How Blackbird Is Unlocking Crypto's App Ecosystem | Ben Leventhal & Jesse Walden

Introduction to Blackbird

Blackbird is pioneering a new approach to loyalty and payments in the restaurant industry, leveraging blockchain technology to create a more efficient and rewarding ecosystem for both restaurants and diners. Founded by Ben Leventhal, former co-founder of the popular restaurant reservation app Resy, Blackbird aims to address the longstanding issues of profitability and connectivity in the restaurant sector.

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In this in-depth exploration of Blackbird and its recent developments, we'll delve into the company's innovative approach, the launch of their new L3 blockchain called Flynet, and the potential impact on the broader crypto ecosystem.

The Restaurant Industry's Profitability Challenge

At the heart of Blackbird's mission is a pressing issue in the restaurant industry: declining profitability. Despite the growing popularity of dining out and the central role restaurants play in our social lives, many establishments struggle to maintain healthy profit margins. Ben Leventhal explains:

"Most restaurants are not particularly profitable. And if you look at profitability over a period of time, it's declining, which is pretty confounding given that restaurants just get more and more popular."

This paradox of increasing popularity coupled with decreasing profitability stems from various factors, including high operational costs and the presence of numerous intermediaries that take a cut of restaurant revenues.

Cutting Out the Middlemen

One of Blackbird's primary goals is to eliminate unnecessary intermediaries that drain resources from restaurants. Leventhal estimates that between 3% and 5% of a restaurant's top-line revenue is lost to third parties that, in his opinion, do not create sufficient value. These intermediaries include payment processors and other service providers that stand between restaurants and their customers.

"We really want to focus on the fact that if you're sitting in a restaurant or you're ordering a cup of coffee, you should not cost 3.5% for the restaurant to collect payment from you," Leventhal emphasizes.

By building a blockchain-based platform, Blackbird aims to create a more direct connection between restaurants and their patrons, reducing costs and improving the overall dining experience.

The Blackbird Experience

For consumers, Blackbird offers a seamless way to engage with restaurants and earn rewards. Users can check into restaurants using the Blackbird app, earn points for their visits, and pay their bills directly through the platform. While Blackbird encourages the use of its native "fly" points for payments, it remains agnostic about payment methods to ensure flexibility for users.

The key innovation lies in the frictionless nature of the experience. As Leventhal describes, "You tap in with a puck, you have your phone in your hand for 10 seconds, and then your bill's paid. That's really magical to me."

Flynet: Blackbird's L3 Blockchain

In a significant development, Blackbird has announced the launch of Flynet, its own Layer 3 blockchain built on top of Base. This move represents a strategic decision to maximize control and transparency within the Blackbird ecosystem.

Leventhal explains the rationale behind creating Flynet:

"We strongly believe in the long run, it's the right construct. We believe that things like governance, things like ownership, things like having our own native gas token over which the network will have full control. Those things are going to matter a ton."

By operating its own blockchain, Blackbird can ensure that all transactions, check-ins, and actions taken by restaurants or consumers are memorialized on-chain. This level of transparency and control is expected to drive down costs and increase efficiency in the long term.

The F2 Token and Value Accrual

Alongside the launch of Flynet, Blackbird has introduced the F2 token, which is distinct from the "fly" points used within the app. The F2 token is designed for governance and control of the Flynet network itself.

Jesse Walden, an investor in Blackbird through Variant Fund, emphasizes the importance of this approach:

"The users of the network are going to own the network. That was not the case for the Starbucks loyalty program. You've got an NFT and you own NFT, but the NFT was a loyalty program. That's very different than owning the underlying network on which these transactions are happening."

This ownership model is expected to align incentives between the platform and its users, both consumers and restaurants. Every transaction processed on Flynet incurs a 25 fly clip fee, which accumulates in a treasury and is redistributed to F2 token holders, creating a potential "fly dividend" for participants in the network.

Building for Real-World Value

A crucial aspect of Blackbird's strategy is its focus on delivering tangible, real-world value to users. Unlike many blockchain projects that emphasize the technology itself, Blackbird prioritizes the end-user experience and the practical benefits of its platform.

Leventhal stresses this point: "Nobody is going to engage with Blackbird because it's on chain. The idea that the Starbucks Odyssey program was on chain and that was a draw. It turns out that was a sort of absurd assumption."

Instead, Blackbird aims to create value through the spending power of its points and the magical experiences it can unlock for diners. This approach sets it apart from many crypto projects that have struggled to gain mainstream adoption.

The Evolution of Loyalty Programs

Blackbird's approach to loyalty programs has evolved since its inception. Initially, the platform allowed for highly customized loyalty designs for each restaurant. However, the team quickly realized that many restaurants lacked the resources to manage complex programs.

"What we've evolved to is a much more standardized version of what loyalty looks like," Leventhal explains. "There's a much stronger emphasis on fly today than there was 12 months ago."

This shift towards standardization and simplification reflects Blackbird's commitment to creating a platform that works for both restaurants and consumers in the real world.

