Stop and think about loyalty points for a second. Where do you see them?
Start simple. Your local cafe probably has a stamp card for every cup of coffee you purchase. Buy 10 cups, get one free. That’s a ~9% return. Make that a bit more complicated and you get Starbucks Rewards. Think bigger, and now you get hotel point programs like Marriott Bonvoy or airlines like Singapore KrisFlyer. Make it more complicated and you get the credit or "gold" system of most mobile or social games like Fortnite.
Fundamentally, the humble stamp card is no different to Singapore’s KrisFlyer. They are all just games to incentivize good things for a business in exchange for consumer rewards. Buy more coffee or airline flights, and get rewarded for it.
Tokens and tokenomics are just that: a system to create positive loyalty loops.
So what’s the deal with web3? Why is it being used for loyalty points system when it's being done well already?
Correction: it’s being done well-ish.
Reward systems are walled gardens
An airline miles program is a good example.
Suppose someone has $1,000 worth of airline points but they can’t travel. Now what? Their points expire in a month and the only possible way to spend them is through the airlines "rewards shop". For some reason, their points can only get them an ugly umbrella and a cheap-looking travel bag.
Gee, they think, why can’t I just sell my points to someone who can use them? Or maybe swap them for hotel points or Amazon credits?
Traditional point systems are a walled garden. They look great on the inside until you need to get out.
But the same goes for other reward systems.
Think about your credit card points. Depending on the partnerships your bank has with vendors, the 50,000 bank points you have could be exchanged for tacky mugs or unwanted low-tech earbuds. But if you don’t use the points, you just lose them.
Online games are another great example. Buy "gems", "credits", "gold", or whatever it's called—you can only use it within each game. When you get bored of playing? Too bad, that’s sunk cost. You can’t even gift you character worth $500 of upgrades to a friend.
Rewards systems are at the mercy of central authority
If your credit card, airlines, or local cafe decides to stop honoring rewards points, then that’s it. There’s nothing you can do about it. They can even devalue the points you already have.
Where you can spend your points is also out of your control, even if a counter party was willing to accept it. For example if a competing hotel program wanted to steal you away from Marriott Bonvoy, they wouldn’t be able to accept your original points.
Web3 can fix all this
There are two key characteristics of web3 that fixes (and supercharges) traditional reward programs: interoperability, and composability.
Interoperability
Since blockchain tech today generally follows the same standard way of building apps, it’s much easier to get web3 things to work together. For example, a point or "token" of one reward program can easily be converted to another.
No more walled gardens.
Composability
Blockchain tech is usually open source, meaning builders and new apps are can create solutions that accept tokens or points out of the box. For example, hotel tokens could be exchanged for a new streaming app subscription if the developers of that new app allow it.
Or a web3 banking app could allow users to deposit hotel rewards tokens and then offer interest for that deposit—effectively treating it as cash. They could even provide their own reward tokens in exchange.
But why stop there?
The same banking app could allow users to borrow money and use those hotel reward tokens as collateral.
What’s crazy is that this isn’t even theoretical. These wacky combinations of different tokens and building on top of each other is already happening in web3.
HyperMint can launch your loyalty program
If you're you a brand, enterprise, or agency that wants to deploy a web3 loyalty program at scale, HyperMint has you covered. Our intuitive, no-code dashboard allows anyone to develop and execute on their ideas with ease.
Contact us to get a free demo and learn more about how HyperMint can help your organization.
Nigel Lee is Strategy and Operations Lead at Immutable
