As bitcoin's market swings steal the headlines, there are some people in the cryptocurrency industry who are trying to push the market back toward its original intent as a decentralized means of payment.
One startup, Metal, is pushing the idea hard, enough to offer what amounts to cash back for making alternative payments.
"The incentives aren't there to pay for something in an alternative currency right now," said Marshall Hayner, CEO and co-founder of Metal. "So our idea is to put a small amount of currency into a large number of hands."
The San Francisco-based Metal positions itself as a social P-to-P company, similar to Venmo. To encourage use, Metal rewards both the payer and payee 5% on every purchase. So a person who sends $100 through Metal would get the equivalent of $5 back in Metal's virtual currency, and the recipient would get $100 plus the equivalent of $5.
"The idea is you get paid to make a payment," Hayner said.
Metal launched its software in October and plans to launch Metal Pay for consumers in February, followed by a merchant portal in third quarter of 2018. Metal plans to earn revenue through merchant processing fees—it expects to have different packages for merchants to choose from—and through revenue it can generate by accruing anonymous data from transactions that can be marketed to merchants and other companies.
The startup is attacking what it sees as a concentration of virtual currencies that hinders broader merchant acceptance. About
"Even though the number jumped by about a million in the past week, it's still not very good," Hayner said. "There are kids' games that have more users than cryptocurrency."
The problem is usability, Hayner contends. It's hard to know how to obtain cryptocurrency and where to use it to pay for things.
Metal aims to fix these problems by linking directly to bank accounts, focus on P-to-P as an early use case to form habits and to "gamify" virtual currency through the cash back offer. People will have money they can cash out for virtual currency, though the company hopes it will eventually have a network of merchants who will accept Metal's currency and offer additional rewards for usage.
"Once you have the network and get more people involved, it isn't scary and it doesn't have the baggage of bitcoin," Hayner said.
"We certainly can't ignore that the year to date returns on the major cryptocurrencies are incentives to invest," said Tim Sloane, vice president of payments innovation and the director of the emerging technologies advisory service at Mercator. "This incentive is certainly driving the acquisition of bitcoins but is not driving usage. As with mobile payments, there needs to be a reason for consumer adoption, and the best reason is that it meets a customer need that has gone unmet until now."
