Accounts.
Gjelina Group, the company behind popular Los Angeles restaurants Gjelina and Gjusta, opened a restaurant in New York last year but had to close it after only 30 days due to a fire. During a dinner with Ben and Gjelina Group CEO Shelley Armistead, she mentioned that they lacked the funds needed to reopen. Ben suggested a partnership: Gjelina could sell House Accounts on Blackbird to raise the necessary funds, and Gjelina would consider its supporters as regular customers, offering them the coveted House Accounts.
I thought this was a great idea and decided to participate on the first day. By prepaying $5,000, I would receive a $5,000 House Account to use at the restaurant once it reopened. I would also get a dedicated reservation hotline for booking hard-to-get tables, a gift (they gave a Gjelina hat and delicious granola), and 50,000 $FLY. It was a wise move as I would have a go-to place and enough $FLY to potentially be considered a regular customer by other restaurants in the network. Mutual benefit.
In March, Blackbird launched the Breakfast Club, offering a different but equally enticing deal: pay $85 as a membership fee and enjoy free coffee or tea for a year at 14 participating coffee shops in the city, along with merchandise, event access, and 5,000 $FLY. Additionally, since you are more likely to choose a coffee shop in your neighborhood, the restaurants gain repeat customers and you will encounter others who are part of the Breakfast Club. Mutual benefit.
Carra Wu, a partner at a16z crypto, tweeted about making new friends at her local Fairfax location:
carra.eth: Yesterday morning, I went to @blackbird_xyz’s Breakfast Club closest to my home and made 5 new friends—actual friends—who all live near me.
As an introvert struggling in happy hours and noisy parties, I can’t tell you how big of an unlock this was for me. Blackbird Breakfast Club is as close to Central Perk Coffee from Friends in the smartphone era as it gets. Maybe @benleventhal will launch a dating app soon?
Twitter link
In June, Blackbird introduced its newest club: Bar Blackbird. Similar deal: pay $50 and enjoy a free drink (with the purchase of a second drink) at over 15 bars in New York every night, along with 2,500 $FLY.
Members get to enjoy a free drink and a “buyback” experience every time they walk into their favorite bars. The restaurants gain new customers who become repeat customers. Mutual benefit.
There will be more experiments in mutual benefit. Earlier this month, Blackbird partnered with Cowy Burgers in Miami for a three-day pop-up event at the Standard Biergarten, open only to Blackbird users who claimed (for free) the Blackbird x Cowy Burger access pass. Perhaps a burger club is coming soon.
But the biggest release from Blackbird is not the experiments. It is their core business, their mission to help restaurants become more profitable.
Today, Blackbird officially launched Blackbird Pay, which they have been rolling out over the past few months.
“Blackbird initially focused on loyalty, which is a nice-to-have,” Fred explained in our conversation last week, “but when combined with payments, it becomes a must-have.”
Here’s how it works.
When you check in at a Blackbird restaurant, a bill is opened. You can choose to split the bill with friends, pay with the in-app charge card or credit card, or even pay with $FLY. From the customer’s perspective, this turns your social capital into actual capital that you can use for dining.
And there’s one more thing…
At some restaurants, you simply tap and order whatever you want, and then walk out. The bill is automatically paid.
I’ve only had this experience once, about five or six years ago, and it was so magical that I remember the details. It was a summer night, and Puja and I were dining outside at Bar Primi on the Bowery. We sat outside, ordered pasta and drinks, and waited for the check. The server came to our table with the receipt: the bill had been paid. We could just leave. A magical experience.
Bar Primi, The New York Times
I even remember using the reservation app Resy for the first time, around 2011. My credit card was on file, and the bill was automatically paid. It was a magical experience for me, and I’m sure the no-checkout Blackbird Pay experience will generate similar buzz.
However, to promote Blackbird Pay, restaurants need to accept it and train their staff on the new system and processes. What’s in it for them?
Blackbird Pay charges a fixed fee of 2%, while the industry average is 3-4%. Payments are Blackbird’s primary source of revenue. Ben explained that they may lose money on some transactions (when users choose to pay with credit cards, Blackbird covers those fees), but make money on others (when they use $FLY, Blackbird incurs almost no fees), but “overall, we like this 2% model.” Mutual benefit.
You can see how it all comes together. Earn social capital, convert it into actual capital. Restaurants gain data, loyal customers, and lower fees. You can become a regular wherever you go.
