(Funding Design) A Self-Funded Economic Stimulus (Chamber of Commerce)
The other day I was speaking with Jo, our chief marketing officer, about small towns.
She just relocated to Austin from a small town in Iowa, and for several years I lived in Astoria, a small town located at the mouth of a large river in Oregon.
Although our company’s software platform supports the aspiration of a distributed, virtual community to achieve and sustain economic and governance self-sufficiency, we frequently discuss the applicability of our platform to small-town communities.
In other words: how would we help an actual small town?
Astoria is the oldest American settlement west of the Mississippi, established in 1811 at the mouth of the Columbia River, one of the largest rivers in the world.
It’s difficult to adequately express the titanic scale of that region — to the west is the Pacific Ocean, with storms that travel all the way from Japan to unleash there a devastating fury, with ocean swells so large they literally swallow ships.
Just to the east are the Cascade Mountains: a string of volcanoes, some of which are periodically active, such as Mount Saint Helens, which filled the river with the blasted remnants of an entire forest when it erupted in 1980.
And the river itself is huge, as mentioned. Almost 4 miles across at the mouth, emptying water from melted snow, glaciers, and rain from the watershed which extends all the way into the far reaches of Canada at a rate of 275,000 cubic feet per second.
Historically, the town had once been quite prosperous, with riches representing fishing, logging, and trapping.
This created a city rich with historic Victorian architecture, and if you’ve seen the movie “The Goonies,“ you get an idea of what I’m talking about, because it was filmed there, just two blocks from my grandparents’ house.
But when we moved there, in the 1970’s, the city was going through a fairly significant decline, with logging and fishing in fall retreat, and a local economy in turmoil.
The stewards of the city worked extremely hard to protect the local economy from chain stores, which would sell goods and services to the locals and take resources out of the region in a phenomenon generally described as “fiscal leakage.“
In the past several decades, there were a variety of “loyalty programs” attempted by local merchants — the current Chamber of Commerce sponsored program is referred to as “Clam Bucks” which occurs annually during an event, and enables those who purchase these “Clam Bucks“ to receive discounts at the point of sale of $.50 on the dollar.
Two weeks ago I discussed in a video how our solution might be applicable within this scenario, and the video ended up receiving several thousand views organically (can’t advertise anything blockchain-related on mainstream social media platforms).
The presented solution apparently represents one of the only examples of how a hybrid private/public crypto solution might help a community launch and sustain a program of economic stimulus, without the need for taxes, bond levies, or government involvement.
In a subsequent video, I described how the same community might introduce a program in a incremental, pilot test, in support of a seasonal event called the “Astoria Sunday Market,“ which runs from May until October, and features about 3,000 to 5,000 visitors a day.
Where to begin?
How about from the perspective of the consumer?
Why would a consumer use a loyalty “token,“ when they have access to US dollars?
From the perspective of the consumer, the “token“ would almost certainly not be referred to as anything more than a “Clam Buck,” because let’s face it: any reference to cryptocurrency freaks everybody out.
We have to be careful what language we use in describing the solution, because sometimes words will stop a conversation dead in its tracks, or take it completely off track.
If we talk about blockchain (which is how we provide an immutable transaction fabric, facilitating high trust transactions between strangers), people fall into two camps:
(1) either they don’t know what blockchain is
(2) or they affiliate blockchain with bitcoin, and start talking about which token is worth more on the open exchanges
Let me assure you the latter is not it all what we are talking about. This has nothing to do with ICOs.
In our solution, the “how“ (blockchain) is completely behind the scenes.
Yes, there is a high-trusted transaction fabric, utilizing the Ethereum blockchain in a hybrid public/private architecture.
This enables us to create what qualifies as a closed economy of “tokens,” represented in mobile software as, for this example, a “Clam Buck.“
The consumer doesn’t really need to know how we do it, but they might appreciate the benefits of going about it in this matter.
By virtue of the blockchain’s design, the community gets a loyalty program which includes extremely secure transaction assurance, highly resistant to fraud and theft.
Also, if they so choose, they can make full use of the platform’s ability to facilitate such complex agreements as crowd-sourced funding, micro credit loans, the ability to buy and sell, auction, subscriptions and payment plans, and so on.
If it sounds like a bank, it’s because it technically is.
Blockchain is a ledger, contrived in such a way that makes it open to auditing, and bitterly resists fraud.
But, again, from the perspective of the consumer, it’s just magic loyalty dollars, which can be spent in precisely-defined ways, and in the instance of this example, would only be available for use for specific goods and services within a pre-defined economy. In this example: businesses from the Astoria region.
And if that sounds too intimidating, it’s no different than Starbucks loyalty points, really.
Let’s say that I go to a Starbucks, and I want to buy a cup of coffee, which is about $4.50. Let’s assume that I decide to put $10 on my Starbucks app at the point of sale, which I can do quite easily.
I’ve purchased a cup of coffee, again for $4.50, and that leaves a $5.50 balance on my Starbucks app.
