Kik's chief executive Ted Livingston spent June at the San Francisco Bitcoin Meetup discussing the company's new cryptocurrency initiative. Kin will operate within the Kik messaging platform, with 5 p
Kik's chief executive Ted Livingston spent June at the San Francisco Bitcoin Meetup discussing the company's new cryptocurrency initiative. Kin will operate within the Kik messaging platform, with 5 percent of the token supply available through an upcoming initial coin offering on Ethereum. During his conversation with World Crypto Network host Thomas Hunt, Livingston outlined how Bitcoin had created new opportunities for app builders.
Livingston first encountered Bitcoin in 2011. The technology appealed to him because it offered entrepreneurs a revenue path their platforms hadn't had before. Consumer apps faced two choices: sell user attention to advertisers or sell digital and physical goods.
"The thing that got us excited about Bitcoin was it presented what we felt was a fundamentally new business model," said Livingston. "Before, you build a consumer app and you get all of these consumers to come to your app and then you have one or two options: option number one is you can sell their attention to advertisers, or option number two is you can try to sell them physical or virtual goods. We realized that with Bitcoin and the blockchain there might be a third option, which is by building an economy inside Kik, get people providing value to each other and facilitate that with a cryptocurrency such that—if you have your own cryptocurrency—if the supply remained the same but demand went up, then the price of the cryptocurrency would go up."
The appeal was straightforward. Create a token with fixed supply. If demand grows, the price rises. Early holders benefit, including Kik, which plans to retain 30 percent of Kin's total supply.
Kik had tested this model before through Kik Points, launched in 2014. Users earned the digital currency by watching advertisements and participating on the platform, but couldn't purchase the points directly with credit cards. They redeemed them for digital goods such as custom emojis. Kik Points processed three to ten times the transaction volume of Bitcoin during that period.
Building an economy around a token offered Kik another advantage. Platforms like Twitter and Facebook controlled their APIs to protect advertising networks and user engagement, blocking third-party developers who posed a threat. A cryptocurrency-based system could operate openly without those restrictions.
"Now, it isn't about controlling eyeballs," explained Livingston. "Now, it's just getting more and more people earning and spending in more and more places and more different ways. The more we did that, the better it would be for users, the better it would be for developers and the better it would be for us."
Kik would incentivize developers by granting them 60 percent of Kin's total supply over time.
When asked about Kin's uses within the app, Livingston was specific. It wouldn't function like Venmo. Physical currencies handled the physical world fine. Cryptocurrencies performed poorly in that space. Virtual communities built around games, content, and digital goods were where a native token mattered.
A user could create a sticker and sell it for Kin. Someone organizing a group chat could charge Kin as a fee to join. Features like live streams and games could operate in the same currency system.
"Stickers, group chats, live streams, games—all those things," said Livingston. Kik expected ecosystem developers to discover applications Livingston hadn't imagined.
The project carries significant risk. Many ventures have attempted to build economies using alternative coins and app-specific tokens, with no clear successes. Ethereum became prominent this past year, but Vlad Zamfir, a researcher working on Ethereum, acknowledged on Bitcoin Uncensored that the platform is not yet being used for much more than launching ICOs. There may not be substance beyond the hype.
Bitcoin's community voices doubts about the appcoin model on principle. Daniel Krawisz published "Appcoins Are Snake Oil" on the Satoshi Nakamoto Institute website in 2014. His argument: people prefer holding better forms of money. They'll want to use the appcoin for the shortest amount of time possible and sell it back to bitcoin or something else as quickly as they can. Switching between money forms for a specific use adds a layer of friction and complexity.
Livingston repeatedly suggested that Kik would incentivize developers to build use cases around Kin by rewarding them with the token. But developers could create their own tokens rather than use Kik's. Kik itself created a new token rather than use one of the thousands in existence.
Livingston's frankest comments concerned Kik's inability to compete against Facebook and Google. These companies dominated the space. Facebook copied Kik's features. After examining Snapchat's S-1, Kik realized the problem extended beyond what they'd understood. Even Snapchat struggled to compete with Facebook.
"We were looking at these huge companies making it so difficult for companies like Kik to monetize and so difficult to compete, that I was like, 'We need a different way to compete, and we need a different way to monetize,'" said Livingston. He became even more direct later: "Just to be honest, this is something we have to do. We cannot compete with Facebook. Everything we do, they copy it two years later. They have way more developers, way more scale."
Questions about Kin's legal status remain open. Livingston stated during the Q&A that Kin should not be considered a security. Regardless, the ICO launch looks like an attempt to capitalize on the enthusiasm around blockchain and ICOs after determining that competing with Facebook through traditional means was a losing proposition.
When an audience member raised that criticism, Livingston invoked the dot com boom. "People are going to make a lot of money—people have made a lot of money," responded Livingston. "People are going to lose a lot of money here; this is coming. It's going to happen multiple times as we move through this innovation, but at the end of the day, Amazon and Google came out of the dot com [bubble]."
