Could BitShares 2.0's referral system be the key to network effects?

The network effects of telephone, email, and Facebook are still fresh in our memory.

If a product is to have a network effect, first of all, it must be user-centric. Only in this way can the developed product have a chance to adapt to market requirements and achieve spontaneous growth and success.

Recently, the BitShares team Cryptonomex has adopted a lightning development strategy, with rapid product iterations. However, due to the neglect of the establishment of relevant technical documents and the overestimation of the community's coordination capabilities, the original ecology has been destroyed to a certain extent, leaving the community at a loss. This can be seen from the low price of BTS. At the time of writing, the exchange rate of BitShares to Bitcoin is hitting a record low. Putting aside the price and investment market, will the BitShares system adapt to the user market?

Cryptonomex has shifted its focus from community investors to potential commercial users, such as cryptocurrency exchange CCEDK and financial processor Openledger.   , cryptocurrency exchange banx, large investment institution peak, etc. This track seems familiar. Yes, the ripple system has been at the forefront in this direction.

This will more or less cause protests from early community investors, especially when there is a lack of communication. For example, all the QQ groups I joined for Ripple have been silent for a long time. Cryptonomex has made more improvements on the BitShares system, so the protests are naturally loud.

The protests mainly focused on the substantial increase in transfer fees. The fee for a transfer transaction was raised from 0.1bts to 20bts , and then the board voted to raise it to 40bts amid the protests, equivalent to 1.2 yuan. What is the intention of the board? Of course, it is not to provoke everyone to compete for a seat on the board, because you need to have hundreds of millions of bts to have a chance. The board wants to stimulate everyone to buy an annual membership (2000 bts) or a lifetime membership (20,000 bts). After becoming a member, you have the power of a referral and can take 80% of the commission for yourself and the users you introduce.

The referral system is the catalyst for generating network effects.

In our opinion, this is a pitfall innovation that hinders user experience. However, in the eyes of commercial users, they have a stable profit channel. With this referral system, their own resources, such as subscribers, forum users, and e-commerce members, can be easily converted into BitShares users. In the future, 80% of the transaction fees of these users will go into their pockets. About one user will contribute 1 yuan for one transaction. If the price of BTS increases, the contribution will also increase. If there are 100,000 users, 10,000 of them have opened an account and made 10 transfers, then it is 100,000 yuan of income. As for why their users transfer money, they will always find a need. After all, they have a more accurate judgment of the needs of their user base.

So, on the surface, the ecosystem of BitShares has been destroyed. In fact, many big capitals are ready to move, as evidenced by the 20% price difference between the two exchanges in China and abroad. Products must adapt to the user market. Users who can bring you profits are potential users worth developing. Not all the people who are crying are your best choice.

This referral system is very different from the referral system of traditional exchanges. Take the time token of BitTime as an example. The time token is issued in a reduced amount, so the network effect decreases; bter's referral system is a fee sharing system, which is similar to our system, but it is subject to the management and operation constraints of the exchange itself. Our system is open, which is equivalent to being prepared for countless bter.

If successful, how quickly will success come?

We can make the following assumptions:

In the first year, Cryptonomex developed 10 big referrers, and these 10 big referrers brought 100,000 effective users. These 100,000 users each developed a new user, which was 200,000.

In the second year, Cryptonomex will develop 20 big referrers. These 20 big referrers will bring 200,000 effective users. If these 200,000 users each develop one new user, the total number will be 400,000. Of course, the number of users in the first year should also reach 400,000. By the end of this year, relying on the referral system, 800,000 users should be accumulated. If these 800,000 users transfer money twice within a year, they will bring more than 1.6 million RMB in revenue to the system. If each of them reserves 1,000 BTS in their wallets, the reserve amount will be 800 million. Now the total reserve of the two exchanges is less than 700 million, which is obviously in short supply.

In the third year, everyone can YY.

Calm down, if it is so good, why don't traditional payment companies have such a referral system? Because they have to use the handling fees for various operating costs: servers, labor, government taxes, shareholder profits, etc. However, the decentralized blockchain encryption system has a much lighter burden.

Why doesn’t Bitcoin have such a referral system? First, its user base is already huge; second, its profit system is mining; third, its system cannot be easily innovated.

Why don’t competing coins have such a referral system? First, they may also be developing it, but it is not yet complete; second, they don’t know where their big referrals are.

Why don’t subscription coins have such a referral system? They are all short-term projects, and I don’t think it’s necessary to make it so complicated. Even the middle-aged and young people don’t understand it.

Using the BitShares referral model, users do not have to pay for registration themselves, and the registration fee is paid by the referrer. (Is this true? BitShares is so sincere!) But after becoming a user, how the referrer guides you varies from person to person. Perhaps, many subscription coin operators will switch to become BitShares referrers, because this profit model is more long-term and healthy, with a good image and an active community. In the past, in order to use their control to make profits, they could only buy a coin and give it a name. This method was quickly abused, and usually they had to constantly change blood, and finally the leeks resources were exhausted and a mess. This is a lose-lose situation: the subscription coin model is eliminated, and users are deceived and afraid of cryptocurrency.

Why doesn't mmm have such a referral system? Maybe there will be one after the original system collapses.

Will the referral system lead BitShares astray?

We know that all these crooked ways were invented by Westerners, so this worry is not excessive. To this end, let us once again return to the origin of network effects and BitShares:

Information products have an inherent need for interconnection, because people produce and use them for the purpose of better collecting and exchanging information. The degree to which this need is met is closely related to the size of the network. If there are only a few users in the network, they will not only have to bear high operating costs, but can also only exchange information and usage experience with a limited number of people. As the number of users increases, this situation that is not conducive to economies of scale will continue to improve, and all users may gain greater value from the expansion of the network size. At this point, the value of the network grows exponentially. This situation, in which the value of a product to a user depends on the number of other users who use the product, is called network externality, or network effect in economics.

Blockchain upgrades the Internet from the information age to the value age. The network effect is stronger.

BitShares can provide the following unique services to Internet users:

1. Prevent exchange managers from counterfeiting currencies;

2. Avoid exchanges being hacked;

3. Avoid assets being frozen by exchanges;

4. Providing valuable virtual reality through anchoring;

5. Provide a currency unit with a relatively stable exchange rate (bitcny does not have the same ups and downs as Bitcoin, and most of the time the price is equal to the corresponding RMB).

These services are worth promoting even without a referral system.

Are these services really important? That's determined by economic realities.

First of all, current exchanges are very weak. Even strong banks have to remind people to prevent money laundering all the time. Cryptocurrency exchanges can top up and withdraw money at any time, which puts them at the forefront of the storm. Exchanges can be very ethical, but they cannot ignore external shocks.

Secondly, the fiat currency system will continue to exist for a long time, and unstable cryptocurrencies will find it difficult to become popular.

Finally, anchoring is an extremely interesting exploration for virtual reality. You have a carrot at home, but you can't feed it to your pet in the online game. If there is an anchored carrot, I will be the gateway. You give me the real carrot, I will give you the anchored carrot, and you feed the pet in the online game the anchored carrot. This model is not completely fictional, and it has a stronger sense of reality.

Therefore, the referral system will be a great help to BitShares.