Challenges in Crypto Adoption

While Blackbird represents a promising intersection of blockchain technology and real-world applications, the broader crypto industry still faces challenges in achieving mainstream adoption. Leventhal acknowledges that there's work to be done:

"I think generally with crypto, we are falling way short of magic. But we're quickly making up ground."

He cites improvements in wallet creation and management as examples of progress, noting that Blackbird has created over 100,000 wallets for its users without requiring any additional steps during onboarding.

The Importance of User Experience

For crypto projects aiming to achieve widespread adoption, Leventhal emphasizes the critical importance of user experience:

"Products these days work. The good ones work incredibly well. They're doing amazing things with design, with functionality, with technology behind the scenes. That's what you're up against."

This high bar for user experience is pushing crypto projects to innovate and streamline their offerings, moving away from the often complex and friction-filled experiences of early blockchain applications.

The Historical Context: Diners Club and Visa

Interestingly, Blackbird's approach draws parallels to the early days of credit card adoption. Jesse Walden points out the similarities to the founding of Diners Club, the first widely accepted charge card:

"The founding story, Ben, you can fill me in where I'm wrong here. I think the story is there's this guy who's a socialite guy in New York and he used to host a lot of dinners out. One night, he was a big group and forgot his wallet. He got really upset and he was like, I wish there were way I could just pay without having to think about my wallet and carry much cash on me. That was the founding story of Diners Club."

This historical context provides an interesting perspective on Blackbird's potential to revolutionize payments and loyalty in the restaurant industry, much like how credit cards transformed consumer spending habits decades ago.

The Future of Blackbird and Crypto Adoption

As Blackbird continues to develop its platform and expand its reach, it represents a compelling case study in how blockchain technology can be applied to solve real-world problems in specific industries. The success of projects like Blackbird could pave the way for broader adoption of crypto technologies in other sectors.

Leventhal is optimistic about the future: "If we can figure those things out, there'll be lots and lots of versions of Blackbird all over the world."

However, he also acknowledges that regulatory clarity and the success of current projects will play a crucial role in determining the pace of adoption among larger, more traditional businesses.

Lessons for Crypto Founders

For crypto founders looking to build successful applications, Blackbird's journey offers several valuable lessons:

1. Focus on real-world value and user experience above all else.
2. Be prepared to iterate and adapt your approach based on user feedback and market realities.
3. Consider the historical context of your industry and how new technologies can address longstanding pain points.
4. Build for mainstream adoption by minimizing friction and complexity for end-users.

The Role of Progressive Decentralization

Blackbird's approach to building its platform exemplifies the concept of "progressive decentralization." This strategy involves first creating a product that people want and use, then gradually introducing decentralized elements and ownership.

Jesse Walden explains: "You first need to build a product that people want. Blackbird's done that. It's working. By giving users real ownership and underlying network itself, which is something that they intuitively understand the value of as users of the product."

This measured approach to introducing blockchain elements could serve as a model for other projects looking to bridge the gap between traditional applications and fully decentralized systems.

The Potential Impact on the Restaurant Industry

If successful, Blackbird and similar platforms could have a transformative effect on the restaurant industry. By reducing costs, improving customer engagement, and providing new revenue streams through tokenization, these technologies could help address the chronic profitability issues faced by many establishments.

Moreover, the increased transparency and direct connection between restaurants and their patrons could lead to more personalized dining experiences and stronger customer loyalty.

Challenges and Criticisms

Despite its promising approach, Blackbird and similar crypto projects face several challenges:

1. Regulatory uncertainty surrounding cryptocurrencies and blockchain technologies.
2. The need for widespread education and understanding of blockchain concepts among both consumers and businesses.
3. Competition from established payment and loyalty platforms that may adopt similar technologies.
4. The potential for market volatility and speculation around crypto tokens, which could distract from the core value proposition.

The Broader Implications for Crypto Adoption

Blackbird's focus on the restaurant industry provides a blueprint for how crypto technologies can be applied to specific sectors. This targeted approach could lead to a more organic and sustainable path to widespread crypto adoption, as opposed to more generalized or speculative use cases.

As more industry-specific blockchain solutions emerge and prove their value, it could create a network effect that accelerates adoption across various sectors of the economy.

The Role of Investors in Shaping Crypto Projects

The involvement of investors like Jesse Walden and Variant Fund in projects like Blackbird highlights the important role that venture capital plays in shaping the direction of crypto innovation. By supporting projects that focus on real-world applications and user experience, investors can help guide the industry towards more practical and impactful use cases.

Conclusion: A New Chapter in Crypto Adoption

Blackbird's approach to revolutionizing the restaurant industry through blockchain technology represents an exciting new chapter in the story of crypto adoption. By focusing on solving real-world problems, prioritizing user experience, and taking a measured approach to decentralization, Blackbird offers a compelling model for how blockchain can move beyond speculative use cases and create tangible value in specific industries.

