Lightspeed Podcast: Blackbird's Innovative Loyalty and Payments Platform

Introducing Blackbird: A New Era of Restaurant Loyalty

Blackbird is emerging as a game-changing loyalty and payments platform for the restaurant industry, leveraging blockchain technology to create a more efficient and rewarding experience for both consumers and businesses. Founded by Ben Leventhal, co-founder of the popular restaurant reservation app Resy, Blackbird aims to address longstanding issues in the restaurant industry by cutting out middlemen and creating direct connections between restaurants and their customers.

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The platform, built on the Base blockchain, has recently announced the launch of Flynet, its own Layer 3 blockchain. This move signifies Blackbird's commitment to maximizing control, ownership, and governance for its users. The ecosystem comprises two main components: the Blackbird loyalty program with its Fly points, and the Flynet blockchain with its native F2 token.

The Restaurant Industry's Trillion-Dollar Problem

The restaurant industry in the United States alone represents a trillion-dollar market. However, despite its size and cultural significance, most restaurants struggle with profitability. Ben Leventhal explains:

"The really interesting thing about restaurants and the real crux of the opportunity for us in many ways is that 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 and decreasing profitability stems from the industry's economic structure, particularly the presence of numerous third parties that stand between restaurants and their customers, suppliers, and cash flow.

Cutting Out the Middlemen

Blackbird's primary mission is to eliminate these costly intermediaries. Leventhal estimates that "there's somewhere between 3% and 5% of a restaurant's top line revenue that's leaking out to third parties that, in my opinion, are not creating enough value." By focusing on this issue, Blackbird aims to improve restaurant profitability while enhancing the connection between restaurants and their customers.

One of the main targets for optimization is payment processing. As Leventhal points out, "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." This inefficiency is a key area where Blackbird sees an opportunity for improvement.

The Blackbird User Experience

From a consumer perspective, Blackbird offers a seamless experience that belies its underlying blockchain technology. Users can check into restaurants, earn points, and pay their bills all through the Blackbird app. The platform supports various payment methods but encourages the use of Fly, its native rewards token.

A unique feature of Blackbird is its hardware component - NFC chips placed in restaurants that allow users to "tap in" when they arrive. This digital handshake creates a reliable signal of the customer's presence and facilitates information sharing with the restaurant.

Flynet: Blackbird's Layer 3 Blockchain

The recent launch of Flynet, Blackbird's own blockchain built as a Layer 3 on top of Base, marks a significant milestone for the company. Ben Leventhal explains the rationale behind this decision:

"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 creating its own blockchain, Blackbird aims to maximize control, ownership, and governance for its users, setting itself apart from traditional loyalty programs and other blockchain-based initiatives.

The Dual Token System: Fly and F2

Blackbird's ecosystem employs two distinct tokens: Fly and F2. Fly serves as the loyalty points currency within the Blackbird app, allowing users to earn and spend at participating restaurants. F2, on the other hand, is the native token of the Flynet blockchain, focused on governance and control of the network itself.

This bifurcation addresses different needs within the Blackbird ecosystem. As Leventhal explains, "Fly is going to be your points to spend on Blackbird and maybe someday in lots of other contexts, we hope. Flynet and its token F2 is really about governance and control of the network itself."

Value Accrual in the Blackbird Ecosystem

The value proposition for users in the Blackbird ecosystem is twofold. On the Fly points side, users can enjoy immediate benefits such as free meals, coffees, or special treats at participating restaurants. The real-world applicability of these rewards creates a tangible and appealing value for consumers.

For F2 token holders, value accrual comes through a different mechanism. Every transaction processed on Flynet incurs a 25 Fly clip fee, which is collected in a treasury. These accumulated Fly points are then redistributed to F2 token holders, creating a form of dividend for those who hold the network's governance token.

Lessons from Year One

Reflecting on Blackbird's first year of operation, Leventhal shared some key learnings. Initially, the platform was designed to support highly customizable loyalty programs for each restaurant. However, they discovered that many restaurants lacked the resources and expertise to fully utilize these capabilities.

