Rajesh Jain

Workings – 2

Making MuCo as a Web3 entity is important for multiple reasons: governance is not in the control of a single ‘centralised’ entity but is decentralised, which in turn should lead to an increase in trust in Mu; Mu creation is decided by rules and is either capped or the increase is pre-planned, which should then lead to appreciating in the value of Mu over time creating an alternative to simply spending it; and the creation of a Mu Exchange, which allows trading of Mu without a central intermediary determining the price. This is how most cryptocurrencies work. The creation of new Mu can still continue with the proceeds being used for Mu operations. Mu transactions and the ledger can be onchain thus enabling Mu to be traded on other exchanges also.

The one assumption made above is that Mu cannot be converted back into fiat currency. This may be necessary to ensure it is not considered a ‘currency’ or a ‘virtual digital asset’ and taxed. One side of a Mu trade is of course Mu, while the other side of Mu is a product, service or an experience.

Let’s run through an example to see how this works in practice. Let’s say I have earned 1,000 Mu from various brands for my non-transaction actions – attention, data, voice and network. Now, I have two options. I can either hold on to the Mu with the hope that it will ‘buy’ more in the future than today, or I can spend (redeem) it on the Marketplace for experiences. Let’s say I decide to spend 300 Mu to get an advance copy of the new Daniel Silva book from HarperCollins. I then pay 400 Mu to attend an interaction with The Economist editors.

Brands will need a constant supply of new Mu. They can get some Mu from selling ‘experiences’ on the marketplace. They can also buy Mu from the daily auctions conducted by MuCo on the exchange. This is where price discovery happens. It is probably what happens on commodities markets with daily trades determining the price. At some future point of time, once enough Mu have been ‘mined’, MuCo ceases to offer Mu and lets Mu holders trade among themselves – this is what will perhaps lead to an appreciation in the value of Mu.

While MuCo is selling Mu, it has a clear source of revenue. What happens once all Mu are minted? How does MuCo then generate revenue? The answer could be two-fold. MuCo could then introduce a small fee for running the exchange, or it could simply remain a ‘protocol’ and end its existence as an independent entity. Mu exchanges (and there could be multiple of them) would create the liquidity, with the wallets on the public blockchain. (Note: This is perhaps a bit speculative and needs more thought.)

Whatever be the long future, as long as MuCo has created a lubricant to remove the friction between non-financial interaction between brands and consumers, it would have served its purpose. Investors in MuCo would benefit from the revenues from Mu sales and perhaps an initial pre-mine of the Mu tokens that they could later sell on the exchange(s).

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.

LETS

My friend, Atanu Dey, had once told me about LETS (Local Exchange Trading System). It traces its origins to Michael Linton in 1983 in British Columbia. According to Investopedia: “Local Exchange Trading Systems (LETS) are locally organized, economic organizations that allow the exchange of goods and services among group members. The groups use a locally created units of value as currency which can be traded or bartered in exchange for goods or services. Members of LETS typically view the systems as organized and cooperative schemes that maximize purchasing power while benefiting members and the community.” From Slow Movement: “Instead of money LETS use ‘community credits’. People earn LETS credits by providing a service and they spend their credits on whatever is offered by other people in the scheme e.g. childcare, transport, food, trade services or home repairs. Where there has been a financial outlay to provide the service eg purchase of wood to make a box, the recipient pays for the wood, but not the service of making the box.”

Wikipedia adds:

A list of services offered by network members is put together to create a LETS scheme, and trading takes place between members using a local currency. The LETS foundation is a virtual currency, a check book, a directory as well as a transparent accounting system built on trust and community regulation. The first LETS required nothing more than a telephone, an answering machine and a notebook. Since then, there have been several attempts to improve the process with software, printed notes, and other familiar aspects of traditional currencies.

1. Local people set up an organization to trade between themselves, often paying a small membership fee to cover administration costs
2. Members maintain a directory of offers and wants to help facilitate trades
3. Upon trading, members may ‘pay’ each other with printed notes, log the transaction in log books or online, or write cheques which are later cleared by the system accountant.
4. Members whose balances exceed specified limits (positive or negative) are obliged to move their balance back towards zero by spending or earning.

LETS is a full-fledged monetary or exchange system, unlike direct barter. LETS members are able to earn credits from any member and spend them with anyone else on the scheme. Since the details are worked out by the users, there is much variation between schemes.