Expect more experiments in mutual benefit. With Blackbird officially launching Blackbird Pay, they have laid the groundwork to help restaurants become more profitable.Blackbird can provide a strong platform and usage suggestions for restaurants, but the restaurants themselves must fully utilize all the value provided by Blackbird and design unique loyalty programs using these values.
Ben also expressed a similar view, believing that tools for acquiring and retaining customers are the most difficult for restaurants to understand. However, he said that Blackbird’s job is to help them improve in this aspect.
“We plan to work with them to enhance this skill, collaborating with restaurants on all aspects from promotion to product design,” he said. Blackbird has a responsibility to build an interface that allows restaurants to simplify the use of $FLY, rewards, and information as much as possible to attract customers and increase profitability through repeat visits.
Initially, they will gain a profit margin of 1-2% from Blackbird Pay. Over time, the plan is to help restaurants measure what decisions they can make today to resolve short-term and long-term conflicts, in order to achieve profitability now and in the future.
A major lesson from USGH is that business models and customer experiences are closely linked, and Blackbird hopes to make it easier for each restaurant to understand and leverage this relationship.
Magical regular customer experience
The good news is that Blackbird provides tools and incentives for restaurants to enhance our dining experience (unless you are very rude to the waitstaff, or just here for the photos, you might run into trouble).
If you are in New York, I highly recommend giving it a try. The Blackbird team generously offers an additional 500 $FLY to all “Not Boring” readers, just by signing up for Blackbird on your next visit and providing your name, email, and phone number.
I discussed many benefits from a customer perspective in “How Blackbird Works,” so I won’t go into detail, but I did ask Ben how he thinks the experience will evolve in the years after expanding online. Here is his description:
You open the Blackbird app. Based on its understanding of you, your location, and the specific queries you make, it will recommend two to three nearby places. This will be your last interaction with the technology. You simply walk into the restaurant, which will identify you and understand your preferences. All staff knows your name. They might give you a complimentary drink, cook your steak the way you like it, or prepare a special dessert for your birthday. Then you can just leave. The bill will be deducted from your $FLY balance, and you will also receive additional $FLY for your visit.
The idea is to use technology to take you away from technology, into a magical in-person experience that lets you feel like a regular wherever you go.
Blackbird as the online version of AmEx
More profitable independent restaurants, more amazing dining experiences. Sounds good. However, to achieve this future of dining, Blackbird itself needs to be a successful business model. It needs to grow while maintaining the charm of a startup.
Just like the restaurants themselves, the better Blackbird is built, the better it can meet customer needs.
From this perspective, the best way to understand Blackbird is to see it as the online version of AmEx. It profits through payments and increases transaction volume by enhancing customer loyalty.
There is a reason that Blackbird looks like AmEx – both are in the payment and loyalty business. Fred Wilson stated that Ben’s experience at AmEx directly influenced Blackbird’s concept after acquiring Resy.
He worked at AmEx for a year, understanding the internal mechanisms AmEx had built in payment and loyalty. He recognized the power of this business model and the dependence of the restaurant and hotel industries on it, but its limited impact. He believed in rebuilding this business model online and allowing restaurant owners to become owners at the right time.
There are similarities between these two businesses, but also crucial differences.
AmEx has built a $170 billion giant supported by a closed loyalty and payment system, where it is both the issuer and recipient of merchant payments. Its operation model is as follows:
AmEx charges higher fees (2.5%-3%) compared to Visa and Mastercard (around 2%).
Higher fees enable AmEx to provide generous rewards, attracting affluent customers.
Affluent customers drive high transaction volumes, making merchants feel the fees are reasonable.
High transaction volumes generate more points, increasing customer loyalty and spending levels.
Enhanced loyalty and spending attract more merchants, increasing acceptance.
Wider acceptance drives more transactions, creating a virtuous cycle.
If Blackbird succeeds, it will reflect like AmEx in a funhouse mirror:
Blackbird charges lower fees (2%) compared to traditional restaurant payment systems (3%-4%).
Lower fees attract more restaurants to join the platform.
Restaurants use $FLY rewards to attract more diners to the platform.
These diners drive transaction volume, attracting more restaurants to join the platform.
High transaction volumes generate more $FLY points, increasing customer loyalty and spending levels.
Enhanced loyalty and spending attract more restaurants, increasing acceptance.
Wider acceptance drives more transactions, creating a virtuous cycle.