As a result, Blackbird has evolved towards a more standardized loyalty model with a stronger emphasis on Fly points. This shift has made the platform more accessible and easier to implement for a wider range of restaurants.

The Challenges of On-Chain Loyalty Programs

The concept of blockchain-based loyalty programs isn't entirely new, but many previous attempts have fallen short. Notable examples include Starbucks' NFT program, which was discontinued last summer. Leventhal attributes the success of Blackbird to its focus on real-world value and magical user experiences, rather than emphasizing the blockchain aspect to consumers.

"Nobody is going to engage with Blackbird because it's on chain," Leventhal states. "We just have a really sober view about this. I think it may work because we think largely it's going to be really hard to make it work. We want the value to be about what you can get at restaurants and how those points make you feel from spending power and unlocking magic standpoint."

The Importance of Progressive Decentralization

Jesse Walden from Variant Fund, an investor in Blackbird, emphasizes the importance of progressive decentralization in blockchain projects. This approach involves first building a product that people want and then gradually introducing decentralized elements.

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."

Blackbird's Unique Position in the Crypto Space

Blackbird stands out in the cryptocurrency landscape for its focus on "normie" consumers and real-world applications. Unlike many crypto projects that cater primarily to crypto-native users, Blackbird aims to bring blockchain technology to everyday restaurant-goers who may not even realize they're interacting with a blockchain-based system.

This approach positions Blackbird as a potential bridge between the traditional world of consumer loyalty programs and the emerging possibilities of blockchain technology.

The Magic of Seamless User Experiences

Throughout the discussion, Leventhal emphasizes the importance of creating "magical" experiences for users. In the context of Blackbird, this means designing interactions that are frictionless and thoughtful. For example, the ability to pay a restaurant bill with just a few taps on a smartphone, without the need to physically present a card or cash, embodies this concept of magic in user experience.

Leventhal notes that the crypto industry as a whole has often fallen short in delivering such magical experiences due to inherent friction points. However, he sees rapid progress being made in this area, with companies like Privy helping to reduce onboarding friction by creating wallets behind the scenes for users.

The Historical Context: From Diners Club to Blackbird

An interesting parallel is drawn between Blackbird and the history of credit cards, particularly the Diners Club card. The Diners Club, founded in the 1950s, was born out of a similar desire to simplify payments in restaurants. This historical precedent provides an interesting context for understanding Blackbird's potential impact on the restaurant industry.

Furthermore, the ownership model of Visa, which was initially a consortium of banks that owned the network, bears similarities to Blackbird's approach of distributing ownership of the Flynet blockchain to its users.

The Future of Restaurant Loyalty and Payments

As Blackbird continues to evolve and prove its concept, it may pave the way for broader adoption of blockchain technology in consumer-facing industries. Leventhal speculates that as Blackbird demonstrates success, larger chains and businesses may take notice and consider similar approaches to loyalty and payments.

However, he also notes that regulatory developments and the success of current blockchain projects will play a crucial role in determining the future landscape of this technology in consumer applications.

Building for Long-Term Success

Blackbird's approach to building a sustainable and valuable platform involves several key strategies:

1. Focusing on real-world value for users
2. Creating frictionless, "magical" experiences
3. Implementing a dual-token system to address different needs
4. Progressively decentralizing to build user ownership
5. Adapting based on real-world feedback and usage patterns

By adhering to these principles, Blackbird aims to create a loyalty and payments platform that can stand the test of time and provide genuine value to both restaurants and consumers.

The Role of Blockchain in Consumer Applications

While Blackbird leverages blockchain technology, it takes a "blockchain last" approach in its user-facing elements. This strategy allows the company to focus on delivering value and functionality to users without getting bogged down in the complexities of blockchain technology.

Leventhal believes that as companies like Blackbird prove out use cases and demonstrate scalability, interest in blockchain applications for consumer-facing businesses may resurge. However, he emphasizes the need for patience and the importance of regulatory clarity in shaping the future of these applications.

