Japan recently decided to accept the Bitcoin as an official currency. This is a big step toward legitimacy for this misunderstood (or completely not understood) virtual currency.
Most countries -- and individuals -- around the world are not close to accepting the Bitcoin the way Japan has. That's because after seven years in existence, most people still have no idea what a Bitcoin is or how it works. A recent Rutgers University study found that both people who have used the Bitcoin and those who have not are unclear about how it works and overestimate its capabilities.
This leads us to the following questions:
- Would the Bitcoin have benefitted from being branded when it was first released to the public?
- Would a brand have helped explain the Bitcoin concept to the general public, built trust in it and sped uptake?
- What can emerging Fintech companies learn about branding themselves from the Bitcoin?
The initial release of the Bitcoin
The Bitcoin isn't the first virtual currency. However, it's the first one that caught on because of the level of security it provides. It's been accepted by a small part of the population and has gotten people thinking seriously about the value of virtual currency.
It all started in November 2008, when a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System was posted on the internet by someone using the name Satoshi Nakamoto. (The actual identity of this person or group of people is still under question.) It explained how to use a peer-to-peer network to create "a system for electronic transactions without relying on trust."
In January 2009, Bitcoins came into existence when Nakamoto used a network to mine the first block of them and some of those Bitcoins were indirectly used to purchase pizzas.
The creation of the first Bitcoins was a decentralized group effort, owned by no single person or organization. Because of that, when Bitcoins were introduced, no one took responsibility for owning the Bitcoin "brand" and "message" and communicating it to the world.
The Bitcoin has never benefitted from the elements that make for an effective brand, including clear positioning and messaging. This is a big reason why seven years after launch, most people still have no idea what a Bitcoin is or how it works -- and why they simply don't trust the concept.
According to the Rutgers study:
- Those with no experience using the Bitcoin think it is too hard or scary to use.
- People who use the Bitcoin regularly are not well-versed in how it works.
Still, despite the lack of understanding and trust, there is a demand for virtual currencies like the Bitcoin. When the researchers at Rutgers asked what they wanted from a payment platform, the subjects of the study described the features of the Bitcoin.
It's interesting that there's a demand for virtual currency like the Bitcoin, but because the Bitcoin was never properly branded and explained when released, most people don't know that it's the solution to their problem.
The benefit of a brand
Most products and services -- especially complex high-tech financial ones -- can benefit from branding because a brand:
- Clearly articulates the purpose of the product or service to consumers
- Differentiates it from other offerings
- Builds consumer comfort and confidence
- Sets expectations on how it should be used.
These are all the attributes that are missing from the Bitcoin: purpose, differentiation, comfort, confidence and clear expectations.
A great example of the branding process done right for a high-tech product is the iPad. The device was introduced a year after the Bitcoin. At the time, no one really understood what it was or how it worked. Yet today, iPads and similar tablet devices are a ubiquitous part of everyday life, unlike the Bitcoin. That's because Apple did a masterful job of branding and explaining the iPad when it was introduced.
Right now, Bitcoin's upstart competitors in the virtual currency space are doing a somewhat better job branding themselves, if only because they must differentiate themselves from Bitcoin. Here are some of the key players within the new virtual currency or cryptocurrency space -- and how they position themselves:
Litecoin, often known as "silver to bitcoin's gold."
Peercoin, which bills itself as a more sustainable, environmentally friendly alternative to the Bitcoin.
Primecoin, which promotes itself as more secure than Bitcoin because it bases mining of them on prime numbers and their complexities.
Ripple, which is set up as an open payment network.
Quark, a highly secure and anonymous currency
Freicoin charges a fee for hoarding in order to encourage spending and discourage cost inflation.
Omnicoin, an alternative currency option with a high level of security built-in.
Auroracoin, a virtual currency developed for Iceland.
Dogecoin, a popular virtual currency that actually started out as an Internet joke (check out the paint-by-numbers dog that is its symbol), yet has a market capitalization of greater than $50 million today.
Clearly, virtual currencies that followed Bitcoin into the marketplace have done a better job branding themselves because they had to differentiate themselves from Bitcoin and other cryptocurrency options. In most cases, this has sped acceptance of them in different segments of the marketplace.
Why Fintech companies need branding
The Bitcoin story offers a lesson for complex, hard-to-understand Fintech companies. High-tech financial products and services need -- and deserve -- a brand. A brand gives even the most complex Fintech firm the power to explain and differentiate itself in the marketplace. This will help build comfort with customers, which will increase uptake and acceptance of its products and services.
It's important to trust the branding of your Fintech business to a firm that has been developing compelling and relevant brands for financial and technology-based companies for decades, including modern brands for leading-edge companies. Contact Carpenter Group to discuss how we could help you build a brand for your Fintech firm.