Utility is the perceived ability of something to satisfy needs or wants. While the utility of a cryptocurrency is an important feature, it’s surprising (or not, depending on how you look at things) how little they are used to satisfy any need or want beyond speculation and trading. Giving your cryptocurrency utility beyond this is the easy part; convincing the community to take advantage of that utility is much more difficult. There has to be a reason beyond speculation (or ‘gambling’) that encourages more users to enter the system than leave over time. Our utility approach focuses on legitimately increasing demand for colored coins particularly within the ‘late adopter’ demographic. More importantly, we promote utility in a powerful way by intertwining it with both scarcity and an incentive to participate (see Section 6: Inceptive to Participate and Section 7: Stability).
4.2: Addressing ‘Utility Pressure’
Our focus is to remove the necessity for any relationship with fiat after it’s entered the system: an obvious but particularly longer-term approach. If users can purchase anything they need without using fiat: buy dinner, furniture and groceries, pay their rent, their utility bills, their taxes, the need (and appeal) for that user to exit into the fiat system greatly diminishes. While this is a sound strategy for increasing utility in a closed system, such an approach does not prevent third parties and external merchants cashing out to meet their own obligations. An increase in utility for a number of coins, including both NobleCoin (NOBL) and Bitcoin (BTC), has been blamed for causing increasing downward price pressure as that utility at some point means an exit to fiat. So, there are a few questions and underlying problems we must attempt to answer:
To improve demand while accommodating generated utility pressure we focus on infrastructure and services that are not only self-sufficient but that receive more colored coins than it costs to ‘run’ them. This is easier said than done and requires a three-pronged approach:
Alongside improving demand, we focus on increasing scarcity of such a colored coin over time in section 6: Stability. We aim to promote a positive feedback loop by completely removing emission, focusing on demand, and using products/services to permanently remove coins from circulation.
4.3 Gifts (Noble Gifts)
For eleven (11) months the Noble marketplace has offered gift cards from Amazon (every branch), Newegg, Dell, Microsoft, Overstock, Tiger Direct and others at the most attractive cryptocurrency rate in the world.1 This range is being increased weekly to include all vendors who currently accept third-party payments for gift cards in either BTC or fiat. It is estimated that approximately three-hundred (300) gift cards from the largest retailers around the globe will be available by 2015 for NOXT at the ‘stabilized’ rate (see Section 7: Stability). This includes all retailers currently available on more mainstream gift card services such as Gyft or eGifter.2
This range will be transferred on to its own subdomain (gift.noblemovement.com) designed to offer a more exclusive, professional and streamlined purchase process for gift cards. NobleGift will better manage the display, choice, and amount by focusing only on gift card products. Because funding removes the need for manual market trades and bank transfers we can automate the process and remove the delays in orders.
4.4: Rent/Utility Bill (Australian NoblePay)
In Australia there is a single bill payment service called BPAY which is accepted across the banking system and enables payments to be made for over forty-four thousand (44,000) types of bills from over nineteen thousand (19,000) businesses.3 It is important to note that NoblePay is in no way affiliated with nor endorsed by BPAY.
Living Room of Satoshi, a business that focused on enabling BTC payments through BPAY, recently closed its doors due to a taxation issue that has arisen as Australia develops its cryptocurrency laws and regulation.4 In 2014, the Australian government issued its first guidance on cryptocurrency and taxation that caused an industry-wide backlash.5 It effectively resulted in a ‘double taxation’ problem because cryptocurrency users may have to pay 10% GST to buy a coin and 10% GST when paying for an Australian product or service. For every one-thousand dollars ($1000) used on their service, Living Room of Satoshi has to either add one-hundred dollars ($100) in fees or cover that amount themselves. Despite being well-intentioned, this is unsustainable. We expect this issue resolves itself in the coming six (6) to twelve (12) months, as young industries often experience conflicting laws that require time to mature.
