Blockchain and Cryptocurrency Are Bringing Transparency and Verifiability to Loyalty Programs 1 4713

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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Chinese Crypto Leader Li Xiaolai Suddenly Retires 0 70

One of China’s most prominent Bitcoin investors has announced his retirement from the crypto world. Billionaire Li Xiaolai is the founder of BitFund, a crypto venture capital firm that has fostered a slew of Bitcoin-related startups.

Li’s announcement of his decision to withdraw from cryptospace—and investing otherwise—came unexpectedly via his page on Chinese social media site Weibo.

“From this day on,” his post reads, according to TechNode’s translation, “I, Li Xiaolai, will personally not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it.”

Li is a former school teacher, and claims to be the first person in China to openly trade Bitcoins, rather than hiding behind its famous anonymity. Now, retired from both teaching and investing, he says he’s not sure where to go next. “I plan to spend several years to contemplate on my career change. As for what I’m doing next, I’m not sure just yet.”

Li closed his post by expressing that he still maintains a long term optimism about the blockchain.

Li’s Ventures Grew Crypto Capital, Controversey

Through BitFund, Li has incubated a number of blockchain related startups, including an off-chain wallet called Bitfoo, the crypto exchange YUNBI, and HashRatio, a miner manufacturing company. Li organized 2014’s Global Bitcoin Summit in Beijing, back when you could get a BTC for as little as $440, and years before China instated its full ban on cryptocurrencies.

Earlier this year, Li also acted as managing partner of Hangzhou Xiong’An Blockchain Fund, a billion dollar fund backed by the Hangzhou government. Li stepped down after fellow venture capitalist Chen Weizing introduced a series of accusations against him.

Included in the eleven accusations, which Chen broke on social media and messaging platform WeChat, were a supposed debt of 30,000 BTC that Chen says Li failed to pay on time. Li published a point-by-point response to Chen’s accusations, addressing the 30,000 BTC debt by saying “it’s not true… Chen is just muddying the water.”

Though Li called them “defamations,” and Chen did not offer supporting evidence for his allegations, Li said Chen’s antics “brought material and negative impacts on the reputation of Xiong’An Blockchain Fund” and that his resignation would “let the Hangzhou government continue its push for blockchain development.”

Li was the subject of controversy on another occasion when, in a candid conversation he did not know was being recorded, he outed several influential organizations as scams and said that the best way to succeed in blockchain, even if your project is worthless, is to get famous and build consensus.

The State of Crypto in the People’s Republic

All crypto and blockchain related websites are blocked by the Chinese government, and citizens are forbidden from engaging in crypto transactions. The People’s Bank of China released a statement on August 24th warning against ICOs, which they consider to be “illegal fundraising, pyramid schemes, and fraud.”

But the rules have been difficult to enforce, and crypto still enjoys an active user base in China. Beijing Sci-Tech Report, China’s oldest technology publication, is now the first Chinese publication to accept BTC as payment from its subscribers. Chinese crypto channel cnLedger announced in a tweet on September 25th that Ethereum Hotel, China’s first hotel to accept ETH as payment, is open for business in Sichuan Province.

A Crypto Landscape Without a Leader

The sudden exit of Li Xiaolai from the Chinese crypto scene could have caveats, or greater implications. Weibo users expressed their support and gratitude following his announcement, but some also speculated that his choice of words leaves room for Li to continue investing in crypto indirectly, perhaps through funds or corporate entities. Whether that will be the case or not, for many, his resignation marks the loss of a public blockchain leader.

The Block Talk Award Winners Announced 1 1110

Thanks to everyone for submitting your favorite blockchain innovators and influencers. Our editorial team had a great time learning about new projects and individuals that are building a foundation for our future with blockchain technology, and realizing amazing technological feats in the present.

While it was difficult to select just one project or individual in each category, we’re excited to announce the winners of our first inaugural Block Talk Awards.

  • Best ICO Analysis & Commentary – Tatiana Koffman, Various Outlets
  • Most Engaged Community – Rod Turner, Various Outlets
  • Favorite Blockchain Blogger – Rachel Wolfson, Forbes
  • Best Crypto Journalist – Jordan French, The Street
  • Innovative Female Founder – Amber Baldet, Clovyr
  • Best Podcast Host(s) – Joel Comm and Travis Wright, Bad Crypto
  • Favorite Blockchain Event Host – Adryenn Ashley, Loly.io
  • Top Crypto Speaker – Ian Balina, Crypto World Tour
  • Most Innovative Blockchain CEO – Trevor Koverko, Polymath
  • Top Social Entrepreneur – Evan Caron, Swytch

Winners in each category will receive a $1500 media credit on The Block Talk, access to a network of TBT Award honorees, and VIP access to TBT events in 2019.

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