MuCo can be thought of as creating a LETS-like trading system. Think of it as a two-sided system. Consumers have time, personal information, their social networks, and their recommendations to offer – attention, data, network and voice. Brands can benefit from all of these. But they have no easy way to compensate customers for these. They could use points as part of their existing loyalty programs, but there are two constraints: rewards for these non-monetary actions need to be much smaller than what is possible via the loyalty programs, and not all businesses have loyalty programs. The way to solve this problem is to create a pan-brand solution delinked from money – that is where Mu as points or tokens comes in. Micro-incentives for small, in-the-flow actions all add up to enable a meaningful aggregate for consumers who can now be offered an array of ‘priceless’ experiences by the brands at close to zero cost. MuCo thus creates a LETS-like market where there is none today, a win-win for both brands and customers.

Clash of Clans

Well-designed games grab our attention for long periods of time. One such game is “Clash of Clans” (CoC). Thanks to my son, Abhishek, I have been playing it for a few minutes daily for the past many years. It is the only game I play. (I tell everyone who is willing to listen that they should pick a game and stick with it for many years; there are a lot of marketers and product managers who can learn from games on how to ‘hook’ customers.)

Recently, CoC introduced a whole new section, “Clan Capital”. After the Home Village and Builder Base, it is the third expansion.

Every weekend, there are “raids” (attacks) that need to be done on other Clan Capitals. In return, one earns “raid medals” which can then be redeemed for various goodies.

Through the years, I have not spent a rupee on buying the in-game digital/virtual goods. But the time adds up. It’s fun and one also learns about gamification through the various tricks and tweaks CoC does to keep the interest going. (For example, they recently removed all training costs on troops encouraging gamers to attack much more.)

Mu can be thought of as doing something similar. It removes the financial element from the brand-customer equation – that has its own Loyalty 1.0 equation. What Mu does is bring in the non-monetary aspects into the equation. Give time (like in CoC), get rewards (like gems and medals in CoC) and then use those to ‘buy’ experiences (gold, elixir, dark elixir and various “Magic Items” in CoC). If all of this had cost money, I would have probably stopped playing it a long time ago.

What Mu therefore enables is for customers to ‘earn’ rewards in the form of Mu which can then give them exciting experiences that money cannot buy. In that sense, it “gamifies” our real world. And as far as I can tell, no one has done that before. This is what is unique about MuCo and Loyalty 2.0.

Examples

I asked myself: which experiences would be costless for the brands I engage and transact with, and at the same time be priceless for me as a customer? In loyalty parlance, these are 1:100 rewards – cost is 1 for the brand and value is 100 for the customer. Airline miles are the best and most successful example. The incremental cost for an airline is just providing free meals (assuming the seat was anyway going empty), while the perceived value for the flyer is that of the actual cost of the ticket.

• Daniel Silva is one of my favourite thriller authors. His new Gabriel Allon book, “Portrait of an Unknown Woman”, was published on July 19. I would have loved to get early access to the book by paying Mu (tokens).
• A similar approach can be taken for releases on Netflix or other OTT platforms. I could have paid in Mu to get early access to the recent “Lincoln Lawyer” series on Amazon’s Prime Video.
• We participate in many online webinars. Most of them have a chat box to type in the question; the moderator then picks a few for the presenter(s) to answer. I could use Mu to ensure my question is prioritised and answered.
• Publishers could connect readers with authors. For example, I read Richard Rumelt’s book, “The Crux.” I would be keen to ask a few questions to the author – and Mu could be the passport for that conversation.
• Influencers could do the same – offer their followers exclusive content in exchange for Mu.
• Media companies could offer interactions with editors and journalists with payment by Mu as the entry (access) fee. Imagine being able to discuss the Ukraine crisis or the inflation scenario with the team at The Economist.
• Content companies with paywalls could offer a Mu-based payment system for single articles (as an alternative to a full subscription package).
• Samsung could offer early access to their new mobiles for Mu to long-standing Samsung mobile customers (like me).
• Fashion companies could allow me to use Mu to unlock special features on their website (an Augmented Reality option, for example).
• In a long queue at a shopping outlet, I could use Mu to get to the front of the line and checkout faster. A similar approach could be used at airports – not just for check-in but perhaps even at the security and immigration counters.

Most of these experiences do not happen today. It is because customers are reluctant to part with their money to pay for these and brands do not have an alternative ‘currency’ that they can accept. This is the friction that Mu can eliminate. Mu becomes the alternative – which customers earn with their actions delinked from spending. Because Mu is, in a sense, ‘free’, we would be more amenable to using it for optional and yet exclusive experiences. As customers start seeing value and utility for Mu, they will be keen to earn it – and that is where brands will benefit in the form of attention, data, referrals and reviews. Think of things that Mu can ‘buy’ as “digital goods” – akin to what happens in games.