This enables Starbucks to make use of this “money still in the app” in support of their corporate aspirations for growth.
In effect: the consumers are loaning Starbucks money that they intend to use at a later date, and note that once the money is placed into the “app,“ they can only be spent on Starbucks goods and services. It’s nonredeemable for cash.
This is effectively what we are talking about, translatable to a community. For example: the businesses in the Astoria region, or as a pilot test, the vendors participating in the Astoria Sunday Market.
Users of our software would see a mobile application which would probably be called something like “Clam Bucks, Sponsored by the Astoria-Warrenton Chamber of Commerce.”
That’s because we “private label” our application for our customers, and in about three weeks after engagement, our customers are able to download and install a version of our software with their name, which enables them to turn right around and project thought leadership to their community.
The application features seven pre-integrated functions we consider to be essential to a self-sufficient community, regardless if they are geographically distributed or limited to a specific region.
The first is digital identity
Digital identity enables you to project your persona to the community, and there are various methods of verification, to ensure there are no fake accounts, trolls, etc.
As a related aside: until 2017 I was in the information security and anti-fraud industries, and was responsible for algorithms which could automatically detect fake profiles and fraudulent behavior for a vendor which was actively monitoring almost 4,000,000,000 devices every day.
If you have done any transactions in the modern world, they’ve been protected by software that I have either helped design or have managed.
In other words: we know a lot about fake accounts, trolls, and hackers. Digital identity is how we control those elements.
The second pre-integrated function: communication
We enable users of our platform to chat with one another, and browse the offerings of vendors through an interface which is something like a mobile-app version of a browser capability.
This enables vendors to communicate with their customers, customers to communicate with one another, and vendors to communicate in private chat.
The third pre-integrated function: commerce, which is the way that people buy and sell goods and services, but is not limited to transactional commerce.
Technically, the system can also facilitate loans, barter, and so on.
Just recently we introduced our inventory management architecture, which will eventually support perpetual inventory capabilities, as well as tokenized supply chain features.
A perpetual inventory system automatically keeps track of what items are featured by the vendor, and can be configured to automatically order a replacement of supplies when inventory drops to a certain level.
A “tokenized supply chain“ is a dramatic capability, because it would enable the people of the Astoria region to limit their purchases to goods and services they have verified originated from the region.
How does it work? Not to go into too much detail, but remember when I talked about the immutable blockchain? Think about the many steps produce (apples, etc) must take as they travel from the farm to the consumer.
At each step, the inventory is scanned and each transaction is entered onto the blockchain, enabling the consumer to extract a manifest which verifies that the product or service is in precise alignment with their own values.
We have a customer that’s doing precisely that with their network, and it’s fairly incredible.
This will enable people in distributed communities to make economic decisions which align with their values, such as those who refuse to use products or services which are engaged in any animal cruelty, those who would like to limit the purchases to a specific identity group (such as indigenous tribes), or those that would prefer to limit their communities’ purchases to those which originate from partner community in a cross-community economic coalition (in our example, the Astoria area, and collaboration with other coastal cities along the Oregon and Washington coast of the United States).
The fourth pre-integrated function is banking
Banking includes a digital wallet, which enables consumers to store and send their digital currency, but does not stop there.
The wallet we just released will also support storage of collectible, high-value assets, which would include titles, deeds, and so on.
This would enable a community to place a piece of property on collateral in support of a shared business initiative, utilizing the platforms built-in escrow capability.
Other banking functions include crowd source funding and micro credit loans, which would enable members of the Astoria community to seek community donations in support of, for example, repairs needed for an automobile or a business.
The fifth pre-integrated function is reputation
This one is a fairly fascinating topic which merits it’s own separate discussion, but is contrived in such a way which discourages fraud, but also enables the community to reward acts of virtue which fall in alignment with their community values.
We do this by monetizing reputation; in the example of this blog, vendors (and consumers) would literally get paid ClamBucks for their earned reputation.
Additionally, their earned reputation score would be available for view as a portion of their digital identity, which could be available inside and outside the community, depending upon the wishes of the user; an interesting example of our hybrid public/private blockchain architecture.
There are other dimensions of reputation monetization, beyond the several levels of performance typically associated with a commerce-based relationship.
For example, our “selvage” sub-token. If someone can innovate ways to effect a reduction in the rates of conflict and arbitration, we pay them for essentially optimizing our system. This may manifest as “restorative justice” vs normal approaches to address misdemeanor crimes.
In other words: it would become “profitable” to provide restorative justice to a community at a massively discounted rate, because the provider would be paid in “selvage” reputation tokens, monetized as Clam Bucks, if the community desired.
The sixth integrated function is arbitration
Conflict happens. There’s no getting around it, although our approach is both effective, and pragmatic
The process we use is a private administrative arbitration using notary, which is recognized in almost every jurisdiction on earth.
