Why Businesses Are Moving Their Loyalty Programs to Blockchain

Understanding the recent interest in blockchain-based loyalty programs

Cardstack Team
Cardstack
3 min readJan 20, 2023

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Many businesses, in recent months, have announced plans to move their loyalty programs to a blockchain-based system. The reason behind this shift is blockchain’s ability to potentially revolutionize the way businesses handle their loyalty programs. By leveraging the power of blockchain, businesses can unlock the true potential of their loyalty programs. From increased transparency and security to custom-tailored programs and boosting customer engagement, blockchain-based loyal programs can prove to be a game changer.

In this blog, let’s find out how blockchain-based loyalty programs program work, their benefits, and how businesses can implement such loyalty programs.

How blockchain-based loyalty programs work

Blokchain-based loyalty programs create a decentralized system for calculating and distributing loyalty points to customers. Each transaction, such as a purchase or action that earns points, is recorded on the blockchain and added to a block. These blocks are then linked together to create a public ledger of all transactions for individual customers. This ledger is accessible to all parties involved, providing transparency and allowing customers to see exactly how their points are being calculated and distributed.

Why are businesses shifting to blockchain-based loyalty programs?

Web2-based loyalty and rewards programs have been underperforming due to factors such as account inactivity, low redemption rates, long wait times, and high costs for transactions. Blockchain-based loyalty programs allow businesses to create more transparent and efficient systems for calculating and distributing loyalty points, tailored to customers’ needs, which can increase customer engagement, drive sales, and reduce account inactivity. Here’re a few key features of blockchain-based loyalty programs:

Transparency: One of the main benefits of using blockchain for loyalty programs is that it allows for a decentralized system of record-keeping. This means that all transactions and points calculations are recorded on a public ledger that is accessible to all parties involved. This increased transparency helps in building trust between businesses and their customers, as customers can see exactly how their points are being calculated and distributed.

Security: Loyalty program frauds are on the rise, causing businesses to lose millions in loyalty points as well as face damage to their reputation. Another advantage of using blockchain for loyalty programs is that it helps in reducing fraud. Blockchain technology is inherently secure, as transactions cannot be altered once recorded. And, any changes are recorded as a new transaction. Furthermore, compromising a blockchain network is increasingly difficult due to its design. This makes it much more difficult for hackers to commit loyalty fraud and steal points.

Personalization: Implementing blockchain for loyalty programs can help to increase customer engagement and loyalty. By providing customers with a transparent and secure system for earning and redeeming points, businesses can create a sense of trust and loyalty among their customers. Additionally, businesses can also use blockchain to create unique and customized loyalty programs that are tailored to the specific needs of their customers. This can help to increase customer retention and drive sales.

In conclusion, blockchain technology has the potential to revolutionize the way businesses handle their loyalty programs. By providing a transparent and secure system for calculating and distributing points, businesses can increase customer engagement and loyalty, while also reducing fraud and increasing security. Implementing blockchain for loyalty programs is relatively straightforward, and businesses of all sizes can benefit from this technology.

How Cardstack can help?

Cardstack’s Champer Protocol simplifies reward management and allows businesses to ensure equitable reward distribution among community members, customers, and contributors. It uses advanced data analytics methods to calculate and distribute rewards among eligible members.

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Cardstack Team
Cardstack

Official account for the team behind the Cardstack project.