A service similar to Living Room of Satoshi will be established as a core utility feature of the Noble ecosystem (NoblePay). Because BPAY requires only a biller and reference code in order to process bill payments, NoblePay does not require personal identifiable information such as real name, telephone numbers or address (guaranteeing customer privacy). The process is relatively automated with NoblePay acting as middleware facilitating everyday bill payments in colored coins:
By extrapolating data provided by the Living Room of Satoshi we see that the majority of NoblePay payments would be for credit card/bank, phone/internet and electricity/gas bills. However, NoblePay will ultimately and more importantly allow Australians to pay their taxes using a colored coin. In its first year of operation, it is likely NoblePay does not see as high a use as Living Room of Satoshi for BTC. However, it has the potential to process up to approximately forty-thousand dollars ($40,000) worth of bills during that time.
If the GST double-taxation issue were to remain for twelve (12) months, that is a four-thousand ($4,000) GST bill that Noble would be liable for by keeping the service fee-free. In the grand scheme of things post crowd-fund this is an acceptable cost for proof-of-concept due to the attention utility like this can attract. There is also a good possibility the double-taxation issue is resolved relatively soon. If this becomes the case, most of the service is automated and ongoing running costs are minimal (hosting).
4.3: Precious Metals, Diamonds & Jewelry (see also Section 7.2)
Precious metals and bullion trade on the Noble marketplace has long been on the agenda but suffered setbacks, in no small part due to uncertain legalities related to cryptocurrency and associated legal costs. Australian Second-hand Dealer/Pawnbrokers Licenses for multiple states are relatively inexpensive to obtain at approximately six-hundred dollars ($600), but it is the professional legal advice, documentation and clarification on the subject in the capital that is more costly (to the tune of a few thousand dollars). This license and advisory is to be immediately gained and published pending funding.
Furthermore, we continue building relationships with retailers who allow third-parties to act as unofficial re-sellers and trade bullion on behalf of customers (provided AML/KYC laws are adhered to). By linking the Noble marketplace with global and reputable suppliers of precious metals, bullion and jewelry, we congregate all possible online products into one ‘super-store’ that deals strictly with Noble-related ‘currencies’ and colored coins. In this case the initial proposed system of precious metals, diamonds and jewelry merchants is as follows:
It is important to clarify that Noble is currently in no way officially affiliated with or endorsed by these retailers. Our goal is to act as trusted resellers of products facilitating their purchases using supported alternative cryptocurrencies.
Secure digital, art, blueprint, and e-book download support will be added pending crowd fund. This has so far not been prioritized because hooks, plugins and custom website development allowing automated purchase and download of digital goods is costly. Funding will allow support for the following digital goods direct from vendors on the Noble Marketplace:
The 15% universal discount will be wound down and instead moved over to the three-tiered ‘Nobility’ reward program (see Section 5: Exclusivity), which rewards community members with the same discounts but also promotes holding a fixed number of coins. In the event of low prices a discount can still be received by using NOXT and taking advantage of the guaranteed exchange rate (see Section 7: Stability). The marketplace itself will see significant overhauls during this period as the crowd funds go towards re-design, plugins and custom development to present a more streamlined, professional and mobile experience. There are a number of identified issues with proposed marketplace features and alternative cryptocurrencies that must be resolved:
To resolve these issues short-medium term we propose a price supportive fixed exchange rate (see Section 6: Stability). While this fixed exchange rate supports the NOXT to BTC exchange rate, it does not protect against fluctuations in the BTC to USD price. A second tier in the stability plan must be implemented to resolve this. What this means is that the fiat equivalent of NOXT-BTC is recorded and this value used to determine the guaranteed acceptance rate. Resolving the fiat/bank delay issues requires the gradual move to cryptocurrency accepting merchants only. An account that can handle large orders and weekend periods can be maintained for products requiring fiat payments.
