Token Economy and the Future of Loyalty Programs From Alex Egorov, experienced VP-level financial specialist and CEO of BitRewards.
Loyalty marketing has come far from humble beginnings. Those coupons in the newspaper or the "surprise' in your cereal box; we couldn't imagine a world without cash back from your bank or points to be spent in store. The result is 3.8 billion memberships in customer loyalty schemes in the US alone.
The time is coming where customers will receive points in the form of cryptocurrency tokens for their purchases and for their loyalty. The value to the user is set to be much higher than in traditional schemes since the rewards in tokens will depend less on the success of the merchant and will not expire.
While matching the interests of e-commerce businesses and shoppers, at this stage cryptocurrencies are yet not so widely accepted. As being a leader of BitRewards, I faced this challenge and came up with a vision to overcome it.
An Educated Approach to the Problem
Back in 2011, our team started building a centralized digital gift cards and promo codes processing platform that went live in 2012. Since then, GIFTD has developed several standard e-commerce solutions that are installed by more than 500 online merchants and this figure will go to more than 1000 in 2018. In 2016, it became clear to the GIFTD team that the blockchain will inevitably be adopted among its corporate clients and their customers.
BitRewards is essentially a spinoff from this successful business, because with the blockchain technology, we can take a new, more innovative approach towards solving loyalty and rewards challenges, creating more value for retailers, consumers, the community and investors.
The main idea of BitRewards is to enable retailers to reward their customers' purchases with crypto-currency. Customers, the end-users, are rewarded for their purchases with liquid Ethereum-based tokens, which can be redeemed against future purchasing or offers, or transferred to another crypto-wallet and spent on other goods/services.
Balancing Interests with Token Economy
There are many emerging crypto projects with business models designed to open up the cryptocurrency market to a much larger audience thus improving the adoption of cryptocurrencies in the mainstream retail scene. In this regard, token as a digital currency simplifies transactions and enables their security for all involved parties.
Internal BitRewards' token is called BIT and it is used to conduct all operations within the ecosystem. To ensure the balanced interests of merchants and shoppers, a number of use scenarios were designed:
- Customers of the online stores connected to the BitRewards network will receive BIT as a cash-back — a certain configurable amount or percent on their purchases, purchases of the friends that they referred to the store, shares and likes in social networks and other actions.
- The cash-back will be credited to the customer's automatically created crypto-wallet connected to the store via BitRewards plugin.
- BIT can be redeemed at the same store or with the other BitRewards participating merchants via an online crypto-wallet connected to the participating merchants.
- Customer crypto-wallet's BIT balance may also be connected to the bank debit card, which the users can spend just as if they used their regular Visa or Mastercard.
- The retailers will only have to buy BIT in the open market to reward their users. The value of such software starts from $200/month, whereas we will provide it for free. Therefore, thousands of retailers will be keen to connect to the platform.
Invest for the Future and Save
Implementation of blockchains is not without its costs, but study from Deloitte shows that integrating blockchain with loyalty schemes will bring about a reduction in costs incurred from system management, transactions and customer acquisition.
Understanding that blockchain technology is still in its infancy, there are still many tests that it needs to be put through to make it scalable for thousands of transactions per second. This is where implementing blockchain ecosystems that mimic financial ones could really prove fruitful for ideas on how to scale projects, whilst through industry participation and discussion. Moreover, we will be bringing efficiency and innovation to a still-developing market.