Twitter’s decision to be a Bitcoin tipping trailblazer gives it first-mover status versus Facebook, Amazon, Apple, Netflix and Google (FAANG) — digital cohorts it is chasing from a user engagement and user monetization standpoint.
On September 23rd, Twitter announced a feature enabling its 330 million subscribers to tip content creators with Bitcoin. Available initially via iOS, the feature will be added to Android in the coming weeks (until then, this content creator will graciously accept “likes” or other feedback). While FAANG companies have begun to build bridges with cryptocurrencies, these heavyweights have yet to make a move as bold as Twitter. In June 2021, Apple Pay and Google Pay announced they would allow users to utilize Coinbase credit cards. However, Twitter’s platform removes intermediaries or middlemen, a core value proposition of decentralized digital assets, like Bitcoin.
Twitter’s move is another “W” for decentralized finance
By integrating Bitcoin into its platform, Twitter serves as another publicly traded company that acknowledges the value proposition of decentralized finance (defi) — the notion that removal of centralized financial institutions (e.g. banks, credit cards) enables sending and receiving funds cheaper and faster. The lynchpin of this infrastructure is blockchain, a database that operates as a distributed digital ledger. Bitcoin is the current king of cryptocurrency, with a market cap of $900 billion as of Oct 3rd, 2021. Although Bitcoin commands crypto headlines, there are other blockchain-based companies participating in the defi revolution.
For example, Ripple Labs is utilizing blockchain as a means to improve the operational efficiencies for automated clearing house (ACH) transactions. Think of a 3-5 day transaction and settlement timeframe being achieved in seconds. Meanwhile, Stellar Lumens’ network provides a gateway for some three billion individuals without a bank account, a cost-effective means to wire funds internationally. Imagine a $50 flat fee for utilizing SWIFT being whittled down to less than a penny.
Addition of Bitcoin aims to improve Twitter’s “stickiness”
As growth in user base slows for Twitter and FAANG peers, revenue growth becomes increasingly contingent on new product offerings and/or increasing the amount of time users spend on the platform (longer engagement equates to more advertising revenue and cross-selling/upselling opportunities). In the comparison below, it is important to note that while Facebook and Twitter may compete for advertising budgets, Netflix is purely a subscription-based business.
2Q21 Financials and Market Cap (10/4/21)
MAU = Monthly active users worldwide
ARPU = Average revenue per user
In theory, the Twitterverse should benefit as more quality content will be showcased, given the increased likelihood of content creators being recognized (i.e. tipped). Even for creators who aren’t Bitcoin enthusiasts, adding a Bitcoin wallet address “just in case” is a toe in the cryptocurrency waters. This action alone will increase awareness and education of cryptocurrency, paving the way for future adoption. Twitter’s decision to directly support Bitcoin could be a harbinger to other blockchain add-on features, such as non-fungible tokens (NFTs).
Bitcoin and blockchain development continues: enter at your own risk
Construction areas can be hazardous. To be certain, there are pros and cons to technology that is as transformative as blockchain. Global financial system incumbents, businesses and consumers should conduct their requisite due diligence when investing (on that note, money itself is a polarizing topic and not always well understood). While some will say they are on one side of the fence or the other about Bitcoin, I prefer a mindset of no fences. Instead, I see it as an extension of the existing landscape with an array of new financial tools, available to those who want to participate — at their own risk.
Organizations that opted to sit safely on the sidelines during the advent of the internet, streaming content and ecommerce may have saved resources early on and dodged an element of risk and financial loss. However there comes a point when minimal investment or minimal participation in technological innovation leaves an organization vulnerable, regardless of the industry (see: Blockbuster, Borders, Sears). For a current day example, Tesla carried the torch for innovation of electric vehicles (EV). Now we see the likes of GM, BMW and other manufacturers joining the EV revolution. Government regulations are prompting the shift from internal combustion engines to electric engines, but the argument can be made that Tesla has a significant leg up on the competition by making significant, early investments.
Interoperability and coexistence are integral to web 3 construction
Bitcoin maximalists will say they are all in on the cryptocurrency as both a store of value and a replacement for fiat currency; however, I believe cryptocurrencies like Bitcoin will co-exist within our existing financial system (once the SEC understands the nuances). Even if you’re not a fan of Bitcoin or defi, central bank digital currencies (CBDCs) are already being developed as a “digital dollar” in multiple countries.
Sources: Atlantic Council & Axios
It is just a matter of time before crypto and digital assets serve as another means for investment, payment, etc. Similar to the early days of the internet, society tends to view cryptocurrencies as tools for tech-savvy nerds and/or cloak n’ dagger criminals. Just as the internet has become ubiquitous, there will be a day in the not so distant future where Bitcoin and other defi protocols will become mainstream.
The world wide web has not replaced libraries or snail mail. Similarly, Bitcoin alone will not transform or usurp today’s financial ecosystem. Rather, it will be a collection of existing financial institutions, digital natives and defi organizations that create new ways of transferring and storing value. Twitter’s integration of Bitcoin is just the tip of the digital spear for web 3. In this vein, a Bitcoin tips feature is not likely to amplify user engagement/monetization to Facebook or Netflix levels, but sometimes it’s the thought that counts — especially for adoption new a technology/currency. H/T #Twitter
Seth Ulinski is a market research analyst, advertising technology specialist and blockchain enthusiast.