Challenges and Opportunities in the Restaurant Industry

The restaurant industry, despite its cultural significance and economic size, faces numerous challenges. Blackbird aims to address some of these issues by:

1. Reducing transaction costs for restaurants
2. Improving the direct connection between restaurants and customers
3. Providing more efficient loyalty and rewards systems
4. Offering restaurants better data and insights about their customers
5. Creating new revenue streams through the Flynet ecosystem

By tackling these areas, Blackbird hopes to contribute to a more economically sustainable restaurant industry while enhancing the dining experience for consumers.

The Importance of User Ownership in Web3 Projects

Jesse Walden from Variant Fund highlights the importance of user ownership in Web3 projects. He explains that Variant's founding thesis is to "make a billion users owners," and Blackbird aligns perfectly with this vision by giving both consumers and restaurants ownership stakes in the underlying network.

This approach differs significantly from traditional loyalty programs or even some blockchain-based initiatives where users might own tokens but not have a stake in the underlying infrastructure.

Adapting to User Needs and Market Realities

Blackbird's evolution over its first year demonstrates the importance of flexibility and responsiveness in the blockchain space. The company's shift from highly customizable loyalty programs to a more standardized model with a stronger emphasis on Fly points showcases its ability to adapt based on real-world feedback and market needs.

This adaptability is crucial in an industry as dynamic as blockchain technology, where user needs and technological capabilities are constantly evolving.

The Potential for Blockchain in Traditional Industries

Blackbird's application of blockchain technology to the restaurant industry serves as a case study for how distributed ledger technology can be applied to traditional sectors. By addressing real pain points like high transaction fees and fragmented loyalty programs, Blackbird demonstrates the practical value that blockchain can bring to established industries.

This approach could potentially inspire similar innovations in other sectors, leading to a broader adoption of blockchain technology in everyday consumer experiences.

The Challenge of Creating Successful Token Distributions

The discussion touches on the challenges of creating successful token distributions or "airdrops" in the crypto space. Walden highlights several strategies that can lead to more effective token distributions:

1. Implementing seasons or epochs to distribute tokens over time
2. Using non-transferable tokens with vesting periods to encourage long-term alignment
3. Balancing the need for sufficient market float with targeted distribution to genuine users
4. Ensuring a large enough high-quality user base before conducting major token distributions

These strategies aim to reward genuine users and supporters of a project while discouraging short-term speculation or "farming" behavior.

The Intersection of Blockchain and Traditional Tech

Leventhal, coming from a more traditional tech background, offers insights into how the blockchain space is perceived by those in "Web2" companies. He notes that there's often a lack of understanding about the opportunities presented by blockchain technology, coupled with fatigue around regulatory uncertainties.

However, he believes that as companies like Blackbird demonstrate successful use cases and scalability, interest from traditional tech companies and large chains may resurge. This highlights the importance of pioneers in the space creating tangible, successful examples of blockchain applications in everyday contexts.

Creating Magical User Experiences in Blockchain Applications

Throughout the discussion, Leventhal emphasizes the importance of creating "magical" user experiences, particularly in blockchain applications where friction has historically been high. He defines magic in product design as "extremely low friction, extremely thoughtful" interactions.

For Blackbird, this translates to features like the ability to pay a restaurant bill with minimal interaction with a smartphone, or the seamless creation of crypto wallets for users without requiring any additional steps during onboarding.

This focus on user experience is crucial for blockchain applications aiming to achieve mainstream adoption, as it helps bridge the gap between the complex underlying technology and the everyday user who may not be interested in the technical details.

The Future of Blockchain in Consumer Applications

As Blackbird continues to develop and prove its concept, it may serve as a blueprint for how blockchain technology can be successfully integrated into consumer-facing applications. The company's approach of focusing on real-world value, creating seamless user experiences, and gradually introducing blockchain elements could become a model for other companies looking to leverage distributed ledger technology in traditional industries.

However, the success of such ventures will likely depend on several factors:

1. Regulatory clarity around blockchain and cryptocurrency applications
2. Continued technological advancements to improve scalability and reduce costs
3. Growing consumer awareness and acceptance of blockchain-based solutions
4. The ability of companies to create genuinely valuable use cases that go beyond speculation

As these factors evolve, we may see an increasing number of blockchain applications that, like Blackbird, focus on solving real-world problems and creating tangible value for users, rather than emphasizing the underlying technology itself.

