Bitcoin banknotes, or: living in the old world
Tangem, headquartered in Hong Kong and Switzerland has announced their „bitcoin smart banknotes“. Each tangem banknote comes donated in bitcoin (ranging from 0.01 to 0.05 BTC) and is spent like paper money by literally handing it over. To verify the banknote it comes embedded with an NFC tag that upon scanning with a smartphone app reveals the banknote’s balance. Furthermore, these banknotes have very low intrinsic value and are, therefore, according to Tangem, “Cheap enough to hand over“.
As argued in Blockchain and socio-technical systems — diffusion through hybridization tangem’s banknotes are an example of hybridization where blockchain solutions (solutions from the „new world“) are incorporated into existing „normal“ products. Through that integration, those „normal“ products can be enhanced with features that — in the best case — are only achievable using blockchain technology.
In this case, the „normal“ products are banknotes, and the solution from the „new world“ is bitcoin. As argued in the governance. gatekeepers. privacy coins. newsletter | week #17 there are three advantages to this hybrid approach:
- Companies which are enhancing existing products are not positioning themselves as competitors and thus aren’t a threat to incumbents. Because incumbents are very powerful, this strategy allows Blockchain startups to work without having to worry that much about competition. This leads to the second advantage.
- Because startups must not fight incumbents they have enough time to study the industry and work on bigger products which will eventually end up being direct competitors. Until then, however, those startups are operating under the „competition radar“.
- Accustom people slowly to the new „world“: By not confronting users directly with something completely new, startups can slowly accustom people to the new paradigm and incrementally lead them towards the new world.
Besides this, it is ironic to see a digital technology, relying on analog technology. Nevertheless, such a cascading approach towards crypto payments (first accepting digital cash per se and than paying with digital cash itself) makes a lot of sense as argued in Two mental steps towards cryptoasset diffusion in the context of cryptocurrencies per se. However, the question remains whether paper money is the best mean to drive diffusion. An alternative are payment cards (debit and credit cards). Companies like TenX, Monaco, and Centra (which receive legal attention recently) are working on debit and credit cards that can be used to pay with cryptocurrencies.
Chainium, a blockchain startup that finished its token sale in April is following a similar hybrid strategy. Chainium is a building a blockchain-based platform to issue equities. In this case, the “old world” are equities, and the “new world“ is blockchain. In contrast, a fully „new world“ solution, wouldn’t deal with equities in the first place, but rely fully on blockchain-based financing methods such as ICOs or AirDrops. Examples from this category include crowdfunding platforms such as Zilla or AirDrop platforms such as Earn which recently got acquired by Coinbase. (Chainium is part of Researchly’s Global ICO Report April 2018 — sign-up here to receive the full report when its out.)