New Money | You Should Listen To ThisOctober 24th, 2017
What does it take for a startup company to compete at the same level with the tech giants in today’s industry? Facebook, Google, and Amazon have an unprecedented ability to diversify and grow their business into new markets, utilizing their massive user base to rapidly expand with little risk. ‘Copy and Crush’ has become a common term that refers to the trend that these industry leaders are following, as they copy a startups idea and distribute it to its millions of users. Snapchat is one relatively young company that, even with their large user base, suffered as a result of Facebook’s intrusion into their market. In one fell swoop, Instagram (a Facebook company) installed stories into their platform, and Snapchat saw their growth grind to a halt.
This StartUp podcast by Gimlet, follows the unique story of a company that fell prey to the dominant expansion of Facebook and its messenger app. Instead of biting the dust, the messaging company Kik created a new idea to sustain its development and adapt to the situation. Kik launched an ICO, and initial coin offering, and developed a cryptocurrency and an internal economy unique to its messaging platform. The ICO raised over 100 million dollars to support their idea and stand a chance against Facebook. Kiks sees its new currency ‘Kin’ as a way of furthering this internal economy within their app, to support developers and users within the system, and grant these users the ability to exchange their tokens for goods. Additionally, Kik is betting on itself in this economy, by holding onto 30% of the total Kin points with the hope that the value goes up.
But how does the value of a currency climb? You should listen to this podcast because it follows the story of an emerging digital currency, and gives an expansive yet simple description of cryptocurrencies and how they operate. The host of the show breaks down the successes of cryptocurrencies into two components: Scarcity and Demand. This episode contends that Bitcoin continues to be successful because of the limited supply of tokens available. The creators of bitcoin only make 21 million units of the currency and track each coin and every transaction. This process accounts for the scarcity of the currency and establishes an initial value to each unit.
The second requirement is more abstract, and this episode asks how it’s possible for a new currency to create demand? Here, each digital currency’s process is likely to be different, yet intrinsically important to the establishment of value in each unit. Demand creates value. There is value because people want it, value because people can use it for goods and services, and value because it is transferable into other monetary units, such as cash. This episode neatly establishes the need for demand in a currency and notes how quickly currencies are being funded, adopted and used across industries.
The episode concludes, however, by raising an element of doubt, and asks if this cryptocurrency boom is sustainable? Some suggest that digital currencies are going to follow a similar path to the dot-com boom, with many currencies standing out with no product to offer and no value to support its users. This is likely to erode public confidence in the system and force many of the currencies to fall apart.