At this key point in Incent’s journey, it’s worth looking back at one of our first attempts to articulate what a digital reward currency should look like – and how we’ve updated our thinking.
Round about four years ago, as the idea for Incent was gathering pace, we published an article describing what we thought it could look like. The idea was based on an experience in Starbucks, and the rewards the coffee giant offered. You can read that article and an update to it here. Since then, we’ve learned a thing or two, and it’s worth explaining how and why.
The basic idea behind that article was that Starbucks had chosen to make its rewards ‘closed’. Sure, it issued a reward point (called a ‘Star’) with every coffee, and if you collected 15, they were worth a free coffee. But those points were non-transferable. They’re yours and yours alone; you can’t give them away or sell them.
A blockchain version of Stars would have been incredible. The simple act of making those reward points transferable would be game-changing:
It means I can send someone a Starbucks drink whenever I want, ideally straight from the app that I would immediately download to my phone. It also instantly opens up a third-party market for Stars. I could buy these at market rates from anyone willing to sell them, on one or other exchange that would no doubt start trading them within a day of the initiative being launched.
So a Star would immediately have market value — value that would approximate to the value of the coffee it represented in any of Starbucks’ outlets around the world. It would be a decentralised token, effectively a currency, ‘backed’ by Starbucks’ willingness to redeem it for drinks. (Naturally a blockchain would be a good way to administrate this.) It would, to all intents and purposes, be money. There’s no reason that money couldn’t be used to pay for all kinds of things that Starbucks doesn’t know or care about.
But Starbucks don’t do this. They artificially limit the value and utility of Stars by keeping the system closed. (There’s still hope; Starbucks are positioning as a major force for crypto adoption in their partnership with Bakkt.)
The next step
Looking back at this idea, it might have worked beautifully for Starbucks (assuming they could fine-tune the accounting to ensure it was profitable, and gain regulatory approval). But there are two ways in which Incent is radically different: Digital Scarcity, and avoiding the Single Point of Failure (SPoF).
Digital Scarcity is a critical element of Incent’s value proposition. Like Bitcoin, its finite supply is intended to make it a store of value as well as a means of exchange. We want people to be able to save using Incent as well as redeem it whenever they want. While it might make sense for Starbucks to mint rewards into existence with each purchase, and redeem (destroy) them when they spend them, that leads to potentially unlimited coins being created. That’s how conventional loyalty works, and it can only work if that business is the only entity creating those points (or there’s a coalition following a very clear set of rules). When a business is the central bank of its reward currency, it has to keep tight control of it if it wants to stay solvent. And that leads into the second difference.
Avoiding the Single Point of Failure. If Stars were hosted on the blockchain, the infrastructure would be decentralised. But the issuing company is a single point of failure. If Starbucks goes bust, those Stars can no longer be redeemed and they’re worthless. By removing the ‘central bank’ element of the process – by ensuring digital scarcity – Incent avoids this problem. There’s no one company that gives Incent value. It’s a collective effort, a product of the aggregate demand by every business and service using the platform. It’s only possible to build confidence in that collective demand because no one holds the keys to the printing press.
We’re pretty sure this is what one of the rewards currencies of the future looks like. If you want to find out more, join us on social media or sign up for the platform.
With the launch of the platform, Australian users can access rewards in Incent tokens on every spend they make. To find out more, visit www.incent.com.
- Incent Slack: https://incentinvites.herokuapp.com/
- Incent Telegram: https://t.me/IncentLoyalty
- Buy and sell INCNT tokens on Bittrex.
Disclaimer: Starbucks was chosen as an example for illustration purposes only. There is no intention to suggest Starbucks’ reward program or the product itself is superior or inferior in comparison to the market.