The cryptocurrency industry has spent years building the infrastructure that underpins financial products and layering novel creations on top of those rails. Now comes the harder part: getting people to actually use these products — and keeping them once they arrive.

That question is becoming more pressing across the sector 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 — it is figuring out what will make consumers and institutions choose to use them.

For companies like Coinbase (COIN), one of the largest cryptocurrency exchanges, 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, he noted, 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, according to Shen. Customers want to grow their money, hold it, send it, spend it or borrow against it — and whether a blockchain sits underneath the product is not necessarily the point. That list, in other words, describes the core jobs of a traditional bank account.

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 the equation. The bigger test, the company acknowledges, is whether that person stays.

Coinbase thinks about adoption as a cycle with three parts: money comes onto the platform, customers have a reason to hold it there, and then they have ways to use it. In practice, that could mean receiving a paycheck or making a deposit, earning rewards while holding assets, and eventually spending, trading or making payments with those funds. Each stage is designed to feed the next.

“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, while other incentives are temporary and designed to persuade someone to move money from a product they already use — a tactic long familiar from traditional finance, where banks offer sign-up bonuses and account-opening rewards. Promotions of that kind can help “break inertia,” Shen said.

But Coinbase does not 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.

Source: CoinDesk, via CryptoNewsNet.