The crypto crash in 2022 caused significant reputational damage to the sector. Many investors lost big as the covid-fuelled bubble burst, stablecoins turned out to be not so stable, and regulators swept in to impose the centralized frameworks and safeguards cryptocurrencies were supposed to be uncoupled from.
The damage was not terminal. Crypto will recover. But the utopian ideal of a decentralized global currency with the same status as fiat currency in the minds of investors, markets, and the general public seems further away than ever.
But one of the great advantages crypto has over other currencies is its flexibility. As a digital-first mode of exchange it has far more potential to evolve at lightning pace, to move laterally and do things central currencies simply cannot.
Given a different use case, for instance, there’s every chance cryptocurrency could be the way we unlock a whole new global approach to brand loyalty programs.
Why crypto fails
Blockchain is central to the way crypto functions. Whereas regular currency trading relies on gatekeepers like banks to facilitate commerce, crypto allows traders to conduct transactions between themselves with each deal recorded on an incorruptible blockchain.
But this is also the risk of crypto. Whereas fiat currencies are underpinned by central banks such as the Federal Reserve, crypto is rootless, relying on the pure perception of the market to assign value. While stablecoins such as Tether act as a crypto reserve, they are far less secure than a central bank. A case in point: the Tether stablecoin was supposed to have a fixed value of $1, but has consistently traded for less than that since 2018.
In short, by its nature, the crypto markets rely heavily on confidence. And when confidence disappears, as it did in 2022, the effects can be far more widespread and fast-moving than the swings of regular trading.
How customer loyalty can succeed
Tying crypto to brand loyalty programs can mitigate many of the problems outlined above. By adding a tangible, real-world value to digital currencies it’s possible to create a system that works better for brands and their customers, while also forming a crypto marketplace that’s more attractive to investors.
By replacing outdated, bureaucratic loyalty schemes with programs based on the blockchain, brands get quick wins. They can embed all the rules of their program in a Smart Contract so every part of the chain, from earning to redemption, is transparent and indisputable. At a stroke, this eliminates the headache of reconciliation and the possibility of fraud.
But, because of blockchain, the opportunities are far greater. As Andrew Doxsey, co-founder of Libra Incentix, a company at the forefront using blockchain to transform loyalty programs, puts it: “The idea is that we’re trying to consolidate multiple loyalty programs, in multiple industries, in multiple countries, allowing them to be redeemed in a borderless fashion. Points are interchangeable because they’re all backed by the same platform within the blockchain.”
The advantage of this is that all the points a brand generates and a customer earns, now have far greater functionality. They don’t just need to be spent with the same brand (or one of their partners): their value becomes entirely transferable. A customer could use their points to unlock savings in a global marketplace, convert them directly into fiat currency – or use them as a tradable token.
As Doxsey says: “Our vision is to scrap using points altogether. Brands can mint their own tokens or a collection of NFTs with us, and reward their consumers through our loyalty management platform using their own digital rewards, with a level of control and customization that really makes a difference”.
The evolution of crypto is the evolution of loyalty
Crypto faced a tough year in 2022. But new use cases like this offer an opportunity to rethink the possibilities of digital currency. Combining crypto and loyalty programs is a huge chance to demystify crypto in the minds of consumers, offering them true value in the form of tradable crypto tokens in place of inflexible loyalty points. And at the same time, offers a way to increase credibility in the minds of investors by underpinning crypto currency with tangible value.