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Blockchain and Cryptocurrency Are Bringing Transparency and Verifiability to Loyalty Programs 5 6353

New blockchain apps using cryptocurrency as rewards and cash back have the potential to improve the loyalty space. Read on to learn how.

Blockchain, Cryptocurrency, and Loyalty Programs

The International Council of Shopping Centers reports that the loyalty space grows by about 30% every year, with 85% of consumers belonging to at least one loyalty program, circulating $300 billion between them annually. With so many users and so much money circulating through loyalty programs, adding blockchain-related features and cryptocurrency mechanics would help companies offload complexity and interact with crucial partners and customers, taking stress off of core loyalty programs.

Blockchain technology would also allow companies with large balance sheet liabilities stemming from redemption bottlenecks to open up redemption options, widening these bottlenecks to increase revenues. Lastly, incorporating blockchain tech into loyalty programs would allow partners to integrate loyalty programs seamlessly regardless of their size, helping them craft trendy offers more easily and eliminate back-end redemption problems.

The largest problem loyalty programs face today is a dual one: they are being used at an all-time high rate, while the total number of unredeemed points (and the cost of managing them) is growing. The average US household today participates in an average of 29 different loyalty programs, according to the 2015 Colloquy Loyalty Census. New accounting standards, however, state that revenue attributed to loyalty points must be deferred until the redemption conditions are met.

With so many overlapping and often confusing rules and regulations for redeeming points, rewards, and cash back in so many places, companies operating loyalty programs are losing money from consumers’ analysis paralysis. People aren’t redeeming to their full potential due to the large and confusing web of guidelines associated with doing so; most people don’t have the bandwidth to understand all of them.

Blockchain, the distributed ledger technology behind cryptocurrencies like Bitcoin, could improve loyalty programs with enhanced features like instant rewards redemption and loyalty point currency exchanges, centralizing them and making them more accountable and transparent. Blockchains improve transaction verifiability, integrity, and transparency by grouping transactions into blocks confirmed by a wide public network, or chain, of participants (hence the term “blockchain”). Afterwards, every ledger in the blockchain is updated to reflect the new transaction(s).

This is an improvement upon centralized databases, where intermediaries with full control over databases and the data they contain create, read, update, and even delete data as single points of failure. In contrast, blockchains rely on a network of people to verify transactions by validating and writing new data. Past entries never change, and new entries are written to update the state of past entries. This secures and strengthens the record of each one through consensus.

In the end, blockchains allow for decentralized control while traditional databases use centralized control to manage data, which is more fallible since a database administrator constitutes a single point of failure for everyone’s data security, were the security infrastructure to fail. On a blockchain, there is no single point of failure, improving data security and integrity.

Loyalty programs that grouped point currencies, rewards redemption options, and rules into one digital wallet would encourage companies to cooperate with one another to create shared value, since siloing loyalty programs over multiple blockchains creates saturation and detracts from consumer value. Instead, companies could co-create loyalty programs in partnership with blockchain platform developers to centralize information people need in order to easily reconcile all of the point options, redemption systems and point exchanges. This would help people make quicker and smarter decisions on which loyalty programs are best for their shopping habits and preferences. This would also make points and rewards redemption easier and more consistent, allowing consumers to redeem more rewards and points.

For businesses, blockchain tech would enable greater revenues by alleviating the balance sheet bottleneck created by unredeemed points. It would also let businesses explore new loyalty program models incorporating large and small business partners, allowing them to integrate seamlessly with loyalty programs. This could help businesses craft popular offers more easily and make it easier on businesses to distribute points since the entire process would be outsourced to the blockchains their programs were on. Blockchains’ decentralized nature allows greater verifiability and transparency of points distribution and rewards redemption by a wide network, freeing up back-end costs for other needs.

Blockchains aren’t infallible. With so many out there today, creating new blockchains on which to operate loyalty programs could create program saturation, detracting from loyalty programs’ ability to deliver value to customers. In addition, the blockchain-based transaction layer between consumers and loyalty program operators would, on paper, generate a small per-transaction cost for transactions associated with these loyalty programs, which could grow over time. Customer data could become available to other participants in the loyalty network, or to competitors. And, rewards currency could devalue in what would be an open marketplace for trading points.

