The news last week that messenger app Kik is creating its own cryptocurrency for users caused some ripples in the blockchain sector, but deserves even more.
First of all, Kik is a pretty big deal for the millennial generation. Apparently it has over 15m monthly users, most of whom are between 13 and 24 years old.
The cryptocurrency – called Kin – will be used to reward developers, and to let users buy things within the app.
Why reward developers? For building and maintaining apps for the platform. In other words, for strengthening the ecosystem.
If this sound familiar, it should: the bitcoin protocol also issues bitcoins to reward the maintainers of its ecosystem. Although the mechanism is different, the principle is similar.
Why does Kik want an ecosystem? The more one can do with a platform, the more people will use it.
To get a glimpse of the potential, we only need to look at Tencent’s WeChat, a Chinese messaging platform on which users can buy things online and offline, book trips, read the news and make doctor appointments. And a whole lot of other regular activities, including – whaddyaknow – send messages. Its 889m monthly users would make any potential competitor drool.
If that sounds familiar, it should. Last week Coinbase also hinted that its new Token platform was inspired by WeChat’s business model.
Compare this to Facebook’s model – it started out hoping that developers would build for its platform, but pivoted to the acquisition method of growth.
The development of Kin (to be built on ethereum) is likely to inspire other mobile services to think about how to incentivize their communities to take care of the ecosystem – and to increase “stickiness”. If you can both earn and spend on the app, without friction, users will stay longer.
And the generation and use of an app-specific currency will foster the development of microcosms of economic activity – with the impressive data harvesting potential that that implies. Given the massive sizes of the potential markets, the microcosms could soon become macrocosms.
And in the process, show the market that initial coin offerings (ICOs) are not just about circumventing venture capital. Kik plans to issue Kins through an ICO (selling 10% of the total coinage) within the next few months, despite having raised over $120m to date. The most recent raise gave it a valuation of over $1bn status. This would make Kik the most well-funded company to raise an ICO, as well as the most-used service.
The fact that WeChat’s owner Tencent is a major stakeholder in Kin just adds to the intrigue.
So, who’s next? Facebook, with its sprawling ecosystem and obvious desire to emulate WeChat, is an obvious candidate. In terms of size, its 1.9bn monthly users dwarfs that of WeChat. But WeChat’s users spend an average of 4 hours a day on the app (vs an average of 1 hour for Facebook).
Could it be that the metrics are shifting more to engagement than size?