There is one detail I haven’t mentioned yet. While the purpose of $FLY is to maintain stable value or fixed rates, using $FLY allows diners and restaurants to acquire stakes in the network through Blackbird’s second token, $F 2. The more $FLY you hold and spend (as a diner) or hold and receive (as a restaurant), the more stakes you acquire.
I like Blackbird’s approach because it prioritizes experience over ownership. It’s not about kickstarting the flywheel, but making the existing flywheel run faster by providing additional incentives for diners and restaurants.
Blackbird gives control to restaurants and customers, contrasting with the key method between AmEx and Blackbird: AmEx’s value comes from its closed-loop payment system across all merchants, while Blackbird’s value comes from its focus on an open system specific to certain merchants.
Over time, other industries may develop products specific to vertical industries, using $FLY and $F 2 to enhance the utility of rewards and expand the ecosystem’s scale.
But Blackbird Labs focuses on restaurants, given its business model, the alignment between the two is evident.
Blackbird needs to simplify the process for restaurants to use its tools to provide a high-quality experience. These experiences will bring more transaction volume to restaurants, increasingly processed through Blackbird Pay. Blackbird charges 2% of all transaction volumes and with widespread use of $FLY, can generate more net revenue.
High-quality experience → more transaction volume → more profit.
This is true for restaurants and for Blackbird, partly thanks to the support of encryption technology.
Cryptocurrency solves this problem
So far, we have rarely mentioned cryptocurrency. Blackbird’s membership cards are non-fungible tokens (NFTs), its loyalty token is $FLY, network participants can acquire stakes in the network through $F 2, but we focus on the impact of these different products on restaurants and their customers, rather than the specifics of the tokens themselves.
And that’s a good thing.
Blackbird is one of the first “crypto” applications adopted by mainstream users and businesses, many of whom may not even be aware that they are using a “crypto” application. When I asked Ben about the reasons for this, he gave two reasons:
People love restaurants. “Restaurants are deeply rooted in our habits. They bring joy. Placing ourselves at the center of restaurants naturally makes consumers happy.”
Building a magical product, whether involving blockchain: “The key to adoption is developing products that consumers love. This has nothing to do with blockchain technology itself.”
However, despite his experience building traditional software products, Ben chose to introduce blockchain technology into Blackbird, despite the regulatory complexity and technical challenges it brings. After all, he doesn’t need to work after selling two companies, he is dedicated to supporting the restaurant industry, and if blockchain technology cannot achieve this goal, he will not develop on the blockchain.
So, why introduce blockchain technology?
Last November, in an article titled “Blockchain as a Platform,” I argued that blockchain is just a platform that offers unique benefits and comes with certain drawbacks, and as infrastructure improves and these drawbacks are eliminated, more developers will develop on the chain.
When transaction costs are $50 and take minutes to settle, or customers have to deal with the complexity of setting up wallets and signing transactions, many consumers and developers may find this trade-off unappealing. “However,” I wrote, “as transaction costs decrease, speed up, and user experience improves, these products start to become feasible.”
In fact, Blackbird is an example I cited in that article.
Five years ago, you couldn’t build Blackbird on the chain. That’s obvious. This means that five years ago you couldn’t develop a product similar to Blackbird. This point is less obvious but more critical.
Blackbird is effective because it can operate like a regular consumer app while executing functions that regular consumer apps cannot achieve.
Let’s delve into the structure of Blackbird’s underlying new Flypaper provided by Blackbird to understand why and how it works.
Earlier, I mentioned that Blackbird’s restaurant membership cards are non-fungible tokens (NFTs). Currently, they are the only part on the chain in the application, and their existence on the chain is not crucial. They are currently non-transferable (we believe identity should not be transferable), limited to use within the Blackbird app. For now, they can be considered a record in the Blackbird database, except if Blackbird disappears tomorrow, I can walk into Gjelina and show them that I do indeed own my House Account NFT.
The $FLY tokens currently exist in Blackbird’s database. When you sign in at a restaurant for $FLY, Blackbird simply moves the $FLY from the restaurant’s quota to your account in the database. When you settle the bill with Blackbird Pay using $FLY, it simply moves it from your account to the restaurant’s account.
In the future, $FLY will be used as a reward and payment token within the platform, and restaurants will be able to exchange $FLY with Blackbird at a relatively fixed rate. It will not be traded, transferred, or exchanged for cash outside the application. You cannot profit from speculating on $FLY.
Blackbird users have speculated that aside from being reward and payment tokens, $FLY will also serve as a fuel token and symbol of network ownership, but that is not the case.
