Over the last few years, there has been a concerted effort by crypto providers to bring crypto to the masses. After all, blockchain technology relies on the collective efforts of the many to mine new tokens (the proof-of-work model) and to invest in Web3 projects such as staking (in the proof-of-stake model). The emphasis is certainly on bringing more people into crypto; not only does mass adoption typically increase the value of a token, but it also increases the security of these investments. This “one-size-fits-all” approach has aimed to make the underlying technologies of blockchain easier to understand for the average consumer, and more readily accessible for this audience to invest in.
It’s a model we have seen before; just a few years ago the wave of challenger banks marketed “a bank for the people”. The focus was on digitising the front end user experience; radically simplifying the way by which people gain access to a bank account, allowing them to complete the entire onboarding process via an app on a phone. Convenience was championed, and banks such as Revolut and Monzo allowed you to confirm your identity, submit your application, and receive your bank card directly into your mobile wallet in a matter of minutes. Even the notion of a “bank” was overhauled. Bricks-and-mortar institutions were replaced with one app that allowed customers to manage all transactional needs, rather than visit a bank branch to spend hours talking to an advisor, only to be declined for a loan or credit card.
The crypto exchange 2.0
The crypto industry grew in parallel, and companies such as Coinbase and Bitstamp have emulated this approach with great results. Crypto users have grown exponentially over the last few years, driven, in part, by an increasingly simple landscape that took away the need for any technical understanding. Whereas buying crypto would typically involve setting up a wallet and understanding the transactional process, it can now be done with a single click of a button; more akin to the e-commerce giant Amazon than a complicated financial instrument.
Over the past few years, in a similar way challenger banks have developed, we have witnessed the crypto industry’s ‘The Great Bundling’ moment. Indeed, many crypto exchanges shifted their model to combining exchanges and wallets, up to becoming one-stop shops to serve all of your crypto needs, which are models that have been popularised by the likes of Nexo and Coinbase. It’s a strategy that has seen huge success, with the number of crypto users growing by almost 200% throughout 2021.
Accessibility is one factor that has made crypto more appealing to the masses, but we cannot ignore that growth has been accelerated by the fact that people have become weary of monetary policies deployed by governments as a response to recent events such as the pandemic, and of current geopolitics uncertainties. Trust in government is at lows and inflation is high; the ideal recipe for fuelling a desire in people to seize control of their financial future. People are now seeking alternative places to put their money, where they can be in charge of their financial assets, benefit from more favourable returns, and ultimately give them financial freedom in a world where crypto seems the only way they can have a real control towards this goal. The uptake in crypto has been exponential recently, and there has been talk of the number of crypto users exceeding one billion over the next few years, but what do crypto providers need to do to sustain such rapid growth?
A change in consumer demand
2022 has been a period of change, not just in the crypto industry but across the fintech sector as a whole. There has been a shift in focus when it comes to user experience, fueled by an increasingly competitive landscape in which the one-size-fits-all approach just doesn’t cut it anymore. We are beginning to see a trend towards creating more personalised experiences for the end user, and I firmly believe the future of crypto going mainstream lies in offering people to be part of a community that matters to them, with services that answer their problems, and platforms providing them the ability to educate financially.
In fintech we have seen the emergence of community-centric financial services that are tailored to the audiences they serve. Take Yonder as one example; they have specifically focused on reinventing the credit card. Their product removes many of the negative connotations a credit card; hidden fees, discriminatory credit scoring, and reward schemes that are outdated and irrelevant. At the same time they’re adopting a different approach to unlock credit cards to those underserved by current credit card providers, which stands at around five million in the UK. They’re hyper focused on Londoners and they’re delivering exclusive rewards in the form of experiences in the city of London; the London community to their city.
It’s not just geographies that are driving personalisation, but also different racial or sexual identities, that have typically experienced challenges when it comes to financial inclusion. Daylight, for example, is an LGBTQ+ led digital bank for the LGBTQ+ community, which rewards customers for spending on businesses that are LGBTQ+ supportive. They also offer LGBTQ+ specific financial products for hormone therapy, gender-affirming surgery and adoption (which are currently underprovided in the market). There’s also First Boulevard, which is a neobank that aims to empower Black Americans to take control of their finances, build wealth and reinvest in the Black economy. These are just two examples of many hyper-personalised banking products that aim to tackle financial inequality and help users overcome issues such as financial literacy, credit discrimination and access to banking.