The most basic way for companies to eliminate these risks is to take a ground-floor role in structuring commercial agreements and partnerships to protect the core components—currency value, customer data and relationships, and transaction costs—of their loyalty programs when creating or choosing a blockchain platform to run their loyalty programs.

Blockchain apps using cryptocurrency to power rewards and cash back have great potential to deliver new value to consumers, such as passive income, savings, and compound interest to help them buy more with less. This is because cryptocurrencies—not only Bitcoin, but also Ether, Litecoin, Ripple and others—are just as much assets as digital money with which to buy and sell things. Since blockchains are at the heart of many cryptocurrencies, loyalty programs can use them to turn everyday shoppers into investors, giving them a single place to redeem all of their rewards and get cash back in the form of crypto, creating more convenience and more value. Several disruptive use cases, such as BitRewards, FluzFluz, and Rewards.com are already putting these ideas into action.

Use Cases

BitRewards is a rewards network that works with token holders to confirm liquidity contracts between itself and partner cryptocurrency exchanges, allowing the platform to deliver rewards in cryptocurrency. Operating on the Ethereum blockchain, the BitRewards network uses a distributed system of nodes, or cryptocurrency-holding professionals operating on the platform, to fund rewards through their cryptocurrency exchanges through smart contracts that allow rewards to flow through the system, creating a liquid system of cryptocurrency rewards.

FluzFluz operates a global co-op network between merchants and consumers on JP Morgan’s Quorum blockchain, letting consumers build their own shopper networks and make passive cash back-based cryptocurrency income, both when shopping and when members of their networks shop. Each co-op member group (up to a maximum of 65,535 people) shares cash back internally, with 50% going to the purchaser and the rest being split equally among the members of the co-op. The FLUZ token is tradable for cash back rewards and gift cards, and helps fund network transparency and lower transaction costs.

Maurice Harary, Founder of Fluz Fluz, says, “A good leader creates followers, whereas a great leader creates other leaders. The global cash back rewards co-op technology at FluzFluz lets average consumers empower others to become influencers, grow the rewards network, and increase each member’s buying power and cash back potential as a result.”

Rewards.com recently incorporated cryptocurrency into its online rewards platform as well. Since it has thousands of retail partners across the country, its new RWRD token is redeemable at any one of them. By incorporating it as the platform’s core store of value with its enormous network of partners, Rewards.com is helping to put cryptocurrency into the wallets of more mainstream consumers by powering everything from cash back rewards to discounts on its platform.

These are all examples of ways in which blockchain technology and cryptocurrency are already beginning to impact the loyalty industry. Their founders have so much confidence in their products that they’ve all opened themselves up to questions on platforms like Telegram and Slack to help refine their products.

Looking Ahead

Blockchains and cryptocurrency have the potential to reshape the loyalty industry, helping consumers use multiple rewards programs across stores, making rewards transactions securer and more transparent, and centralizing cryptocurrency rewards programs in one place. Verifiability is an important part of this equation as well. Blockchain’s decentralized and transparent nature can allow loyalty programs to be used in one place and be open source. That adds accountability to these programs, since everyone monitoring a loyalty program’s blockchain would be responsible for verifying points, rewards redemption, and cash back transactions.

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From Pandemics to Geopolitics: Major World Events Are Proving Accelerants for Digital Economy Adoption Comments Off on From Pandemics to Geopolitics: Major World Events Are Proving Accelerants for Digital Economy Adoption 504

It seems that we’re living through one historic and global crisis after another. Our universal “pause from history” seems to be over, with both natural and man-made forces creating epic challenges that are determining a new world order as we speak. While no one can predict the future, we can look to the past and be sure that challenging times accelerate innovation and disruption at a mass scale.

Take the Coronavirus pandemic. In just one year after the start of the pandemic, almost every aspect of our professional and personal lives was impacted by rapid digital transformation. A full 85 percent of CEOs indicated that their organizations had significantly accelerated digital transformation during the COVID-19 crisis. But, it’s not just companies. From remote working via video conferencing, to grocery delivery, our ability to adapt and to adopt a digital-first way of life increased – with little proof that we’ll ever go back to the “old way of doing things.”