Because the process leverages common law legal precedent going back to the Roman era, it enables communities to handle their affairs completely outside a courthouse, dramatically limiting legal costs.
The seventh and final pre-integrated function is governance
In the context of our platform, governance is almost entirely invisible. Just enough to get the job done, and out of the way where it belongs.
Within private industry, the word “governance“ is usually manifested as policies and procedures, roles and responsibilities, access and permissions.
So it is with our platform, although we add an additional layer.
Some members of the community might be encouraged to elevate their role such that they are stewards, rather than beneficiaries, of the system.
As such, their digital identity is associated with certain administrative functions, and their actions are evaluated by a reputation fitness system which ensures their accountability to the constituents (beneficiaries).
Did the stewards meet and exceed their stated goals?
If so, they are rewarded with the opportunity to continue to serve in this capacity, but if they are not, the community can encourage a performance remediation plan, similar to how this is handled within private enterprise.
As you can see, these seven pre-integrated functions give a community what they need to manage their own affairs.
However, what has not yet been fully described is how the solution might help a community launch and sustain an economic stimulus without the need for taxes or levies.
There are two angles to this:
- “Slush fund”
- Transaction-based revenue
Slush fund is a crummy term, but it gets the job done. There’s probably a more appropriate term for it, but this is my blog.
Let’s go back to the example of the Starbucks app. In my example, I put $10 on the app, and spend $4.50, leaving $5.50 in escrow, in a non-redeemable form which can only be spent with in the Starbucks economy.
Anybody who utilizes the loyalty system (consumer) would create this aggregate pool of resources (aka the “slush fund,”) which leverages responsibility by the stewards of the community.
Review: why would a consumer use the loyalty token?
The answer is simple: discounts at the point of sale.
If you had an opportunity to save money at the point of purchase, would you?
Popularity of in-app purchases such as that which is described in the Starbucks app answers the question.
In addition, the consumer has the option to opt into updates from the vendor, which is also in alignment with how consumers would like to interact with companies.
They don’t trust advertising, and they would like to curate their own ecosystem of vendors who have values similar to their own.
On that note, we don’t allow advertising on our platform.
The only way for a vendor to elevate their ranking is through reputation performance. This creates a reputation system similar to what’s used by Lyft or Airbnb.
As a consequence, this engenders greater trust within the community, and levels the competitive playing fiend, by enabling small high-quality vendors to compete against vendors with more marketing resources.
Why would the vendor want to utilize the loyalty program?
Reduced per transaction charges at the point of sale = increased margins.
The vendor doesn’t have to use Visa or another credit card company to verify the transaction at point of purchase, because you can’t spend what you don’t have; another interesting byproduct of using blockchain.
That might not seem like a very big deal, but if you’re a retailer this will get your attention, because although the credit card rates are different at the point of purchase, in general consider that the Visa program is about 2.3% plus $.10 per transaction, and let me tell you, that adds up in a hurry.
Therefore a retailer has a built-in incentive to get their consumers to use another form of currency which bypasses the Visa system, which brings them an increase of margins they might leverage to fund an in-store promotion.
Second benefit, as mentioned previously: the consumer might wish to opt in to updates from that vendor, which gives them direct access to the consumer, through our chat/communication capability described earlier.
As far as that goes, there’s really nothing preventing them from continuing to sell to that consumer after the event is over, because all of the capabilities to perform those functions are already there.
In effect: the city of Astoria gets their own branded version of eBay/Amazon, you know?
What’s the benefit to the organizer of an event or a community?
Revenue, in the form of transaction-fees paid by the consumer.
When you use eBay or Amazon, or any other commerce platform, you’re paying transaction fees, and that’s actually not a bad idea for a lot of reasons.
And our transaction fees are lower than that which is charged by credit card companies.
If the community itself has their own commerce platform, might they not receive a percentage of transaction fees which would normally go to eBay or Amazon?
We know that consumers are already receptive to paying a transaction fee, so why not charge a fraction of that on a platform exclusive to the members of Astoria?
That creates transaction-based revenue, right? Because it’s a commerce platform, so why not?
Here’s the cool thing: we share a healthy percentage of that transaction revenue with the community itself; in the case of my example, the Astoria Warrenton Chamber of Commerce.
Why do we do that? It’s actually really simple:
The transaction-based revenue actually enables the community to pay for the platform, which we provide on a subscription basis.
Basically: the platform pays for itself, and then some.
And because we share in that transaction-based revenue, we now share an objective: the growth and diversification of the local economy, resulting in a highly resilience, low variability economy.
We have a shared objective in building a stronger local economy.
This additional revenue can be leveraged by stewards of the community to do marketing (further benefit to the retailer), vocational assistance, or whatever.
We have some ideas about how to best utilize these resources, because our “customer service“ organization looks a lot like a group of business analysts/public policy experts, and less like a call center.
214 Alpha helps communities keep their money and affairs “local.”
Did this get your attention? If so, give us a call and set up a meeting so we can learn more about your community and its needs