Blockchain in loyalty programs: possibilities and advantages
Blockchain is the gateway to NFTs, cryptocurrencies and Metaverse transactions, being the center of the new digital transaction ecosystem. After all, this is the technology that stores and protects users' data.
What is it and how does it work?
Blockchain is a technology for recording and storing data and transactions that works in a decentralized way. This means that it does not depend on intermediaries and is distributed across several computers connected to the network.
This concept may seem abstract, but its name helps us better understand how it works. In Blockchain, information is recorded and stored in blocks that are joined together in the form of a chain.
Each block is protected by a hash, a mathematical encryption code, and the hash of the previous block. In this way, security is enhanced and blocks are prevented from being hacked or another block is randomly inserted into the chain.
Under a peer-to-peer (P2P) architecture, each computer in this distributed network functions as both user and server, eliminating the need for a central server.
In short, Blockchain technology has 4 main features:
- Consensus: For a transaction to be considered valid, all network participants must agree.
- Provenance: All network participants know the origin of the information.
- Immutability: No transaction is modified. A new one must be opened to edit the previous one.
- Purpose: In a distributed network, it becomes easier to verify the ownership of a piece of data or the completion of a transaction.
Who are the participants in the Blockchain network?
A blockchain network has several participants, each with certain specificities. Understand who they are and their respective roles:
- User: Participant who has permission to enter the network and conduct transactions with other participants.
- Regulator: User with special permissions to monitor transactions.
- Developer: Programmers who create the connection between users and the blockchain.
- Network operator: User with special permissions to manage the blockchain network.
- Data source: Data provider systems that define how the transfer of information will occur between traditional applications and the blockchain.
- Certified authority: User who provides and manages the permissions within the blockchain.
Why is this the technology of the future?
Various innovations (such as the Internet and other mobile technologies) have improved the convenience, speed and efficiency of transactions while reducing or even eliminating the distance between sellers and consumers.
However, some limitations mean that data storage and online transactions are still vulnerable. Several organizations, for example, have already suffered from cyber-attacks and leakage of confidential information of their users.
In addition, because they require intermediaries and/or central servers, traditionally used technologies are more costly and time-consuming to complete records and transactions.
In this sense, Blockchain stands out as the technology of the future for offering 3 major advantages: time savings, cost savings and greater security.
How to use Blockchain in business?
The impacts caused by COVID-19 have influenced organizations to rethink their ways of operating. According to PwC, the digital transformation of core-business processes and operations is currently a priority for 61% of companies.
In this sense, Blockchain has been used as a technological solution by several industries around the world, as it offers security and transparency and, consequently, adds value and generates economic growth.
And despite having its fame attributed to cryptocurrencies, Blockchain technology can be used in several areas within an organization. Its five main purposes are:
- Payments: Blockchain has been used by banks to create "stablecoins" - tokens that lower transaction fees and allow them to be instantaneous.
- Contracts: Smart contracts reduce friction between the parties involved, improve the flow of business agreements and automatically create an audit trail.
- Identity: It is possible to store any types of documents in a completely secure way, avoiding fraud and ideological falsehood.
- Provenance: Blockchain allows a company's customers to verify the origin of products and their raw materials, creating loyalty through transparency.
- Customer engagement: Blockchain enables loyalty and reward programs to integrate their processes and offer the customer the ability to redeem, store, share and use their points/rewards on one platform.
Blockchain and the use of Crypto rewards
With the use of blockchain, it is possible to avoid fraud and scams, being able to safely offer crypto re wards as a reward for loyalty programs, which can be used to redeem cryptocurrencies and NFTs. All this becomes a great advantage when we remember that these are the technologies and transactions of the future, making crypto rewards increasingly interesting and necessary for users.
Want to learn more about Blockchain and the technologies that are shaping the future of loyalty? Download our e-book here: How to build customer loyalty in times of Blockchain, NFTs and Metaverse.
Indico is a Brazilian Martech company with an experience that has reached more than 150 million customers in 9 countries, that develops solutions to combine Loyalty and Innovation creating unique connections between consumers and brands.
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