Recap from OST LIVE with Mark Bonchek, Founder & CEO of Shift Thinking — Branded Currencies and Tokenized Loyalty For Business
Mark Bonchek, Founder and CEO of Shift Thinking, joined us for the 50th Episode of OST LIVE. Bonchek is a Harvard Business Review contributor and faculty member at Singularity University, a Silicon Valley think tank that offers educational programs and a business incubator. Bonchek is also an advisor to OST.com. He joined us to discuss branded currencies, benefits of token economies, and the future of brand loyalty.
Parallels Between Blockchain in 2018 and The Internet in 1990's.
Internet in the 1990’s was about democratizing information and disintermediating the gatekeepers that controlled information. The basic function was a web page that anyone could create to share information. The second phase of the internet was social networking, enabling people to communicate and share information at scale. Bonchek says that “Blockchain is doing to trust what the early internet did to information.” It is democratizing trust and disintermediating the gatekeepers that have controlled trust. It enables a network effect so that trust can happen at scale.
“The nature of exponential change is deceptively slow in the beginning and then overwhelmingly fast once it picks up steam. We’re in that deceptive phase where there’s initial hype and then it dissipates a bit, so people think not to take it seriously. That’s just the time when you need to be doubling down.” — Mark Bonchek, CEO of Shift Thinking
There is a parallel in the evolution of blockchain and the internet. The potential of what the internet could do or would become was not taken seriously in its early development. The same is happening with blockchain, people aren’t taking it seriously in its early stage. Comparing this to the 1990’s, there was a post crash phase where stock prices dropped and stayed low for a while. Companies that kept working on their digital internet strategies are the ones that really have succeeded, such as Amazon.
Loyalty Programs and Branded Currencies
In July 2018, OST Chief Commercial Officer Chris Dark wrote an article on the major differences between blockchain tokens and points programs . One of the most popular use cases for branded currencies is to replace an antiquated loyalty program such as a punch card or points program. Bonchek says that “Ironically, today’s loyalty programs have nothing to do with loyalty. They’re actually incentive programs.”
Loyalty programs today are very transactional. Usually, a customer makes a purchase in exchange for points that can be used to make another purchase. There is also very low trust in loyalty programs today. Customers want the certainty that their points will still be worth something in the future. Brand to user relationships need to change from being transactional to being collaborative.
Currently, there aren’t many good ways for brands to reward influencers without it feeling like a payoff. Branded currencies can enable the creation of a much richer set of interactions between and among customers, influencers and brands. To understand how branded currencies change the relationship between users and brands, we must first understand the way in which people interact. Bonchek brings up the anthropological model of a market and gift economy.
A Market Economy is based on a transaction. If you hire a mover, you would pay the mover in fiat currency. A Gift Economy on the other hand is based on a relationship. If your friends help you move, you reward them with Pizza. Financial currencies have been useful for transactions on the market economy. However, we are moving towards an economy where we can transact with social currencies. Blockchain will enable social currencies to be used in a way that people can be rewarded for what they do in the relationship.
The Goldilocks Zone
The true value of a branded token economy is creating an intermediated state in which branded currencies serve as both a social currency and a financial currency, so that it doesn’t feel like a payment, yet it has real value. The balance between both social and financial currencies is the “goldilocks zone” that brands haven’t been able to create in the past. This is something that companies like Starbucks has been working on with their stars program. Stars don’t feel like a payment, but they can be used to buy things. Brands are now able to express appreciation to customers for recognizing the brand without it feeling like a payoff.
Mass-Market Blockchain Use Cases
Real mass-market blockchain use cases will begin to emerge as early as 2019. OST is best positioned to lead this charge. Boncheck says that “OST is the equivalent of salesforce.com for micro economies and branded currencies.” OST is building the blockchain infrastructure and developer tools needed for companies with millions of users to be able to manage their branded currency and micro economy. Companies can use OST’s platform to manage relationships in their business as a micro economy without having to worry about blockchain so that they can stay focused on their core product.
Coming Up Next on OST LIVE: Brian Lio
Brian Lio is CEO of Smith + Crown, a research and consulting group focused on providing insight, analysis, and data across the breadth of technologies, projects, organizations, and trends within the blockchain and cryptofinancial industries. Lio will share insights from the Chamber of Digital Commerce Token Alliance and current trends in blockchain-based projects. Subscribe to our YouTube channel or listen to the audio format on anywhere you listen to podcasts, including iTunes, Stitcher, and Spotify. We’re also now available on Alexa! Simply add “OST LIVE” to your flash briefing.
OST blockchain infrastructure empowers new economies for mainstream businesses and emerging DApps. OST leads development of the OpenST Protocol, a framework for tokenizing businesses. In September 2018 OST introduced the OpenST Mosaic Protocol for running meta-blockchains to scale Ethereum applications to billions of users. OST KIT is a full-stack suite of developer tools, APIs, and SDKs for managing blockchain economies. OST partners reach more than 300 million users. OST has offices in Berlin, New York, Hong Kong, and Pune. OST is backed by leading institutional equity investors including Tencent, Greycroft, Vectr Ventures, and 500 Startups.