows down the mainstream adoption of these new assets and collectables.
Similarly, once a consumer has acquired these cryptoassets, they can speculate on the asset’s value and trade them for other cryptoassets, however they will have a difficult time exchanging the asset’s value into a non-crypto asset. Their choices are to withdraw it to a fiat currency, or use it in marketplaces that accept crypto, which are limited. The current ways to exchange crypto-assets into non-crypto assets, and their limited use cases, may become a blocker for wider mainstream adoption.
Another way to participate in the crypto economy is being pioneered by projects such as Kin, Jet8, IndaHash and Props. With these projects, users can earn a cryptocurrency without having to jump through the hoops of acquiring an exchange account to buy the cryptocurrency. However the hundred billion dollar question is whether mass market consumers will be willing to earn the cryptocurrency via these platforms, as each project has unique friction points, incentive structures, and business models.
With Kin, end users are paid for completing tasks such as watching ads or completing surveys, funded by those task originators. With Jet8, consumers are paid by brands to share branded content. With IndaHash, consumers are rewarded with a cryptocurrency with a restricted value, funded by brands. With Props, end users and advertisers fund the rewards pool that pays out stakeholders.
The problem with current earning platforms
The issue with most of the crypto earning platforms is that they need to pull users into their apps, and only inside the app is where the user discovers their earning and spending opportunities. The user needs to download the app, understand how they can earn on the platform, then take an action (or series of actions) to earn their cryptocurrency. This creates a lot of friction for the consumer, especially before they receive any information on the value (earning and spending) associated with using the platform.
A potential solution
An ideal scenario would be for consumers to ‘hear’ about earning and spending opportunities with a cryptocurrency in their normal day to day digital activities, without having to opt-in to another platform. Consumers should be able to earn the cryptocurrency while consuming content they already come across. In this way, the consumer can understand the immediate value of earning the cryptocurrency and how they can spend it, with a very low cognitive load.
The best way to achieve this is with digital influencers, where consumers already follow, watch, and go to for the latest trends and advice. Digital influencers already have millions of fans built across multiple social channels, where they can provide immediate information on the value associated with earning a cryptocurrency. Influencers could even allow their fans to earn a cryptocurrency while consuming their content, on their already existing social networks, encouraging higher fan engagement.
This is the approach we are taking in designing the Pixel Ecosystem, initially leveraging digital influencers to help educate and inform the consumer market. Using their already existing social media fan bases, influencers can allow their fans to earn Pixelcoins by engaging with their content in a certain way, which at the same time creates a verifiable proof.
The Pixelcoins are the incentive mechanism, the action the consumer takes is a Proof of Engagement (PoE).
The PoE uses various mechanisms to show, on a probability scale, that the consumer is a real human and actually engaged with the influencer’s content. This solves a very important and growing problem for brands, as described by the NYT and Buzzfeed. Brands and advertisers are willing to pay for this proof, so provide the funding for the fan to earn Pixelcoins. This is an important aspect, as both the influencer and fans earn Pixelcoins, with the brand funding their interactions.
How would the consumer spend the Pixelcoins? Since the consumer is already earning Pixelcoins from an influencer’s digital content, they can also spend it on an influencer’s merchandise or redeem a non-monetary experiences such as meeting them, all within the same digital ecosystem.
In effect, the consumer earns cryptocurrency which is funded by an advertiser, encouraged by an influencer they admire, who in turn receives more engagement with the content they create.
Since Pixelcoins are also a cryptocurrency, they will be liquid and exchangeable to other cryptocurrencies outside the ecosystem, including NFTs such as Cryptokitties, solving the ‘how to get cryptocurrencies into the hands of mainstream audiences’ question. It is a win-win for all parties involved, leverages the already existing social media platforms, and increases the total addressable cryptocurrency market.
We’re still in the early stages but if you would like to find out more, email david(at) pixelecosystem.com or visit pixelecosystem.com to sign up for updates.
Questions or opinions? I’d love to hear them in the comments.
This post is the first in a series which will explore our approach to designing a token ecosystem, the incentives structures, and how it solves specific problems for stakeholders in the Pixel Ecosystem.