What is Blockchain?

Blockchain, also known as distributed ledger technology, is a type of database that’s shared, replicated and synchronized among the members of a decentralized network. It records transactions, such as the exchange of assets or data, among participants in the network. 

Determining The Blockchain Fit

There are four key questions in evaluating the need for blockchain; they can uncover how closely our use case aligns with the purpose and value proposition of blockchain itself.


1.  Does the solution require trusted data to be shared across multiple parties without a central authority?​ The fundamental value of blockchain lies in its shared ledger, an append-only distributed system of record across a business network. If a use case doesn’t require a shared ledger and a network of participants, blockchain technology probably shouldn’t be used. Think of it like the Apple app store. We need both the technology platform (app store) as well as the applications to make it truly work.


2.  Are assets being transferred between parties? At its core, a blockchain solution should manage the transfer of anything with tangible or intangible value. Assets can be physical ones like a piece of fruit; digital like an electronic file or data, or intangible like a letter of credit or contract. Blockchain is used to record the transaction of these assets between multiple parties in a business ecosystem.  Where the scenario is without asset transactions, it is better served by a traditional database.

3.  Is there a need for privacy among participants in the current business network? One thing that separates permissioned blockchain from traditional distributed databases and some cryptocurrency-based blockchains, such as Bitcoin, is its ability to permission the data. Participants can transact privately across the network to ensure that confidential information is not broadcast. Their identities won’t be linked to the transaction either, further ensuring their confidentiality. 

4.  Is there the need for greater trust inside the current business network? Heavy regulation and frequent audits are typically a strong indicator of distrust within an industry. Because blockchain assets have a verifiable audit trail and cannot be modified, inserted or deleted, the network’s shared ledger becomes the trusted source of information for all parties. Transactions are also electronically endorsed on a case-by-case basis by mutually-selected members of the business network, fortifying trust even further.

Token and Loyalty Programs

Blockchain, a distributed ledger technology, provides innovative ways to transact and maintain records in a secure, digitized, interlinked network, has the potential to eliminate many of these problems. Blockchain technology can benefit different types of loyalty reward programs.  At the same time, it can significantly improve the customer experience by allowing consumers to access most, if not all, of their loyalty reward programs in one digital wallet almost instantaneously.

Why Blockchain Is The Remedy

Blockchain allows loyalty reward programs providers, administrators, customers, and other parties to interact in one system without compromising privacy or competitive advantage. For loyalty reward programs providers, blockchain has the potential to streamline execution of their programs with near real-time transparency, resulting in savings in administrative and personnel costs.

In addition, blockchain can be connected to social media and digital wallets and can interact with existing loyalty reward program platforms through “smart contracts”, self-executing computer programs that automatically implement the terms of an agreement between parties when conditions are met.

How Blockchain Works

Blockchain has the potential to allow near-instantaneous creation, redemption, and exchange of loyalty reward points across programs, vendors, and industries in a secure environment. Through a rigorous online protocol, well-programmed building blocks and smart contracts can operate without intermediaries. 

Loyalty Network Platform

The platform can connect multiple organizations; such as airlines, banks, and retailers and their loyalty programs. It facilitates their interactions, especially the converting and exchanging of points. The platform connects programs through blockchain nodes, which reach consensus about a transaction without the need for a middleman or clearinghouse.


Rewards Applications

Rewards applications, via a digital wallet, will contain identities in the form of digital signatures, which store value in the form of loyalty tokens. Loyalty program providers can set up reward applications that connect to the loyalty network to execute transactions for customers. Program providers can control exactly how their customers access and redeem rewards.

Loyalty Tokens

On initiation of a loyalty transaction, such as the issuance, redemption, or exchange of a reward, blockchain creates a computer-generated loyalty token, which is a base for all types of rewards, including points. The loyalty token’s unique identifiers can be updated on each participant’s ledger and made available across the network. Several online protocol rules govern the way the points behind these tokens function.

With blockchain technology, the customer experience would be greatly improved. Consider a customer named Alice. When she purchased an airline ticket with a credit card, the airline and credit card provider could immediately transfer loyalty tokens to her digital wallet. During her trip, she could access the loyalty points and redeem them with another network participant such as a large hotel. She could also make micro-purchases; a cup of coffee, for instance on the go. The transactions would be instantaneous and secure, there would be only one user interface, and Alice could use the accumulated points in the manner she chooses.


Creating Unique Business Opportunities
Creating an interlinked network will give providers of loyalty rewards well-developed programs and unique opportunities to offer value-added services to other businesses. For example, a bank that provides merchant banking and treasury management services to small businesses could offer those customers access to its loyalty rewards interlinked network. In addition, the bank could offer its merchant customers the opportunity to join the overall interlinked network on the merchant’s own terms through a tailored reward application. This would enable the business to offer its client’s loyalty points that can be redeemed within a wider network.

The bank would be adding a valuable service to its small-business clients, while the loyalty network gained another vendor that could interact with other loyalty reward programs. For example, a local coffee shop that was afforded entry into the network by its bank could offer its customers opportunities to use their coffee points toward accommodations at a hotel in another state in which it previously had little to no brand recognition.

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