When I first came to the United States to study abroad, one of the majors I seriously considered was marriage and family counseling. Later, I found that the income from this profession was difficult to keep my family, so I changed my major. But there has always been interest in this area. When friends have problems in this regard, I also help them out. But I have found that when a person is emotionally involved, it is very difficult to rationally convince him or her to choose the right solution. Bakkt's current pursuit of Starbucks, in my opinion, is very similar to this situation. Apparently this little ocean girl from Seattle, Starbucks, has a crush on this southern guy from Atlanta, Bakkt. The young man wants to pursue her even if he sticks to it. So, as a bystander, is such a pursuit worth it?
According to recent news reports, Bakkt obtained Starbucks’s terminal installation of its digital asset-based payment system by donating free equity to Starbucks; although Starbucks did not invest in Bakkt in cash, the equity it received was “disproportionate” height of". If this is the case, I think Bakkt has paid too much for this cooperation, and the risk of its future benefits is also very high. This is because the foundation of the current cooperation is not strong, so it is difficult to achieve a good result for a century.
The news that Bakkt first announced its establishment was that Starbucks was one of the initiators. An article I wrote in English at that time (What To Make Out of Bakkt?) while appreciating Bakkt's goals while also raising questions about Starbucks' involvement. In my opinion, the closeness of cooperation between a retail scene using stable digital currency payment and a derivatives exchange of encrypted digital assets is not strong. After a period of research, I think Bakkt should adopt the strategy of developing digital stable currency, so as to have a basis for cooperation with retailers like Starbucks (see my articleThe missing piece in stablecoin Bakkt's strategy). Since then, when Bakkt announced the news of the first round of financing, Starbucks was not among the first round investors. I think this is because Starbucks also saw the impossibility of the current cooperation, so it did not participate in the investment and become a shareholder of Bakkt (see my articleWhy is there no Starbucks in Bakkt's first round of investors?). While releasing the financing news, Bakkt said that Starbucks is a great company, and Bakkt will continue to seek cooperation with it in the future. But what I didn't expect was that after just a few months, Bakkt adopted the method of donating equity to obtain the installation of a payment system based on its encrypted digital assets at Starbucks' terminals. This is actually an upside-down post to win cooperation between the two parties. Bakkt is willing to pay such a high price in order to win the cooperation with Starbucks. Is this decision worth it?
The charm of Starbucks is obvious: retail outlets all over the world, retail customers all over the world, a large number of payment transactions every day, and the IT payment system that supports this retail network. Starbucks adopting any payment method in its system will immediately increase the coverage and usage rate of this payment method in the world. In addition, compared with other similar companies, Starbucks' customer groups are usually young, highly educated, have more disposable income and are more receptive to new things. Such a customer group should be the first to adopt encrypted digital assets such as Bitcoin. Therefore, Starbucks is indeed an ideal promotion channel for payment tools such as encrypted digital assets.
However, the above is a long-term strategic analysis, but specific to the current stage of encrypted digital currency, the introduction of a giant like Starbucks in terms of channels, in fact, does not have much effect on the promotion of encrypted digital assets in the market meaning. This is because the current conditions are not mature in the following key aspects.
In terms of usage scenarios, the most frequent usage scenario of Bitcoin is trading, followed by investment. The current scenario of using Bitcoin for payment can be said to be insignificant. Reports in the media about some merchants accepting bitcoin payments are newsworthy precisely because they are rare. So, is it because Bitcoin payment has great prospects, but it is currently in a very early stage, so Bakkt is willing to sacrifice some rights and interests in exchange for a larger market share in the future? I think this strategy is too early, and it is easy to become a martyr . Because from the current analysis of various aspects, the prospect of payment based on Bitcoin is not clear.
Blockchain and Bitcoin are originally born from the same root, so why rush each other?Blockchain and Bitcoin are originally born from the same root, so why rush each other?). This is a big risk for merchants using bitcoin-based payment schemes.
This is also a negative factor in terms of the number of people holding Bitcoin. The number of people currently holding Bitcoin is too small. That would be a big problem for a mass-market retailer like Starbucks.
This is also a negative factor in terms of willingness to use bitcoin for payments. People who hold Bitcoin may not be willing to use Bitcoin for payment. They prefer to earn capital gains by holding or trading Bitcoin. What's more, using Bitcoin to pay is not as attractive as other payment methods.
In terms of the stability of Bitcoin as a payment tool, the one-day Bitcoin futures based on physical delivery provided by Bakkt will greatly improve the stability and authenticity of Bitcoin's spot price. But the essence of Bitcoin is a very volatile encrypted digital asset. When customers pay with Bitcoin, there will still be a greater risk of volatility. This will directly affect customers' willingness to use Bitcoin for payment.
In retail scenarios, there are many alternatives for payment based on digital assets. The most direct and powerful competitors are the various digital currencies issued based on the US dollar. Since such USD tokens are usually based on the ERC20 standard, they have a high degree of acceptance in the market. The value of such tokens is stable, and there are many people holding them in the market, so this token is more suitable for payment scenarios in the retail industry.
In terms of technical solutions, according to a Starbucks spokesperson, when users use encrypted digital assets to pay, Bakkt will take the lead in converting users’ encrypted digital assets into US dollars, and then Starbucks will accept payments in US dollars. Such a process is very simple and straightforward in business, just like paying with RMB in a credit card in a retail store in the United States. But in the case of encrypted digital assets, users first need to transfer their own encrypted digital currency to Bakkt's encrypted digital currency account. There is a cost to making such transfers on-chain. This cost may not be worth paying for two or three dollars. Specific to Bitcoin, an encrypted digital asset, the cost of transfer on the chain is not low, and the efficiency is still very low. I don't know what kind of plan Bakkt will adopt to reduce this cost and improve this efficiency.
So, is Bakkt equally aware of all the above disadvantages? Maybe or maybe not. But Bakkt's plan is clearly more long-term. It wants to bind Starbucks, a huge retail payment channel. This will help it realize its vision of providing a global network for the generation, consumption and storage of digital assets. But I suspect that Starbucks will sign an exclusive agreement with Bakkt, which will limit Starbucks to only cooperate with Bakkt in the use of digital assets. If it is a non-exclusive agreement, then Bakkt's digital asset-based solutions will be more competitive than other competing products. But what is really suitable for retail payment scenarios must be stable coins, not digital assets with huge volatility like Bitcoin. But so far, Bakkt has not indicated its stablecoin-related strategy. In my previous series of articles (Is there a relationship between stablecoins and ST?， Why is ST Exchange the basis for stablecoins?) all think that ST Exchange is the best scenario for generating stable coins. However, since the current number of ST assets is not large enough, a truly distributed stable bar cannot be used in the short term. However, the various USD-based stablecoins currently circulating in the market can well meet the market's need for stable value digital currencies. Such stablecoins are actually the best option for retailers. If Bakkt really wants to realize its vision of providing a global system for the generation, storage and use of encrypted digital assets, then it should seriously consider ST Exchange instead of being limited to a derivatives exchange for encrypted digital assets.
