Sandblock — From loyalty coalitions to a global consortium

Why the blockchain? Why cryptocurrencies? Why a shared value through one universally tradable token?

A loyalty coalition can mainly be described by a loyalty card system that offers incentives to customers of several businesses in return for allowing those businesses to collect user data. For instance, airlines are gathered in big « alliances » which offer, among other things, a common loyalty program for their members, with the « miles » that most people know about. The biggest integrated programs are those set up by Mastercard, Visa and American Express, which offer rewards (from cashback to price reduction and goods) depending on card usage.

Those current programs have 3 main characteristics:

• They remain exclusive : airlines alliances are limited by some pro-competition regulations because of their nature (miles loyalty programs are a magnified by alliances, but not the reason the alliances exist), while the payment networks (visa, mastercard and amex) each operate their own coalition and carefully manage their reach carefully.
• They are expensive operations: The costs in terms of infrastructure and human resources to first create, calibrate and then manage such an operation are massive and de facto restrict them to those companies with the deepest pocket, which is a requirement in order to maintain an image of « high status » : no leading name brand is going to participate in a coalition that accepts companies with less valuable brand image as members for fear of diluting their most prized asset.
• The coalition management controls everything from the shared customer private data to the various rules and rewards that can be used by the coalition businesses.

Using the blockchain

The consequences of those characteristics are that the only currently possible coalitions are those where members are of the same size, that is to say big established companies with well delimited markets and historical relationships, mostly operating in the same geographical markets, so that the coalitions ends up acting like a stabilizing force instead of potentially helping members to innovate. Small companies have no way to join in those kind of coalitions, as that would result in helping legitimize them as worthy competitors, thus valorizing their brand at the sole expense of the bigger players.

Smaller companies thus cannot benefit from such coalitions, which widens the gap between big and small companies, as they would need to be successful and considerable resources to actually gain access to the tools that might help them succeed.

Using a public blockchain to power Sandblock’s platform enables us to build a worldwide, distributed, inclusive and open platform for customer loyalty and satisfaction management where all members play on a level field, and rules are enforced by a protocol instead of third parties that might rig the game.

The platform’s members will then drastically reduce the costs incurred in setting up and managing their own customer loyalty programs, as the platform will provide them with the necessary infrastructure, operated autonomously.

Cryptocurrencies

While the blockchain is a requirement for cryptocurrencies, cryptocurrencies are not necessary to build a blockchain-based project. But for Sandblock, the advantages largely outweighed the drawbacks because of the nature of our objectives.

Our take on the characteristics of cryptocurrencies as they relate to Sandblock is as follows:

First, the model of distributed governance upon which cryptocurrencies are based eliminates from the get-go the potential risks of having unwarranted external interference, and is in our opinion one of the biggest advantages of Sandblock to convince prospective members to join, it also allows for avoiding the transaction fees which are imposed by payment networks, which on transactions for small amounts of money would be unsustainable.

One of cryptocurrencies’ appeals is the possibility to trade without frontiers, be they geographic, or financial. Cryptocurrencies allow people to trade with each other from any part of the world, and for the sole price of authenticating the transaction.

One controversial characteristics of crypto currencies is volatility. Yet we think volatility is both natural and inevitable in a free market. In fact, the ability of central institutions to control currency volatility in the case of conventional fiat currencies is one of the main issues that cryptocurrencies were built to prevent. In the case of Sandblock, the drawbacks of volatility for merchants are limited as the prices of the rewards they offer are indexed on fiat currencies, and they can also leverage the market to balance their cashflow between their tokens, other crypto and fiat currencies. On the other side, for the customer, the drawbacks of volatility can almost be eliminated due to the “gift” nature of the token received. Moving beyond that, it is perceived as a gamification mechanism for the customer experience.

Satisfaction Token — A token to unify them all

When we invented the concept behind Sandblock, we wanted to avoid a few things:

First, allowing merchants to have their own independent and (consequently) volatile token would mean that only the biggest players could afford a decent market cap, the stability and visibility that it enables, and would thus theirs would be the only token tradable on exchanges. Going through the process of devising an ecosystem using innovative technologies to basically reproduce the same system to the benefit of the actors that need it the least would not make any sense.

Moreover, enabling independent market pricing would not benefit both merchants and consumers as it would basically create a form of small size stock-market with all the trouble and issues that go with it.

Our objective instead, is to build a consortium using the SAT, our ERC20 token, as an index to prevent merchants’ tokens from being independently volatile so as to ensure the cohesiveness of the ecosystem, and aligning the merchants’s incentives. In that consortium, big and small players can communicate, exchange and benefit from the collaboration efforts that they choose to engage in, through the medium of Sandblock’s share currency, the SAT. The advantages to that system are the major savings in terms of both money and time for companies to manage their customer loyalty and engagement programs. For customers, the incentives to effectively buy into the ecosystem is the guaranty that they will never have to waste their time, money and energy to apply for loyalty programs, all the while maintaining ownership of their personal data.

The possibility to exchange different merchants tokens also ensures that customers can walk away from a given merchant’s loyalty program without losing what they have accumulated. Thus their loyalty is never taken for granted.

In conclusion

We are grateful for the interest people are showing for Sandblock, and hope that this piece helps put our ideals and objectives into perspective. We will soon write about the issue of data privacy, and how Sandblock’s design takes it into account.

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