Crypto poured years into new products. The next challenge is keeping users

The crypto industry has spent years building infrastructure for financial products and putting novel creations on top of those rails. Now comes the harder part: getting people to actually use these products.

That question is becoming more pressing across the industry as crypto moves closer to mainstream finance. Asset managers have tokenized funds, exchanges are expanding into lending, payments and other financial services and blockchain networks are courting institutions. The challenge is no longer just proving these products can be built, but figuring out what will make consumers and institutions choose to use them.

For companies like Coinbase (COIN), that has meant thinking less about the technology itself and more about what customers are trying to do with their money.

“The crypto industry oftentimes in the past was very technology oriented,” said Ben Shen, Coinbase’s head of financial services and loyalty products. Products could be heavy on jargon or expose users to the technology running underneath them.

That matters less as crypto starts to overlap with more traditional financial services, he said. Customers want to grow their money, hold it, send it, spend it or borrow against it. Whether a blockchain sits underneath the product isn’t necessarily the point.

Instead, Coinbase is looking for what Shen calls “magic moments” — instances when a customer can immediately see why a product is useful. But getting someone to try a product once is only part of it.

Coinbase thinks about adoption as a cycle: money comes onto the platform, customers have a reason to hold it there and then they have ways to use it, he said. That could mean receiving a paycheck or making a deposit, earning rewards while holding assets and eventually spending, trading or making payments with them.

“If you create the right magic moments across these three parts of the flywheel, then that’ll get people to increasingly bring more and more money onto the platform,” Shen said.

Rewards are one way to get that cycle started. Some are part of the product itself, other incentives are temporary and designed to persuade someone to move money from a product they already use. Those can help “break inertia,” Shen said.

But Coinbase doesn’t want someone to move money onto the platform for a promotion and pull it out as soon as that promotion ends. The bet is that once the money is there, customers will find other things to do with it.