4.6: NXT Merchant
Noble will be filling the decentralized NXT marketplace with the most popular gift cards and products to help give the platform another trustworthy merchant. Since these products must be purchased in NXT, a 0.5%-1% fee will apply which is used to purchase and take NOXT off-market. The NXT price and associated BTC/fiat value must be consistently monitored (updated daily at a minimum), so only best-selling products will be listed to reduce workload. Ideally this will include precious metals provided orders are not at a quantity that require adherence to AML/KYC laws and regulation. In doing this, we help promote the decentralized marketplace as a means of legitimate e-commerce and in the process contribute towards the increased scarcity of our colored coin.
4.7: Escrow & Over-the-Counter (OTC)
Noble will take advantage of its trust and public image to facilitate personal escrow and over-the-counter (OTC) services nationwide. As professionals begin to explore and attempt to understand digital currencies they will seek individuals who understand the market and wallets to aid and train them. These services will be provided in a legal manner ensuring all anti-money laundering (AML) and know-your-customer (KYC) laws are adhered to. In return for aiding in the establishment and marketing of services the usual fees will be paid for in full with colored coins that are taken out of circulation. Due to the competitive nature of such transactions from both current and decentralized services, we focus on personalized services with clients and contacts outlined and established in Section 8: Thought Leadership.
For a more detailed understanding of building demand, volume and utility through publications see Section 8: Thought Leadership. Whitepapers, e-books and self-published hardcovers (under negotiation) are being written and co-authored with professional editors for the cryptocurrency space. These will be available in a number of ways:
4.9: Consultancy and Personnel Services
For a more detailed understanding of building demand, volume and utility through consultancy see Section 8: Thought Leadership. Alongside publications, the primary focus of Noble as a business is to act as consultants to the corporate and financial world seeking to understand blockchain technology. While many of these services will be paid for using traditional means, part of the consultancy will be focused on making and receiving payments using different wallets and cryptocurrencies. No matter what payment method is preferred, a majority of services rendered will be used as a conversion method to colored coins and removing them from circulation. For example, an invoice of $2000.00 paid in AUD would be recorded for business and taxation purposes, with approximately 50% being converted to colored coins which are permanently taken off-market.
4.10: Replacing Unreliable Utility Providers
Alternative cryptocurrencies, especially those with a lower market capitalization and fewer resources, suffer just as much from service providers not delivering as the community suffers from scamming development teams. Over the course of 2014, Noble has paid a total bounty of approximately ten (10) Bitcoin just for popular and expected (at the time) explorer services. Many of these, with a few shining exceptions, have since closed - in an environment where refunds are nonexistent. If exchange listing fees (bribes) had been paid that would have amounted to another thirty (30) BTC. Three of the four exchanges that would have been paid have since scammed, stolen and dumped huge coin holdings before closing up. Two of those had attempted to ‘extort’ tens of BTC during listing, threatening to delist despite having adequate volume, knowing full well they held the power over the public perception of price and how the community would react to delisting. It is frustrating and financially draining paying external services during a positive hype cycle only to be slowly removed one by one when that hype diminishes. Transient communities that switch coins demanding these fees are paid to aid in ‘pump and dumps’ are making this situation worse. It is unsustainable to consistently pay for services that end up closing (or scamming) because no one uses them. Services have been getting away with this business model because by the time the removal occurs, chain developers, market movers and communities have moved on to their next target coin and have no care to what happens to it post-dump.
However, legitimate currencies being forced to pay for a new generation of services every few months are no longer acceptable. Both new and colored coins need to attack this issue from two angles:
4.11: Distribution View
The first of these ‘services’ is the ‘Asset Distribution’ view available on the NXT client, acting as both an address explorer and ‘rich list’ that cannot be taken offline. Tying these addresses to personal Noble accounts and chests will play a key role in transparency and accountability during a cycle (see Section 9: Transparency and Accountability). It will also play a voluntary role in both crypto-governance and legal/regulatory issues (see Section 11: Crypto-Governance and Section 12: Legalities). To view the distribution of a colored coin on the NXT platform, simply go to the corresponding Asset Exchange page and select ‘View Asset Distribution’.