The same is true for the geopolitical crisis that we’re facing now, which started with the Russian invasion of Ukraine. We’re already seeing clues that this global catastrophe is accelerating the implementation and adoption of digital assets within a greater digital economy. Whether it’s new uses cases for crypto or increased fervor around Central Bank Digital Currency (CBDCs), countries large and small and from regions around the world are leveraging digital assets during uncertain times.

In fact, in a recent letter to shareholders, Larry Fink, CEO of Black Rock, indicated that the Russia/Ukraine conflict will fast-track the adoption of digital currencies and payment tools to, “help bring down costs of cross-border payments, for example when expatriate workers send earnings back to their families.” Fink also went on to say that the current geopolitical conflict, “will push countries to reassess currency dependencies and look to means of payments that can bring down the costs of cross-border transactions.” Fink also acknowledged that his firm is experiencing growing interest from clients around digital currencies, something that has only increased since the Ukraine crisis began.

With the increased interest in large-scale adoption of digital assets, comes new insight about how these assets behave and the psychology around why people are flocking to them. Crypto is defying traditional safe-haven assets like gold – making moves that more closely mirror the equity markets than the commodity markets.

Beyond Ukraine, the sustained volatility of fiat currencies of countries like El Salvador, Paraguay, Nigeria, and many others, make digital assets like crypto and Stablecoins more attractive.

The aforementioned geopolitical factors combined with substantial progress in overall digital economy infrastructure development, technology innovation, and user experience, has created the perfect storm for accelerated adoption and use around the world.

Crypto in Ukraine

Crypto is being used as a force for good in the form of donations. Crypto users all around the world have donated more than $80 million since the start of the invasion. Additionally, $6.5 million raised as proceeds from a Ukrainian flag NFT auctioned off by the Ethereum-based group Ukraine DAO – making it the tenth most expensive NFT ever sold.

In addition to charitable donations, Many Ukrainians have turned to crypto to avoid the obvious problems with carrying large amounts of cash and/or trying to access bank accounts locally or abroad. Specifically, Ukrainian refugees are using crypto so they can convert it into fiat currency in a new country. While still volatile, this new digital asset may help many Ukrainians survive financially for the duration of the conflict.

Recently, Ukraine signed a law that will create a legal framework for digital assets. Among other things, that law is expected to help businesses manage crypto donations more effectively. Ukraine’s expedited regulatory actions and its efficient use of crypto funds is not happening in a vacuum. In fact, this pioneering activity is being noticed throughout the world – amplifying the many use cases of digital finance tools and increasing the public’s comfort level in leveraging them in a variety of ways.

Russia Accepts Crypto for Oil

At the same time, Ukraine is demonstrating the use of digital currencies to help their people and the defense of their nation, Russia just took a major step to leverage these assets as well – some would argue a nefarious one. In a recent and sizable turn of events, a report from Russian news agency RBC revealed that Russia will now accept Bitcoin as payment for their oil. Pavel Zavalny, Chairman of the State Duma Committee on Energy, stated that Russia will let “ally” countries trade Russian energy resources with their local currencies or in cryptocurrency.

Whether it’s a shock to some that Russia would take this bold step to evade sanctions or an inevitability by others who knew this move from Putin was coming, the point in all of it is that digital currencies are being thrust onto the international stage in new ways. Whether Russia’s use of crypto is good or bad is irrelevant. Their willingness to put Bitcoin to use in global trade has opened the door for others in the international community to use digital assets as payment mechanisms on a broad scale. This is a new chapter in the digital economy, accelerated by conflict and chaos.

China’s Digital Yuan Question

China became the world’s first major economy to pilot a digital currency in April 2020, aiming for widespread domestic use of the e-CNY, or digital yuan this year and beyond. It currently has more than a hundred million individual users and billions of yuan in transactions, according to the IMF. Plus, with China’s banning of all cryptocurrency transactions, it’s clear that the country is totally focused on the digital yuan’s success and dominance.

There’s no doubt that China wants to expand the digital yuan’s global influence, but how far are they willing to go? Could the geopolitical unrest in Russia offer China an opportunity to compete with the U.S. dollar? Could the stiff sanctions on Russia imposed by the United States, European Union, United Kingdom, and others give China an opening to establish digital finance supremacy there? These questions will have answers sooner than we think.