Instead, Flypaper has introduced a new token, $F 2, which will serve as the fuel and governance token of the network. The network itself will be a third-layer Flynet built on Coinbase’s Base L2, which is built on Ethereum. You cannot trade, transfer, or exchange $FLY for cash outside the application. You cannot profit from speculating on $FLY.
These tokens will be a key part of Blackbird’s ecosystem moving forward, providing opportunities for diners and restaurants to engage and benefit from the network in different ways.To understand this, you only need to know a few things:
First, transactions will be very fast and low cost. You won’t notice any difference from using regular consumer apps, and Blackbird Labs will cover most of the fees.
Second, other apps can be developed based on Flynet. For example, if someone wants to develop a Blackbird for airlines, they can build it on Flynet and utilize $FLY for rewards and payments, using $F2 as fuel.
There will be a relationship between $FLY and F2. When the blockchain is launched, all $FLY balances in the Blackbird database will be transferred to users’ Blackbird spending wallets at a 1:1 ratio.
F2 will be distributed to diners and restaurants based on users’ $FLY throughput – the amount of $FLY they hold plus the amount they consume or redeem in rewards, divided by the network’s total $FLY throughput. If you hold or use 10% of the $FLY in the network at a certain time, you will receive 10% of the F2 allocation for that time period.
This is a simple and elegant mechanism for distributing ownership in the network, one of the reasons Blackbird cannot achieve it off-chain.
First, network participants (mainly diners and restaurants) will receive 2.51 billion of the 5 billion $F2 tokens, representing over half of the network’s ownership and control.
Second, since the distribution of F2 in the 2.51 billion tokens is based on $FLY throughput, the most active restaurants and diners in the network will receive more network shares.
Third, considering that most people can only dine at one restaurant per night, while most restaurants can accommodate hundreds of guests each night, restaurants naturally should receive more revenue than diners.
Fourth, it incentivizes diners and restaurants to join the network and be active early on. Since distribution is based on the proportion of individual throughput to total network throughput, it will be easier to get more F2 early on. This is an elegant solution to the market cold-start problem.
Finally, since restaurants can use $FLY obtained from Blackbird Labs to reward diners in ways they find beneficial to the restaurant, and since restaurants are physically present, robots cannot enter and conduct Sybil attacks to steal all the tokens.
Any robot trying to book non-peak reservations at Principe Restaurant, sign in personally, spend $500 with friends, and settle the bill with $FLY to maximize their $FLY rewards can give it a try.
(Note: I’d like to see restaurants where booking with $FLY is difficult.)
Cryptocurrency technology makes it possible for diners and restaurants to have ownership of the network. It also enables instant, nearly cost-free payments with $FLY on Flynet. These are the core elements that make Blackbird unique.
Restaurants and diners don’t need to spend a second thinking about cryptocurrency technology and how it works in the background.
For restaurants, it is worth considering how to design a loyalty program that maximizes profits, encourages the use of Blackbird Pay, and increases throughput. They may need to understand some data acquisition and user retention strategies, but they don’t need to know about L2 or L3.
As a diner, all you need to do is show up, sign in, enjoy the food, and leave. Just as some people strive to maximize credit card points or airline miles, or secure restaurant reservations, some people also plan to maximize their $FLY rewards. As long as the restaurant develops a plan that benefits both the restaurant and the network, it can be a win-win. Diners do not need to know anything about cryptocurrencies to enjoy a “normal” experience at more and more restaurants.
Cryptocurrency infrastructure has finally matured, and all of this can happen quietly in the background. Jay specifically pointed out two factors that enhance the Blackbird user experience:
Privy makes it easy to embed user-controlled but unobtrusive wallets in the app.
Base, Coinbase’s EVM-compatible second-layer network, is a low-cost, high-performance L2 with Coinbase’s trusted reputation and brand. (Since its launch in August 2023, Base has been upgraded to make the network more economical and faster, which should make on-chain transactions so smooth that users won’t notice when more components of Blackbird move to the chain).
The result is that Blackbird can build a top consumer app with superpowers. Programmable incentive mechanisms. Faster, lower-cost payments. Ownership and control for restaurants.
This means that besides Blackbird, others can develop similar products to improve their industries.
Fred Wilson pointed out that the existence on the chain provides an opportunity to create loyalty programs similar to AmEx, where all loyalty points are on the chain.
