Blockchain for tips

the editor   |   monday, may 2, 2016

Do you care about the blockchain? Should you?

Wall street is a big fan of digital ledgers these days. There are a lot of startups attempting to use digital ledgers to speed up cash settlements. Basically, these startups are trying to reduce the delay between the day a person sends money and the day the person receives the money. Generally speaking, this is achieved by attaching ownership and transaction information directly to a digital record of an asset (this is basically what “blockchain” technology does). This eliminates the need for a bank receiving a cash transfer to confirm to the bank that is initiating a transfer or transaction, via a confirmation procedure separate from the underlying transfer or transaction, the identity of the recipient (of transfer) or counterparty (to the transaction) and that the bank has, in fact, received the transfer or executed the transaction.

Why do they want to eliminate this step? Because, at least with respect to a simple cash transfer, money stuck in a settlement cycle is money that a bank can’t use as a credit multiplier. Quicker settlements = good for business (one could argue that it is even a net gain to the entire economy, not merely the parties to the transfer or transaction). There is really no drawback to this kind of advancement – no one stands to gain from sticking with the old way of doing things.

Looking at it that way, blockchain, or, in any event, the tightly packaged confirmation procedure that blockchain embodies, is obviously great. This got us to thinking – what is really going on when a tipper leaves a tip? (all we really think about at tiptotem is tipping.) What components of a tipping transaction are susceptible to an improvement that brings more value to a tipper and tippee? Could we export something like the blockchain to tipping?

We think it’s possible and we think we have done that. Like the blockchain for wall street, we believe that a proper blockchain for tips and other gratuities must also have as its end result a cash multiplier effect – meaning, one gets paid more by using the blockchain for tips than one would get paid by not using it. A net gain for everyone. Working from this assumption, we realized that tiptotem’s blockchain must ledger-ize tips in a way that increases the potential size or frequency of tips overall. We believe that this is achieved, first and foremost, by capturing information associated with tipping and exposing that information to potential tippers and tippees in order to inform future tips. Basically, it requires introducing a social ledger to tipping.

What does a “social ledger” for tips look like in practical terms? It means that anyone that is tipping you can see what amount others have tipped you recently, which probably discourages miserly tipping. It means that anyone you have tipped has a name and a face that you can attach that memory to, which enhances the value of the service you received behind the tip. It means that you can ask that old bartender you used to trade stories with where they are working these days, which enhances the bartender’s connection with customers and fans and earns her more tips. It means you can tip before you arrive or after you've gone home, which promises to earn you better service now and in the future.

So, should you care about the blockchain? Well, insofar as it affects your own paycheck, maybe you should. Do you stand to gain from sticking with the way you currently receive tips? If you had the opportunity to re-think the tip jar, what would you devise? How would you structure a “digital tip jar” to make sure you get paid what you think you’ve earned? What do you think a “blockchain for tips” would look like?

Tweet us your thoughts on twitter @tiptotem . . . .