$24 — $32 Billion Destroyed
How gift cards cause billions in economic waste & how the blockchain can solve it
Scroogenomics
In 2009, economist Joel Waldfogel penned a very popular book based on a very unpopular idea. In his book, Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays, Professor Waldfogel makes the case that gift giving creates a tremendous amount of economic loss, know as “deadweight loss” or “welfare loss”.
This deadweight loss due to gift givers’ “allocative inefficiency”, which is a fancy way of saying that people are bad at giving gifts that people actually want enough to buy themselves at the market price of said gift.
Think of the $50 wool sweater your aunt got you for the holidays that one year. You never wear it because it itches, and if it was your money you would pay exactly $0 for that sweater. Actually, maybe it’s worth less than $0 to you because it makes your skin crawl, yet you feel obligated to wear it every time your aunt visits during the holidays.
“I could spend $50 and buy something that would be worth nothing to you.”
— Prof. Joel Waldfogel ¹
With that $50 in cash, versus $50 in worthless wool [to you], you could actually buy something worth at least $50 to you. This, my friends, is the deadweight loss of gift giving.
Gift Cards Are Exactly No Better
“gift cards have a welfare loss that is comparable — although perhaps not worse — than physical presents.”
— Prof. Jennifer Pate ²
In her 2007 article published in The American Economic Association’s Journal of Economic Perspectives, economics Professor Jennifer Pate, applies the notion of gift-giving’s economic loss to the topic of gift cards. Through her analysis, Professor Pate estimates that gift cards result in roughly 15% — 20% of welfare loss.²
While gift cards offer the recipient the ability to choose among different goods and services sold by the issuer of the gift card, economic loss mainly comes about when people don’t use their card (in full or in part), and/or when they buy things that they otherwise would not.
When you apply Prof. Pate’s gift card deadweight loss estimates (15% — 20%) to the approximate size of gift card market being $160 Billion in 2018, the economic destruction is staggering — somewhere between $24 and $32 billion just evaporates every year.³
To put that into perspective, this means gift cards destroy more economic value than the entire US Transportation Infrastructure industry ($20.93B) every year.⁴ We’re talking more than all of the revenue brought in by operators of airports, owners and operators of roads, tunnels, and rail tracks, and marine ports owners and operators — combined.
Blockchain Powered Gift Cards
“Is every asset in the world destined to become liquid on the blockchain? The answer is ‘yes’. That is the next revolution.” — William Mougayar ⁵
The blockchain and cryptocurrency mean many different things to many different people. To the team here at brifs.co, these things mean unprecedented liquidity for a myriad of assets; gift cards included.
Blockchain, specifically a public/private blockchain built on the NEM platform, is to us an infrastructure upon which we can create a marketplace that allows users to transact with each other without having to pay a centralized platform for connecting buyers and sellers and for protecting that the transaction goes the way it’s supposed to go.
Cryptocurrency, specifically the brifs.co token (BRC), is to us a system of record for digitizing gift card values, making their values infinitely more transferable, making trust inherent, and with prices (discount on a card’s balance) solely being determined by market participants without having to factor-in the cost of high fees.
0% Commission
The basic idea behind how to fix the very broken gift card industry is brutally simple:
- Create a wallet that uses smart contracts to allow people to store their gift cards easily and securely on a private blockchain
- Build a marketplace that can verify a gift card’s funds and that allows people to buy and sell unwanted gift cards on a public blockchain
- Never charge any transaction fees; ever — 0% commission
It’s All About the Execution
While the basic notion of how to bring utter liquidity & fungibility to gift cards is fairly straightforward, the implementation is not as easy as 1,2,3.
The team here at brifs.co has been heads down researching, planning, preparing, and testing. Now we’d like to share the idea and what we’ve built with you.
We have alpha tested our MVP (minimum viable product) and have had hundreds of visitors who have found us through organic search results and and purchased or sold gift cards on our site.
Our alpha test has concluded and soon we’ll announce our beta test that will allow anyone to purchase discounted gift cards at the best prices anywhere on the net and sell their unwanted gift cards without paying the industry standard 12% to 15% commissions.
If this blockchain-gift-card-geek-out resonates with you, and you want to find out about our upcoming token sale, find out when our beta test is live, or just follow our progress; here’s how:
- Join brifs.co on Telegram
- Read our 1-Page Summary &/or our Whitepaper
- Follow our blog on Medium
- Visit us on the web: brifs.co
- Email: hello {@} brifs {dot} co
- Follow our Twitter: @brifsdotco
Special thanks to the brifs.co team for helping to put this post together
Thank you so much for reading,
Charlie Muir
Founder @ brifs.co
Works Cited:
- PBS, NewsHour, Making Sen$e, Paul Solman and Joel Waldfogel, The economics of wasteful spending: The deadweight loss of Christmas,
2013–12–23 - American Economic Association, Journal of Economic Perspectives, Jennifer Pate Offenberg, Markets: Gift Cards, 2007–04–01
- CEB (now Gartner), 2015 Gift Card Sales To Reach New Peak Of $130 Billion, 2015–12–08
- Fidelity Investments (FMR LLC.), Research, Markets & Sectors, Transportation Infrastructure
- Conference: Cryptospace Moscow, William Mougayar, Business on Blockchain, 2017–12–27