As the project continues to evolve and potentially expand to other sectors, it will be fascinating to watch how Blackbird's innovations influence the broader crypto ecosystem and contribute to the mainstream adoption of blockchain technologies.

While challenges remain, the launch of Flynet and the growing traction of the Blackbird platform suggest that we may be entering a new era of practical, industry-focused blockchain applications that could finally unlock the true potential of crypto's app ecosystem.

Facts + Figures

• Blackbird is a loyalty and payments company for the restaurant industry, built on the Base blockchain.
• The company has launched Flynet, its own Layer 3 blockchain on top of Base.
• Blackbird has created over 100,000 wallets for its users without requiring additional onboarding steps.
• The restaurant industry in the US represents approximately $1 trillion in aggregate sales.
• Despite growing popularity, restaurant profitability is declining over time.
• Between 3% and 5% of a restaurant's top-line revenue is lost to third-party intermediaries.
• Blackbird's "fly" points can be used as spending currency in restaurants.
• The F2 token is separate from "fly" points and is used for governance of the Flynet network.
• Every transaction on Flynet incurs a 25 fly clip fee, which is redistributed to F2 token holders.
• Blackbird's approach draws parallels to the founding of Diners Club, the first widely accepted charge card.
• The company emphasizes creating a "magical" user experience, aiming for actions like bill payment to be completed in 10 seconds or less.
• Blackbird uses NFC chips for digital check-ins at restaurants.
• The platform has evolved from highly customized loyalty programs to a more standardized approach.
• Variant Fund, led by Jesse Walden, is an investor in Blackbird.
• The project aims to make both consumers and vendors (currently restaurants) owners of the underlying network.

Questions Answered

What is Blackbird?

Blackbird is a loyalty and payments platform for the restaurant industry, built on blockchain technology. It allows users to check into restaurants, earn points for their visits, and pay their bills directly through the app. The platform aims to create a more efficient and rewarding ecosystem for both restaurants and diners by eliminating unnecessary intermediaries and reducing costs.

How does Flynet work?

Flynet is Blackbird's own Layer 3 blockchain built on top of Base. It serves as the underlying infrastructure for all Blackbird transactions, check-ins, and actions taken by restaurants or consumers. Every activity on Blackbird is memorialized on-chain on Flynet, providing transparency and control. The network uses its own native gas token, F2, which is separate from the "fly" points used within the Blackbird app for rewards and payments.

What are the benefits of Blackbird for restaurants?

Blackbird offers several benefits for restaurants. It aims to reduce costs by eliminating unnecessary intermediaries that typically take a cut of restaurant revenues. The platform provides a direct connection between restaurants and their patrons, potentially improving customer engagement and loyalty. Additionally, Blackbird's blockchain-based system offers increased transparency and efficiency in managing loyalty programs and payments.

How does Blackbird's approach differ from traditional loyalty programs?

Blackbird's approach differs from traditional loyalty programs in several ways. It uses blockchain technology to create a more transparent and efficient system. The platform allows for real-time, on-chain recording of all transactions and interactions. Unlike many traditional programs, Blackbird aims to give users ownership in the underlying network through the F2 token, aligning incentives between the platform, restaurants, and consumers.

What is the F2 token and how does it create value for holders?

The F2 token is Blackbird's governance token for the Flynet network. It's separate from the "fly" points used within the app for rewards and payments. F2 token holders can participate in network governance and receive a share of transaction fees. Every transaction on Flynet incurs a 25 fly clip fee, which is collected in a treasury and redistributed to F2 token holders, creating a potential "fly dividend" for participants in the network.

How does Blackbird plan to achieve mainstream adoption?

Blackbird focuses on delivering real-world value and a seamless user experience to achieve mainstream adoption. The platform emphasizes the practical benefits of its loyalty and payment system rather than highlighting the underlying blockchain technology. By creating a "magical" experience where users can check in and pay quickly, Blackbird aims to attract users who may not be interested in crypto for its own sake but appreciate the convenience and rewards of the system.

What challenges does Blackbird face in implementing its vision?

Blackbird faces several challenges in implementing its vision. These include regulatory uncertainty surrounding cryptocurrencies and blockchain technologies, the need for widespread education about blockchain concepts, competition from established payment and loyalty platforms, and potential market volatility around crypto tokens. Additionally, the company must continue to refine its product to meet the needs of both restaurants and consumers while maintaining the simplicity and efficiency that make it attractive.

How does Blackbird's approach compare to other crypto projects targeting real-world adoption?

Blackbird's approach stands out from many crypto projects by focusing on solving specific, real-world problems in the restaurant industry. Rather than emphasizing the technology itself, Blackbird prioritizes user experience and tangible benefits for both restaurants and diners. The project's strategy of progressive decentralization – building a useful product first and then gradually introducing blockchain elements – contrasts with many crypto projects that lead with the technology. This approach could serve as a model for other projects seeking to bridge the gap between traditional applications and fully decentralized systems.