How Traditional Businesses Are Entering Crypto and Why They’re Big on Blockchain
Crypto businesses inhabit a world of blockchain, tokens, DAOs, and community governance, while traditional businesses occupy a sphere free of such jargon and onchain phenomena. And never the twain shall meet…only that’s no longer correct. The gulf between web2 and 3, old and new, onchain and never-been-on-any-chain has narrowed to the point at which any company can now flit between the two on a whim. And increasingly, traditional businesses are electing to do just that, making the transition to the cryptosphere with surprising ease.
Why might a business that has existed for decades without blockchain suddenly start simping over one…and what might such crypto-friendly businesses find when they arrive on the other side? Let’s dive in and find out.
The Case for Crypto
There are three primary ways why businesses are entering crypto – or toying with the prospect at least:
- Increase engagement
- Incentivize behaviors
- Resolve technical problems
These three goals can be achieved by utilizing the following solutions respectively:
While an over-simplification, this model makes it easy to understand the incentives that are luring traditional companies into the crypto sector. Now let’s consider a real-world example of each model in turn.
Using NFTs to Drive Engagement
Once derided as little more than tradable JPEGs, NFTs have come of age and are now being used to build highly engaged and passionate communities. NFTs’ exclusivity, inclusiveness, and opportunity for fostering brand loyalty has not been lost on traditional companies. The boldest of these have wasted no time in launching limited edition NFT collections and making tentative forays into that digital analog, the metaverse.
In late 2021, Adidas partnered with Yuga Labs, the creators of Bored Ape Yacht Club, whose NFTs have become status symbols with celebs such as Snoop Dogg and Eminem. An Adidas Originals virtual sneaker collection got the ball rolling, and the sports giant is also taking a place in Otherside, the metaverse Yuga Labs is building with Animoca.
In the metaverse, groups of like-minded people will hang out, socialize, work, and recreate while represented as digital avatars. It stands to reason they’ll want to clad their virtual selves in the hippest threads – sneakers included. It’s no surprise, therefore, that Adidas is joining the likes of Dolce & Gabbana and Gucci in creating virtual accessories for the metaverse generation.
Tokenization to Incentivize App Users
Suppose you’re a traditional business that’s created a mobile application. You have a core group of users but you wish to increase uptake and stimulate positive behaviors from existing users that will improve the service for everyone. How do you go about it? Well, one approach is to incorporate a crypto component that will support tokenization. Introduce a native token and you can reward app users commensurate with their contributions. Now there’s an incentive structure in place that can fairly remunerate users and onboard new ones.
SeaCoast wasn’t always a crypto company, but after seeing the potential in blockchain and tokenization, they took the plunge. The result is a trio of augmented reality (AR) apps that support coastal exploration and maritime navigation. PortView helps sailors locate the entrance to ports and harbors using augmented reality to overlay navigational information. PaperBoat provides information on marina berths including pricing. And ShoreView provides holidaymakers with up-to-date information on coastal attractions and points of interest.
While the clever utilization of augmented reality is what makes SeaCoast’s apps so powerful, the real magic lies in the use of tokenization to reward user-curated content. Locals who share real-time information on the state of the coast will earn $COAST tokens, which will power a thriving in-app economy centered around the sea.
Blockchain to Supply Technical Solutions
All traditional businesses that enter crypto are using blockchain in some capacity since it is the conduit that routes token, asset, and NFT transfers alike. Some enterprises have no interest in the aforementioned use cases, however, and are only in it for the blockchain itself. To them, blockchain solves a very specific problem – that of trust – in a way that conventional databases cannot.
BNP Paribas and JPMorgan are participating in a blockchain-based repo market that enables banks to provision short-term lending of US government bonds as collateral while retaining ownership of the bonds themselves. As the FT explains, “Details such as the length of the loan and settlement time are governed by a smart contract, which ensures that the cash is in the borrower’s account and that collateral locked up against loans is released at the end of the deal.”
Crypto isn’t a cure-all that can revive the fortunes of flagging businesses and provide new revenue streams on tap. Rather, it’s a tool that, when wielded intelligently, can open up new capabilities for customer engagement, incentivization, and growth.