Ted Livingston knows what it’s like to be copied by Facebook. After his messaging app, Kik, launched profile codes in 2016, Facebook’s Messenger app did the same. Kik launched chatbots, and Facebook Messenger soon followed. Same goes for features like stickers and usernames. But unlike some startups that Facebook has copied out of existence or bought and shut down, Livingston has managed to keep his company alive and independent.
Over the years, Kik has dodged Facebook’s competition with esoteric offerings like “chatvertising” and a TV remote control app; it has even raised money from Facebook’s Chinese rival Tencent. In its latest twist, Kik did what many struggling startups are doing: It pivoted to crypto. Livingston took an interest in cryptocurrency years ago. In September, Kik debuted its own cryptocurrency called kin, raising $98 million in an initial coin offering.
Now, Facebook is again coming for Kik. Last week the company announced it created a blockchain group, led by Livingston’s old rival David Marcus, who previously ran Facebook Messenger. Facebook hasn’t said what this group will do, prompting lots of speculation. Livingston is convinced Facebook will launch its own cryptocurrency. “Anytime a big opportunity comes up, it will be copied by them,” he says. He believes Facebook’s token or coin will look “exactly” like Kik’s. “Every time I’m like, ‘They won’t copy this,’ they do. Every time,” he says.
But Livingston is undeterred. In fact he’s relaxed, even a bit punchy, in the speaker’s lounge at Consensus, the cryptocurrency world’s largest annual conference, held in New York City this week. He knew this would happen. And he’s ready for it. “They’ve been copying us for 10 years and the lesson we’ve learned is to set things up so when they do copy us, [the outcome] will be different,” he says.
Livingston’s countermove: an anti-Facebook alliance. “Each company that Facebook has copied has had to take on Facebook alone,” he says. Snapchat suffered when Facebook and its subsidiaries Instagram, Messenger, and WhatsApp launched versions of its popular Stories feature. Facebook has also cribbed features from Foursquare, Twitter and Vine. But what if those Facebook competitors worked together? “Now the point is to have kin in hundreds of thousands of apps that are all philosophically and economically aligned, like the Rebel Alliance versus the Evil Empire,” Livingston says. It’s an ambitious goal. Extending the Star Wars metaphor, he muses, if Facebook is the Empire, then what’s the Death Star? Their future cryptocurrency, perhaps?
Kik’s plan requires convincing sizable allies, some of which compete with Kik’s own messaging app, to adopt kin as a way to make payments on their platforms. The white paper for Kik’s cryptocurrency explains it will court brands, platforms, and seven categories of apps (e-commerce, education, gaming, knowledge sharing, messaging, social networks and virtual goods).
Kik incentivizes partners to adopt the currency by giving them a reward for each transaction. Similar to the way the bitcoin network rewards its miners with bitcoin, Kik plans to distribute 20 percent of the remaining kin it has allocated to its partners each year. The company plans to launch this rewards program later this year.
Blockchain technology is a crucial part of the plan. Kin runs on a decentralized network controlled by a foundation, so the company can’t mess with the supply of the digital currency. That means developers and partners don’t have to trust Kik. The company can’t suddenly print more tokens or shrink the supply. There are 10 trillion kin tokens. Kik owns 3 trillion, it sold 1 trillion in its ICO, and the remaining 6 trillion will be paid out to its partners.
The effort faces a daunting list of challenges, including signing up partners, who must then convince their users to adopt the currency. Eventually those partners and users might want to trade kin for traditional currencies; for that Kik will need to list its currency on one of the major cryptocurrency exchanges, like Coinbase or Gemini.
Kik is promoting its digital currency as a way social networks and digital communities can make money without relying on advertising—and as a way to stick it to Facebook. The idea is that people are hesitant to use real money to pay for digital goods like content, stickers, access to communities and expertise, but perhaps they’ll pay with digital currency. Facebook did not respond to a request for comment.
Kik acknowledges that the rewards it’s offering are not large enough to significantly boost the finances of Facebook’s most notable competitors, including Twitter, Snap and Pinterest. The market capitalization of the 1 trillion kin in circulation is now about $176 million. At that price, Kik’s rewards program would give partners up to $211 million worth of digital currency in its first year. The premise—like any cryptocurrency project—is that the value of kin will increase as more people join the network. Kin will be valuable because people say it’s valuable.
If the idea works, it could prompt Kik’s potential partners, including larger social networks, to consider launching their own tokens. But Livingston says it’s too late—Facebook is moving too fast and has too many resources to play catch-up. “Their options are to keep fighting Facebook and lose, join kin, or do their own, but it’s too late for that. We’ve been laying the groundwork for six years,” he says.
That groundwork includes developing the kin network on the Ethereum protocol, which proved too unstable. The company moved to Stellar, and eventually had to “fork” that, setting up its own nodes on that network. Many blockchain projects struggle to process a high volume of transactions. Livingston touted the resources Kik has poured into building a blockchain that can handle a network of its size.
As far as forging an anti-Facebook alliance, there aren’t that many sizable potential partners. Livingston believes that together, non-Facebook social networks have a billion users. (Kik has 15 million monthly users.) He won’t comment on which potential partners he’s met with, offering a mischievous smile when asked about Twitter CEO Jack Dorsey, who spoke at the Consensus conference earlier that day. So far the company has struck partnerships with videogame developer Unity Technologies and Blackhawk Network, a gift-card and digital-payments company.
Even if Livingston persuades major partners to adopt kin, there’s still the challenge of getting users on board, something the broader cryptocurrency world has also struggled with. Livingston doesn’t foresee a future where any cryptocurrency will replace cash. He doesn’t even believe bitcoin will hold much value in a decade. But he believes digital communities will adopt digital currencies as a way to pay for digital goods, be they expertise, access to communities, or stickers (a popular prior offering on Kik), particularly as they wise up to the privacy sacrifices that come with free, advertising-based models. He’s hoping his competitors, who share a common enemy, will agree. To him, it’s too important a cause not to. “While we’re arguing about whether or not we should fork bitcoin, Facebook is building the Death Star,” he says.