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Bitcoin has no intrinsic value. Unlike platinum which has an industrial use case for, say, the automotive industry, there are none that exists for bitcoin today. The price is determined in the market based on supply and demand, which today is driven by just the speculators.
“Bitcoin is a commodity, not a currency,” Gyft founder Vinny Lingham told the audience at the Bitcoin African Conference 2015. The popular digital gift card startup is hoping to change this within the near future.
“Our vision is to use bitcoin as a platform for secure digital gift cards,” the serial entrepreneur said. In essence, Gyft wants to tokenise digital gift cards using bitcoin technology. On the one hand, eliminating fraud in the industry, and on the other, driving real industry demand for the very first time.
The gift card industry the US startup is tackling is huge. Last year’s gift card market spend in the US is estimated to be US$124-billion. When the company announced that it’s started to accept bitcoin as method of payment in 2013, 55 000 companies in the US essentially accepted bitcoin. Although bitcoin adoption was experimental, it managed to expand the company’s focus.
“All of the sudden people with bitcoin found new ways to spend the currency. We became the largest bitcoin consumer store in the world,” the founder noted. “We were somewhere between 2% and 5% of all bitcoin transactions last Christmas season.”
Lingham told the audience that, by having access to this massive amount of data, Gyft was able to track valuable consumer trends. It found that as the price was going up, people were spending bitcoin and making gains. As the price goes down, they’re hoarding the bitcoin and not spending it with us. “The more we looked at bitcoin, we found that it’s not something that’s going to go mainstream in its current format.” In 2014, 50% of transactions on the Gyft platform were made using bitcoin. Lingham projects this number to drop to as little as 20% this year. The company found that bitcoin is not a consumer product, today or in the near future.
“Ordinary people will only start using bitcoin when they’re using it without knowing they are using it,” the entrepreneur quipped. “It’s too technical for most people. So we looked at ways in how we can make bitcoin more interesting.”
The bold bitcoin vision
“Gift cards are awesome because it drives customer acquisition and revenue for the merchants. But it’s got a lot of fraud challenges. About US$400-million in December last year was spread fraudulently in retail stores,” the entrepreneur explained. “There’s a big problem here with the gift card and prepaid market.”
To combat this, Gyft’s looking to use the bitcoin technology as a platform for an open protocol to secure gift cards as to avoid card signature duplications and fraud. Lingham said that they’re looking at a couple of methods such as tokenisation as well as two-factor authentication. “By building this closed loop system using the blockchain, we can create rules-based private money,” he explained.
We could be the first company that goes out there and say, look, if we move US$300-billion worth of prepaid access value worldwide onto the blockchain, we would require two to three million bitcoins over the next five to ten years. Then you’ll have an industry that’s buying bitcoins in order to survive and thrive. You then just need two or three more industries and all of a sudden you have a use for bitcoin.
“If we can retool our industry to use the blockchain, it would create a stable price point for bitcoin. The more demand we can generate for bitcoin, the more stable the bitcoin price would ultimately become,” he envisioned.
He added that this project will be open-source and that Gyft’s looking at designing an entire ecosystem, not just a protocol.