This is how we will hoover money from the fiat into the digital economy
It’s not enough to do the same thing a little bit better. You need to change the goalposts — or better still obliterate them. If crypto wants to compete, it needs to make an offer too good to refuse.
A while back the BBC ran the intriguing story that ramen noodles are replacing tobacco as the de facto currency in the US prison system. Changing something as fundamental and important as a currency doesn’t just happen: there has to be a very significant catalyst. The reason noodles are considered so valuable is because prisons are badly underspending on food and — unlike tobacco, previously deemed ideal as a currency for its consistency, portability, durability and other key properties — ramen are nutritious and tasty as well. There is a lesson here for bitcoin, or rather wider blockchain-based cryptocurrencies, which up until now have always played second fiddle to mainstream currencies. Fast, low-cost transfers are nice, but unless it can offer qualitative instead of merely quantitative improvements, blockchain will struggle to see meaningful adoption.
Blockchain’s journey into the mainstream rests not on what it offers businesses for efficiency — doing the same old things more quickly and cheaply — but on effectiveness: changing the paradigm to offer radical new and compelling models of commerce. The Incent programme, explored below, is one example of the paradigm shift required. More broadly, though, the message is that we need financial as well as technological innovation.
Rewards reimagined
One area that blockchain offers massive opportunities is in the loyalty-rewards sector. Existing blockchain initiatives are already bringing new efficiencies rewards programmes, by reducing friction and lowering costs. But these simply do the same thing that loyalty schemes have always done, just a little bit better. They don’t change the underlying premise. Blockchain, however, raises the opportunity not just of a better technical model, but of an unanswerably superior economic one.
At the heart of every loyalty scheme is a piece of simple but profound mathematics. Every time a business issues a reward point, they know they may one day have to redeem it, at a cost to themselves. There is a liability involved (which frequently has tax implications too). For this reason, regular rewards programmes operate on the bizarre logic that most customers will not and indeed should not redeem their points. It would cost too much. Get the sums wrong and you end the month in the red. This is also one reasons why loyalty issuers tend to prevent their customers from transferring points. It would make them more valuable to customers, and more would spend them.
Incent, which is now launching its crowdfund and will be hosted as a token on the Waves platform, brings not just new technology to a creaking and outdated sector, but fundamentally different economics. Rather than restricting rewards points to the ‘walled gardens’ of their individual issuing businesses, Incent is a universal token of loyalty that trades freely, thanks to the open nature of the blockchain. This moves, or rather throws out, the goal posts that current loyalty providers assume.
Increasing demand for a scarce resource
Incent is not a worthless token that can only be redeemed at the issuer’s store or website. It’s more like smart, configurable cashback. The originating business doesn’t issue it like a central bank issues fiat money, printing it at will. They buy it off the open market, from the fixed supply created after the crowdfund ends. Merchants designate a percentage of the transaction price — whatever proportion suits their margins and growth targets — to remit to the customer as Incent. In that respect it’s more like being rewarded with gold than fiat money. And, like gold, its price is driven by supply and demand. As more merchants join the Incent network, demand for a scarce resource dictates how much they need to pay per unit.
There’s a reason this is exciting: it makes rewards genuinely rewarding. Currently, customers typically redeem their reward points because they will otherwise go to waste (and go to waste they often do anyway). There’s a kind of grudging inevitability about the whole process. But what if you returned to a store not simply because they gave you loyalty points to spend there, but because they paid you in a commodity that appreciated in value — that you could spend in return for goods and services, if you wanted, but that you might also want to hold as an investment? In an era of historically low interest rates, that’s a very attractive proposition.
Whilst blockchain is fundamental to the whole undertaking, it’s not visible to the end user, or to the merchant. It runs under the hood, powering the Incent system but not intruding into the customer experience. If they want to trade it on a crypto exchange, they can — but there’s no requirement to learn any new skills or download anything but the Incent smartphone app.
Crowdfunding the revolution
The Incent crowdfund started on 1 October. Investors can register and deposit bitcoin and Waves at IncentLoyalty.com/register.
Once the crowdfund has finished on 30 November, Incent tokens will be created on the Waves network and can be withdrawn to local wallets and any participating exchanges. The first merchants distributing and accepting Incent are expected to go live at the beginning of 2017. On the opening day of the ICO Incent confirmed its first bricks-and-mortar partnership with the Temperance Society bar in Sydney, where Incent’s parent company BitScan is based.
Early investors can buy Incent at 10,000 per bitcoin until 4 October, after which the price will gradually increase until the end of the crowdfund on 30 November, or when $5 million has been raised, whichever happens sooner. You can find out more at IncentLoyalty.com or the Incent bitcointalk thread.
