The idea that social networking and messaging platforms could be used to launch and distribute new cryptocurrencies has been widely discussed in technology circles in the last few years. But what about ride-sharing companies—and in particular Uber?
You could argue that Uber might be better positioned than the social networking players to launch a successful cryptocurrency. While this is completely speculative, the launch of Uber Cash in September could be the beginning of something much, much bigger than a simple loyalty program, as it is currently positioned.
If I were at Uber, the idea of using the network of riders and drivers to bootstrap a new global currency would certainly be tantalizing, and might seem within reach—and the first step would be releasing something that looks a lot like Uber Cash.
How interesting would it be if it turns out that ride-sharing companies, with millions of consumers and producers built into their systems—and billions in payments already flowing between them—end up being the most fertile ground for launching cryptocurrencies?
The Crypto ‘Distribution’ Problem
In the last year and a half, there has been a lot of excitement about the idea of social networks and messaging apps being used to bootstrap new cryptocurrencies.
Several social networking companies have released or announced intentions to release crypto projects, including Telegram, Kakao and Kik. Facebook has set up a team to look at the space. And there are rumors that Google has a team actively engaged in figuring out a crypto strategy as well.
It is easy to understand why so many social networking and messaging companies are looking at the problem. The idea of creating a new form of natively digital “money” that can lower the barriers to global transactions, open up faster technical innovation and in theory disrupt the banking industry is a tantalizing opportunity that has captivated many. And many believe that it is precisely what the large social and messaging players have—global digital distribution to millions or billions of users—that cryptocurrencies need to capture that opportunity.
In this respect, to many, the challenge crypto faces today feels a lot like the challenges of the early internet. Then, the vision and to some degree the technology were there, but there wasn’t too much that was that useful until the users showed up—and that took a decade.
The tantalizing vision for crypto is that it will follow the same path, where distribution is the key ingredient to make it useful as a medium of transaction and even store of value. But perhaps it isn’t so unreasonable to believe we could wake up one day to massive distribution through social and messaging platforms.
After all, who wants to wait?!
Theoretical Opportunity: Bootstrap a Crypto Ecosystem Off Existing Social Platform
Telegram is rumored to be on track to release its announced crypto project in early 2019. If it does, Telegram’s currency, known as TON, will instantly have more wallets than any other crypto project. This means more people would theoretically be able to receive TON as payment, and spend TON, than any other cryptocurrency in existence.
That explains why investors are willing to fund the project to the tune of more than a billion dollars based on what most agree was a very weak white paper. The instant scale of messaging platform-based wallets coupled with the incredibly powerful idea of building a global-scale cryptocurrency is too tantalizing to look past.
There is, however, a pretty clear counter argument to this line of thinking. To date, nothing like this has worked for social products, and it hasn’t been for lack of trying.
Large players like Facebook and Google have long flirted with services that allowed people to pay each other, by allowing you to attach U.S. dollars to emails or messages. But these services have generally been a disappointment.
I believe there are two reasons for this failure to date.
First, there is a user mentality problem. Venmo and Square Cash have seen more success than the large tech platforms because people go to them explicitly to pay each other. It is harder than it looks to create an experience for consumers where they can think of an application both for messaging and for payments—they might be technologically similar, but they are cognitively distinct.
Second, there is the reality that the messaging graph of relationships and the payment graph are quite distinct. Sure, it is nice to be able to split bills and repay friends, but think about who you transact with the most day-to-day—it is businesses and service providers, not generally the people you tend to be connected to on messaging platforms.
It doesn’t at all mean that this time it won’t be different or that it can’t be done. But it does mean that distributing a new product or use case on top of an existing platform is a hard thing to do, and it isn’t a foregone conclusion that it will succeed. Large-scale distribution is a great tool, but it’s not the only thing that matters.
Enter Uber
What makes Uber such a tantalizing candidate as a platform for launching a global cryptocurrency is that people already think of it as a commerce platform with tens of billions of dollars in near peer-to-peer transactions. Consumers pay through it and drivers are paid by it.
My credit card is already connected to Uber as a consumer. The bank accounts of millions of drivers are as well. The incentive for me to “load up” into an Uber-based currency is already there and easy for me to understand.
Further, what makes Uber a really interesting platform for bootstrapping a cryptocurrency is just how global it is—with a large number of immigrant drivers who make money with Uber and who are likely sending at least part of their earnings home across borders.
If you believe that one of the major things cryptocurrencies have the opportunity to do is make cross-border payments easier, Uber already has many built-in customers on their platform who can take advantage of this core use case.
This is a very powerful place to start from if you are looking to build a serious cryptocurrency player and ecosystem. Uber has distribution on par with many messaging products, but it also has other advantages many messaging platforms do not have.
Uber Cash: An Inverted Crypto Play?
Which all brings us back to Uber’s announcement of Uber Cash in September.
Uber is asking users to load Uber Cash into a wallet and use it to buy Uber services like rides and food. If Uber were planning a crypto play, Uber Cash would be the perfect way to start getting consumers used to holding a balance of value with Uber.
In a sense, if you want to squint, it is almost as though Uber is doing a presale or an ICO without actually launching a cryptocurrency. If it decides to push the service, Uber will easily get millions of dollars in consumer deposits in return for a small discount on Uber services. That’s far more than almost any crypto project so far. This is the power of having built-in distribution and a built-in use case.
If Uber chooses to pursue a currency, the next step would be allowing other service providers beyond food delivery and ride sharing to sit on top of its payment platform. Uber has the ability to generate plenty of consumer wallets to start. It needs to get a larger diversity of use cases for spending Uber Cash balances.
Eventually, when Uber wants to give consumers confidence that it is worth trusting with savings long term, it could layer in a distributed blockchain solution that would take the “currency” from being a private form of money reliant on a single corporate entity and turn it into something possibly much greater.
From a monetary policy perspective, the transition would also be potentially easy. Uber simply builds up consumer investment/deposits with its private cash tied 1:1 to the dollar (the fully backed “stable” coin solution). And then at some point, when Uber is ready to de-couple its currency from the dollar and establish its own rules governing the supply of its currency, it can become a financial instrument unto itself—at least in theory.
The biggest problem with any plan like this is the regulatory and political challenges of decentralizing a centralized system. For countless political and legal reasons, it seems extremely difficult, if not impossible, to start with a centralized system and then clear the hurdles of moving to a truly “trustless” decentralized system over time. In a central system, the administrators take on the responsibility and liability around policing their own system, and once you have that power and responsibility, it becomes basically impossible to step back from.
It is hard to think of a single system in history that has successfully followed this pattern. Once someone has control, power and responsibility over a system, it is practically nearly impossible to throw it away, even if they want to. This is why crypto purists believe that the only way forward is to build systems which are open and permissionless from the start, and ideally are pure software with as little human oversight or power after launch as possible.
The Near Future
Right now, to the best of my understanding, this is fantasy. I don’t think there are any official plans by Uber to try to move into crypto directly, or that Uber Cash is intentionally a Trojan horse to get into that space.
But exploring Uber’s relative strengths in approaching the market is a pretty interesting way to consider more broadly how the market may play out over time—and some of the challenges that social networks and messaging apps will face entering the market.
In the case of Uber, a move into crypto would help it grow into the $120 billion valuation that has been floated. Further, it would be a heck of a great story if a company that started out by effectively “centralizing” what everyone thought would be a decentralized peer-to-peer service (ride-sharing), ultimately ended up decentralizing money itself.
But in the meantime, for those interested in bootstrapping new forms of money, it is worth bearing in mind that there are many non-obvious players lurking around the internet that might be well positioned to naturally transition their user experiences toward a decentralized future.