CBDCs as Efficient Money

“The history of money is entering a new chapter,” said Kristalina Georgieva, IMF Managing Director. “Countries are seeking to preserve key aspects of their traditional monetary and financial systems while experimenting with new digital forms of money.”

This is especially true in countries that are either experiencing recent unrest or have been dealing with decades of corruption, stagnation, and poor economic conditions.

  • Nigeria became the first country in Africa to launch a CBDC last October. The eNaira is stored in a digital wallet and can be used for contactless in-store payments, as well as for transferring money.
  • The seven countries that make up the Eastern Caribbean Union – Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts, and Nevis, Saint Lucia, and St. Vincent and the Grenadines, have created a form of digital currency to speed transactions and serve people without bank accounts.
  • Bitcoin became a legal tender in El Salvador, a move to boost the country’s economy, which for years has experienced low levels of economic growth. Most of the country’s population does not have a bank account and almost a quarter of the GDP comes from remittances sent from the large ex-pat community working abroad, benefitting around 360,000 households.

The move toward CBDCs continues to gain momentum, especially now as Central Banks look to bolster their economy in uncertain times. All told, around 100 countries are exploring CBDCs at one level or another. Some researching, some testing, and a few already distributing CBDC to the public (like in China). However, we will see these programs pick up speed to unprecedented levels over the next few months and years.

The Ukraine crisis has only sharpened the vision and hastened the rollout of digital asset programs in many countries around the world. The war is turning out to be the catalyst for action in the new digital economy.

A New World Order Driving a New Digital Economy:

The world’s monetary system looks to be on the edge of undergoing the biggest overhaul since the Bretton Woods agreement of 1944 when the USD was declared the world’s reserve currency and the IMF and World Bank were created. The tumult and turmoil of World War II led to that historic global financial transformation. While we’re still in the midst of the Russia/Ukraine crisis and cannot predict what will transpire next, we understand that momentous geopolitical events, like the one we’re experiencing, have reverberations that go beyond the borders of conflict. Nearly 80 years after Bretton Woods, the global financial system seems to be headed toward change once again – making way for a new digital economy – at a speed and voraciousness that just didn’t exist before now.

Tal Elyashiv, Founder & Managing Partner of SPiCE VC, is a seasoned executive and serial entrepreneur. Tal is considered one of the earliest visionaries of the digital securities space – a major vertical in the blockchain & tokenization ecosystem. His deep understanding of the digital finance ecosystem has enabled him to usher in a new era of venture capitalism with the founding of SPiCE VC.

The Bitcoin Bull Run: How It Started, How It’s Going Comments Off on The Bitcoin Bull Run: How It Started, How It’s Going 104

Wherever you stand on Bitcoin, there is no question about its impact on the role of blockchain and cryptocurrency within society.  Whether we look back to Pizza Day or to its heights in 2018, the volatile nature of the cryptocurrency has garnered much speculation and media coverage. 

While many looked at the past few years as a “Crypto Winter,” others saw an opportunity for Bitcoin.  Between COVID lockdowns, political, and fiat currency concerns, Bitcoin has been on a dream run – for a moment going over the $55,000 barrier.

Why Did Bitcoin Suddenly Explode (Again)?

Elon Musk and other influencers played a role in the recent rise in Bitcoin’s price. Tesla’s recent investment in an infrastructure to accept Bitcoin payments, and Apple Pay’s introduction of BitPay, a prepaid bitcoin MasterCard, are also major markers of market adoption. But two other events occurred that set the stage for the Bitcoin bull run: a pandemic and Bitcoin Halving.

Every four years, Bitcoin miners have their processing transactions cut in half. This reduction in supply then drives up prices based on scarcity. This occured in May 2020, when the economy was already at a standstill due to the pandemic. Since the supply of crypto coins is finite many think that there is lower inflation risk with using them – this means that it may be used as a hedge against U.S. inflation. In 2020, more than 20% of all dollars currently in circulation were printed, making crypto even more alluring. 

Crypto isn’t going anywhere. This year, experts project increased use of crypto cards, emergence of new cases, and increased investing from traditional finance leaders.

Take a look at this visual deep dive on the rise of Bitcoin for more information:

Bitcoin: Once A Diamond In The Rough, Now A Treasure

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