Facts + Figures

• Blackbird is a loyalty and payments company for the restaurant industry built on the Base blockchain.
• The company recently launched Flynet, its own Layer 3 blockchain built on top of Base.
• The restaurant industry in the United States represents a trillion-dollar market.
• Between 3% and 5% of a restaurant's top-line revenue is lost to third-party intermediaries.
• Traditional payment processing can cost restaurants up to 3.5% per transaction.
• Blackbird uses NFC chips in restaurants for user check-ins.
• The platform has two tokens: Fly for loyalty points and F2 for network governance.
• Every transaction on Flynet incurs a 25 Fly clip fee, which is redistributed to F2 token holders.
• Blackbird has over 100,000 wallets created for its users.
• The company's $60 Breakfast Club pass has provided free coffee for users in New York City for a year.
• Blackbird has shifted from highly customizable loyalty programs to a more standardized model.
• The first charge credit card, Diners Club, was inspired by a need for easier restaurant payments.
• Visa started as a consortium of banks that owned the payment network.
• Blackbird aims to create magical user experiences with two taps or less for key actions.
• The company uses Privy to create crypto wallets behind the scenes for users.

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, and pay their bills through a mobile app. The platform aims to improve profitability for restaurants by reducing transaction costs and creating direct connections between restaurants and their customers.

How does Flynet work?

Flynet is Blackbird's own Layer 3 blockchain built on top of Base. It serves as the underlying infrastructure for Blackbird's ecosystem, processing transactions and managing the network's governance. Flynet uses a native token called F2 for governance purposes, while transactions on the network incur a fee in Fly points, which are redistributed to F2 token holders.

What are the benefits of Blackbird for restaurants?

Blackbird offers several benefits for restaurants. It reduces transaction costs by cutting out middlemen, provides a direct connection to customers, offers a more efficient loyalty and rewards system, and creates new revenue streams through the Flynet ecosystem. Additionally, it gives restaurants better data and insights about their customers, potentially improving their business operations and customer relationships.

How does Blackbird create a "magical" user experience?

Blackbird focuses on creating frictionless and thoughtful interactions for users. This includes features like the ability to check into a restaurant with a simple tap of an NFC chip, paying bills with minimal smartphone interaction, and automatically creating crypto wallets for users without requiring additional steps. The goal is to make the blockchain aspect of the platform invisible to the average user while still providing the benefits of the technology.

What is the difference between Fly and F2 tokens?

Fly tokens serve as the loyalty points currency within the Blackbird app, allowing users to earn and spend at participating restaurants. F2 tokens, on the other hand, are the native governance tokens of the Flynet blockchain. F2 token holders have a stake in the network's governance and receive a share of the transaction fees collected on the network in the form of Fly points.

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, gives users ownership stakes in the underlying network through F2 tokens, and aims to reduce costs for restaurants by cutting out intermediaries. Additionally, Blackbird's dual-token system allows for both immediate rewards (through Fly points) and long-term value accrual (through F2 tokens).

What lessons has Blackbird learned in its first year of operation?

In its first year, Blackbird learned that many restaurants lack the resources and expertise to fully utilize highly customizable loyalty programs. As a result, the company shifted towards a more standardized loyalty model with a stronger emphasis on Fly points. This change made the platform more accessible and easier to implement for a wider range of restaurants, demonstrating Blackbird's ability to adapt based on real-world feedback and market needs.

How does Blackbird plan to expand its impact in the restaurant industry?

Blackbird plans to expand its impact by continuing to prove its concept and demonstrating the value of its blockchain-based approach to loyalty and payments. As the platform grows and shows success, it may attract attention from larger chains and businesses. The company also aims to contribute to a more economically sustainable restaurant industry by addressing issues like high transaction costs and fragmented customer relationships. Long-term, Blackbird hopes to inspire similar innovations in other sectors, potentially leading to broader adoption of blockchain technology in everyday consumer experiences.