Workings – 1
Let’s dig deeper into the inner workings of MuCo. To make it simpler, we will first assume MuCo is operating in the Web 2.0 world – the current Internet as we know it. We will then later morph MuCo into a Web3 entity. The best way to look at MuCo is to follow the money and tokens (or points).
Think of MuCo as a Mu factory. It takes fiat currency as input and produces Mu. The Mu can then be distributed by the buyers (brands) to their customers – MuCo has no control over that process. MuCo maintains a centralised database which tracks the flow of Mu (from source to destination). End consumers have to come to MuCo to use the Mu – they begin by activating it by identifying themselves (email address, mobile number) to claim the Mu that has been given to them by brands. Thus, brands and consumers have “wallets” and transactions are stored in a database. This is almost identical to how current loyalty programs work.
Consumers will then want to redeem Mu. For this, MuCo will need to run a market of offerings from brands. This can work in two ways: either MuCo ‘buys’ the products from brands and ‘sells’ it to customers (like a Mu Shop) or brands can themselves sell directly to customers (in a Mu Marketplace). In the latter scenario, brands get Mu in return for their ‘experience’ offerings.
This is quite straightforward. MuCo derives its revenues selling Mu. With enough Mu out there, brands will find it to their benefit to create offerings for consumers. Mu works across brands – that is its true utility.
The limitations of the above approach are that there is dependency on MuCo for maintaining the integrity of Mu. Brands and consumers have to implicitly trust MuCo that it will not in any way debase the value of Mu or charge a ‘tax’ on transactions.
One point not discussed above is the price at which Mu gets sold by MuCo. Ideally, this should be via an auctions process so there is price discovery. But that will probably take time because it will need enough demand generation and therefore interest from multiple bidders. Until then, MuCo may need to set an arbitrary price and sell as brands ask for Mu.
MuCo is thus running a 2-sided marketplace between brands and consumers. The challenge such marketplaces face is the ‘cold start’ problem – creating enough demand on both sides to get activity going. To overcome this problem, MuCo may need partners who can help accelerate the process of getting Mu in the hands of consumers. It will also need to create an attractive shop to get consumers to see the value and utility of Mu before brands start coming in with their own offerings. This is where MuCo will need initial capital to bootstrap itself.