Fintech may be leading the charge when it comes to reaching more people via personalised products, but there are some crypto providers that are also leveraging this same sense of community, and partnering with brands or events to offer users of their platforms tailored experiences that appeal to their interests. One theme we are commonly seeing now is crypto providers partnering with key brands in the sports industry. Crypto.com has partnered with many high-profile sporting events; one being the UFC. In a recent collaboration, they opened up a fan vote in which the top three athletes voted for were paid a bonus in the form of Bitcoin. Back in April, Blockchain.com signed a long-term partnership with the Dallas Cowboys, offering fans who use their wallets the opportunity to win exclusive experiences and rewards, ranging from away game VIP trips to player hosted events. There are countless other examples, but all have the common theme of leveraging pre-existing communities and aligning their own product with these values and identities.
Despite these efforts to promote inclusivity, there are many demographics that have increased their uptake in crypto, and are yet underrepresented in the products and services available to them, presenting crypto providers with plenty of opportunity to address these specific needs. A study released by Bitstamp in 2022 showed that the share of women crypto traders has quadrupled to 12% in the past 5 years. Yet, less than one in ten of the active users in the crypto traders community are female. This opportunity will only continue to increase as the audience for crypto grows.
The future of crypto exchanges
The initial push to unlock crypto to the masses relied on a number of variables, but the primary driver was education. Offering dedicated financial services to underserved groups is not enough, and many crypto platforms have understood the challenges with educating on crypto. For this reason, many of those aforementioned partnerships came together with a dedicated crypto literacy initiative, such as the “Block Party” fan experience from Blockchain.com, or the partnership between Crypto.com and LeBron James to teach inner-city school children skills needed for Web3.
However, for crypto to become mainstream, people don’t need to understand the underlying technology or mechanisms, but they need to understand how crypto can help them improve their existing personal situation when it comes to finances, feel part of a journey many of people like them are going through, and potentially be encouraged to start using it through incentives. Take American Express; those that use their service will have little to no interest in what an acquirer, issuer, processor and a network do and how it all functions. Instead, they are invested in the sense of exclusivity provided by the brand and the rewards that come with it. It may be a huge corporation, but it leverages the American Express brand to bring a sense of community, inclusiveness and importantly trust for its members. The same can be said for blockchain technology; Nicolas Julia, CEO and Co-Founder of Sorare stated that:
“The same way you don’t talk about the HTTP protocol when you talk about Airbnb, you’re not going to talk about the technical infrastructure when you talk about NFT companies. You’re going to talk about what you’re doing for consumers. In five years, I don’t think we’re going to have ‘NFT’ on our website.”
More brand-driven companies are also leveraging their brand power and adopting Web3 technologies to bring these brand values, this sense of community, to more people across the globe. Nike teamed up with Roblox to create “Nikeland” in the metaverse, producing a selection of NFT sneakers in the process. Again, they aren’t teaching consumers about the underlying technologies of Web3, rather using Web3 to enhance their current offering and stay relevant by meeting their audience where they want them to be. There is also the example of the Recording Academy releasing an exclusive NFT drop to commemorate the 64th annual Grammy Awards Show earlier this year, including animated 3D renderings of the Grammy award. So, what can the crypto exchanges learn from this success?
Looking forward, we can see the emergence of the “crypto exchange 2.0”. These exchanges will benefit from leveraging the inherent loyalty and trust in brands to overcome any adverse perceptions of the crypto industry. When users of crypto are investing in something they are passionate about, the crypto exchange 2.0 doesn’t have to rely solely on regulation to become trusted by potential new users. The focus is less on the mechanism of the underlying technology and the volatility of tokens, and instead pivots on the sense of community and belonging; a move towards tribification rather than monetisation.
Tribification is significant when a market starts to become saturated; what differentiates Coinbase from a Bistamp or a Gemini? The answer, eventually, becomes not much and instead we see a race to the bottom, and a completely commoditized market. It’s what happened with traditional banks and what resulted was customers simply choosing HSBC or Barclays, not because of some differentiated offering, but simply because it was the bank of choice for their parents. Will generations to come simply choose the same exchange as their parents? It’s unlikely. If the crypto exchange 2.0 can deliver specific value to a specific tribe, like a Yonder or a Daylight have done for fintech communities, they can distance themselves from the race to the bottom and focus on providing differentiated experiences that deliver relevant value to a tribe who is willing to pay (often more) for that value. Just like consumers are willing to pay hundreds of dollars for a pair of Nike sneakers.
The possibilities for the crypto exchange 2.0 are endless; there are a plethora of communities that crypto providers can look to serve. Whether it’s the power of identity, or that of a brand, crypto exchanges now have the opportunity to mirror the change in direction that we have seen in the wider fintech community, and leverage this sense of community to deliver a product that is tailored exactly to the needs of its users.