Crypto took huge steps toward the mainstream this year. Bitcoin soared in value, Coinbase went public and VCs poured even more money into the industry. In case consumers didn't get the message, they'll surely notice when the Staples Center turns into Crypto.com Arena next month and FTX airs its first Super Bowl ad in February.
But the industry is largely missing the biggest opportunity for cheap, viral promotion over the holidays — by letting consumers give loved ones crypto or NFTs as a gift. With the supply chain wrecking shopping lists, it would seem like a great time to capitalize on instant, virtual presents.
It's unlikely to happen. Don't expect shiba inu coin or CryptoPunks to suddenly compete with Apple AirPods or Brooklinen Super-Plush Robes beneath Christmas trees. The options currently available are often too technical, requiring education and coordination to make the gift happen — hardly the formula for a surprise stocking-stuffer.
A recent study by NORC at the University of Chicago found that nearly two-thirds of consumers were at least slightly familiar with cryptocurrencies like bitcoin. It's helped that popular apps like Square's Cash App and PayPal's Venmo offer crypto trading. But only about a fifth of consumers have purchased or traded crypto, the NORC study reported.
This shortfall comes at a critical time for the industry as it gears up for a PR and marketing offensive ahead of widely expected regulation. Cryptocurrency as a concept is now widely known, but consumers still generally view digital assets with skepticism, and they face intense scrutiny from regulators and policymakers.
A gift that's hard to give
Coinbase, the largest crypto marketplace in the U.S., already lets customers send crypto as gifts. Customers can log in to their account, pick a crypto asset amount, provide the email address of the recipient and send the gift.
It's a formula for spreading a new fintech product that hearkens back to PayPal, which didn't require recipients to have an account before someone could send them money via email.
But the recipient then needs to set up an account on Coinbase, which hosts the wallet that will receive the crypto.
Coinbase spokesperson Andrew Schmitt called it a perfect gift for the "crypto-curious."
A new marketing campaign that's expected to roll out this holiday season aims to make crypto an even more accessible gift. Blackhawk, the payments company famous for the racks of retailer-branded gift cards found in supermarkets and drugstores, is working with a major crypto marketplace to make a crypto gift card available in popular retail outlets.
It's not the first time someone's tried to offer a crypto gift card, but those products and the companies behind them have mostly vanished, sometimes with a trail of customer complaints. Blackhawk, which spun out of the Safeway grocery chain in 2014, brings a solid reputation with consumers and distributors.
Blackhawk declined to disclose the partner it's working with. But Tristan Roffey, Blackhawk's vice president for strategy and business development, said the rollout "has the potential to kind of demystify crypto for a lot of consumers through a form factor that they know and trust, which is a gift card."
Blackhawk also recently announced a partnership to let users of Bakkt's crypto exchange app buy, send and redeem traditional digital gift cards from retailers, including DoorDash and PetSmart. The gift cards will be denominated in U.S. dollars.
Blackhawk's plan would make crypto gift cards available to more consumers through traditional brick-and-mortar chains like Safeway and Home Depot.
But the upcoming Blackhawk initiative also underlines the complexities of crypto. The gift cards will not actually represent crypto tokens. Instead, they will have a value in dollars that can be redeemed for cryptocurrencies through the partner exchange. To redeem the gift card, the recipient would have to create an account on the exchange and then receive the equivalent value in crypto.
The crypto gift card "provides consumers an easy entry point to a relationship with the exchange," Roffey said.
Roffey said when he and his team began talking about rolling out a crypto gift about two years ago, the idea was met "with mild enthusiasm and some pause." Security was a big concern.
NFTs: A nifty gift?
NFTs have exploded in popularity, and could offer more promise as holiday gifts. Like a piece of art, the value is more subjective. But giving a token which represents ownership of a unique digital good is still more challenging than wrapping a picture in a frame. NFT marketplaces have not built out the infrastructure to make giving easy for unsophisticated consumers.
Conceptually, nonfungible tokens were designed with the idea that ownership could be transferred. But gift-givers face a lot of technical hurdles. Most NFTs are sold on the Ethereum blockchain where the "gas" or transaction fees are high. Many NFT buyers have expressed surprise at spending more on gas than on the actual token.
And as with crypto tokens, giving an NFT requires dealing with where to store it. Wallets, whether hosted by an exchange or held by an individual in software or hardware, are a necessity to hold crypto, so they're key to making a gift. If someone buys an NFT for a gift on an open marketplace such as OpenSea, they have to ensure that the recipient has a wallet to receive it.
Dapper Labs, the maker of the NBA Top Shot NFT series called Moments, which commemorate basketball game highlights, has tried to address this. Moments are designed so buyers don't have to think too hard about crypto wallets; they're easy to buy with credit cards or bank transfers.
"We're trying to be the Trojan Horse to this entire NFT space," Jacob Eisenberg, community lead at Dapper Labs, told Protocol.
Still, givers have to hold a Moment for seven days before giving it away and must have 10 Moments in their account, a rule the company implemented to prevent people from creating multiple accounts to snap up newly issued Moments. A new Top Shot user will have to jump through hoops to give these NFTs — not a great recipe for spur-of-the-moment giving.
There are other subtle aspects to giving NFTs. Many see them as more than a certificate of ownership — NFTs have become social signifiers. Gift-givers need to think about those implications, and whether the recipient will be keen on joining in on the online fun.
"If I give you an Adam Bomb NFT from the Adam Bomb Squad, I just invited you to a community that's vibrant and has a Discord where there's hundreds of messages a day," said Ian Rogers, chief experience officer at crypto hardware startup Ledger. "It's a really different thing."
A risky present
Besides annoying or confounding the recipient, crypto gifts pose other challenges.
A gift could turn into coal if there's a flash crash in crypto, something that's happened repeatedly with the volatile currencies.
And Melody Brue, an analyst at Moor Insights & Strategy, said givers and recipients must remember that digital assets "can very easily vanish into thin air if someone is even the slightest bit careless with storage — and that goes for exchanges, paper and hard wallets."
"Even the savviest of crypto investors have lost millions by losing storage devices or keys," she said. "And once lost, they are virtually unrecoverable."
As with physical art, the value of NFTs is largely subjective and speculative. And several celebrity-themed NFTs have crashed in price recently. And if the price soars, the recipient could face an unexpected tax bill.
Rogers, a former Apple executive, said it will take time for crypto and NFTs to become the kind of products that are easily gift-wrapped for the holidays.
"We are not yet at the point where we are selling an iPod at Target," he said. "We're still in the days when we're selling the graphics card at Fry's. A year from now, honestly, let's have this conversation. I bet it is 100 times easier than it is today."