4.12: Decentralized Exchange
Noble has suffered more than your average coin when it comes to cryptocurrency exchanges. Between Coinmarket.io, CoinEX and Mintpal, momentum has been consistently destroyed by hundreds of millions of coins being stolen and unloaded on the market. While community requests to pay listing ‘fees’ of between 10 – 20 BTC were rejected, not paying them beforehand fortunately avoided adding insult to injury. Add to this ‘remain listed’ extortion fees that are presented on a whim, and you effectively have a controlled economy where the exchanges run the game and only whales who pump and dump a dozen coins a month can afford a ‘top-tier’ exchange presence. This is unacceptable, and it is disappointing that the alternative cryptocurrency community supported this damaging business model throughout 2014.
Fortunately the demand for low fee, peer-to-peer decentralized alternatives (as well as regulated exchanges offering insurance and protectionism) is increasing. The NXT AE (Asset Exchange) is steadily gaining both in volume and number of ‘assets’. There is no longer a need to rely only on centralized exchanges, although some are gaining legal and regulatory legitimacy. By promoting a move on to these sorts of platforms we remove the need to develop and test our own (timely and costly), take advantage of the growing liquidity already present, and enjoy the exposure of being listed and available for trade alongside other ‘assets’ gaining in popularity.
4.13: NobleTrade Gateway
The NobleTrade Gateway is a project under development by a third-party personally interested in the future of Noble. Because of this, the information provided is subject to change and we will allow the third-party to present more if and when they are ready. The service is a gateway to all market and trading information, actions and services available in the cryptocurrency sphere. Many of these services are trivial and free-to-use, while some are involved and under development in order to generate profits for both the service provider and consumers.
Features being developed include the basic and mandatory information one would expect to be available: market capitalization, mining, statistics, super-trollbox, news feeds, block explorer, market graphs, nodes, network pulse, and maps. Also under development are trading services, price, volume, exchange, arbitrage information, statistics, market data, and live alerts for dozens of variables. This gateway will initially be available for NOBL and NOXT, using service fees to take coins permanently off-market (sponsored by Noble). Once beta period is over it will be offered as a comprehensive platform to other coins for a fee (also used to remove coins from circulation).
4.14: Smart Payment Exchange Rates
Merchants and services providers point to the general lack of liquidity at particular levels on exchanges as a reason for not accepting an alternative cryptocurrency. This is a valid concern, but often fails to consider the potential for what we call a smart payment exchange rate. Assume a merchant receives a payment in coins with a total value of 1 BTC, and their business model demands these coins are immediately exchanged to BTC. However, their linked exchange has a 0.5 BTC bid at 25 satoshi (a), 0.2 BTC bid at 24 satoshi (b), 0.15 BTC bid at 22 satoshi (c), and 0.15 BTC bid at 21 satoshi (d). With tight profit-margins, they are unable to exchange their received payment for order processing without taking a loss, making acceptance of the coin pointless.
Currently, cryptocurrency payment gateways will list the colored coins current exchange rate at time of purchase at 25 satoshi. What this means is if the merchant were to automatically convert their received colored coins into BTC, they can only exchange half (0.5 BTC) at the value they received them for. The remaining 0.5 BTC would have to be exchanged at a sub-optimal rate which more than likely means a loss for the merchant. A smart payment exchange rate is designed to account for the natural liquidity and slippage issues that occur in thin markets. In this particular case it would work like this:
While this exacerbates volatility in thinner markets (which has the positive potential to attract more traders/volume), more importantly it removes the ability for market manipulators (or non-malicious but intelligent customers) to use young markets to take advantage. If merchants know their profit-margins are protected by payment gateways that accommodate smart exchange rates they are more inclined to stick around and provide their services.<< 3. Platform Agnosticism5. Exclusivity >>