“$FLY is like a stable currency. It’s not like Bitcoin, where you buy it and hope it goes up to $100,000,” he said. “But the idea of putting loyalty points on the chain is important.”
Specifically, this will allow any app to accept $FLY. “Right now,” Fred said, “only AmEx and their partners can participate in the AmEx points program. But $FLY is similar to USDC: over time, any developer should be able to launch an app that supports $FLY.”
FLY could become a reward and payment token for various merchants (including but not limited to restaurants). For example, if an airline wanted to treat FLY similarly to credit card points, they might be able to. If a luxury brand wanted to limit the release of its new products to those holding or spending a certain amount of $FLY, they might be able to.
Interestingly, developers and entrepreneurs will come up with more creative uses for $FLY based on their own understanding of the problems that need to be solved, just like Ben did for restaurants.
To this end, Jay offered a very interesting perspective on why the a16z team is so excited about Blackbird. “Whenever a huge market has broken business models, it’s a great opportunity for someone to try to fix them with encryption technology.”
Perhaps in the case of Blackbird, encryption technology can indeed solve this challenge, even if it is happening behind the scenes.
Our current dining habits
The successful future of Blackbird sounds more appealing. This is the world we hope to live in, one that uses technology to create better face-to-face experiences rather than completely replacing them.
Achieving that future will require a lot of effort. According to the Dune dashboard provided by @jhackworth, there are currently 38,811 wallets holding Blackbird’s NFT, and diners have checked in at 142 restaurants in New York City. Upside Pizza is the most popular restaurant, far ahead.
To get more restaurants to join the platform will take time. It is well known that restaurants are slow to adopt new technologies, even if the restaurant owner gives the green light, getting staff to accept the new system will require additional effort.
Implementing Blackbird is challenging for anyone, but it’s even more challenging if you’re not Ben Leventhal.
When I asked Ben if he needed to operate Eater and Resy before running Blackbird, he replied, “Understanding restaurants and how they operate, being able to communicate with them in their language, is a huge advantage for us.”
We understand, love, and deeply engage in this industry. We work with them, build long-term relationships with them, and understand their operations, how to build technology for them, how to implement it, the implementation process, and the content we can reasonably request. We know how to work with them, how to interact, and ask, “What do you need?” and listen to their answers without taking them literally. Many of the things we do well are because we have been in this industry for a long time.
If Blackbird is successful, it will be because it has built a product that helps restaurants solve their concerns. Technology is just a means, not the ultimate goal.
Each restaurant is unique, just like every person and every business. Some restaurants will immediately be excited about new things, while others will need some convincing. But most restaurants want to provide a good experience for their guests, make them want to come back, and hope to make more profit.
If Blackbird can solve this paradox, early partners will attract more restaurants to join.
How they use these profits, like their designed loyalty program, will be up to the restaurants to decide.
“Today, for restaurants, there is uncertainty about what the future holds,” Ben told me. “We hope to give them greater control over their destiny.”
Blackbird hopes to give restaurants a deeper understanding of the future based on the decisions they make today, as well as additional profits that can be used for action based on this understanding.
Some restaurants will use it to reward consumers with prices and discounts. Some will use it to provide better benefits, salaries, and training for employees. Others will use it to try new things: menu development, concept development, capital investment for new locations.
The challenge and opportunity lie in the fact that restaurants are diverse and decentralized. This makes it more difficult to attract customers and develop products that meet their unique needs, but if you can do that, provide the tools and profits needed for restaurants to prosper, it will bring a richer, more interesting, and unique experience for everyone. This will bring more opportunities for your favorite restaurants, making you feel like a regular. And it means that local businesses can thrive without consolidation or uniformity, as they are not merged or unified.
One of my favorite articles is Colson Whitehead’s “Our Current Lifestyle” in The New York Times two months after the September 11th attacks. Whitehead describes New York City as a vibrant, ever-evolving city, defined by the closure of old locations and the opening of new ones, but always remembered for how we first saw them.
No matter how long you’ve been here, when you first say, “That used to be Munsey’s” or “That used to be Tic Toc Lounge,” you’re a New Yorker.
When the past seems more real and solid than the present, that’s when you’re a real New Yorker.
This is a defining feature of this city, a common feature of any city, our local places, the places where everyone knows your name, will be overwhelmed by competition and change. Extinction and rebirth make cities vibrant. But if these places can grow and evolve alongside the city and its residents, that would be great. I hope Blackbird can contribute to this.
And you? Make your contribution. Go out to eat and become a regular.