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Impact of Blockchain in rewards and loyalty points – A Complete Guide for 2020

Blockchain is a decentralized method of taking transactions and accounting for them.

The “blocks” here are storage units for digital information about transactions.

When new transactions are made, new blocks are added to the end of a chain, which is a public database available for anyone to view.

Blockchain is a natural fit for eCommerce because it is designed for storing transactional data in a way that is secure and decentralized.

Let us Discuss some Use cases of Blockchain in rewards and loyalty points

Use Cases Of Blockchain in rewards and loyalty points

Now after a rundown of what blockchain technology is, let’s deep dive into why blockchain technology is a good fit for revamping customer loyalty programs : 

1. Reducing costs

Due to the fundamental overhaul of the transactions, customer acquisition, systems, and management execution, it has become difficult to spend costs on implementing new technology.

But, by maintaining “overhaul” should be put into perspective.

Despite the fundamental changes it promotes, blockchain is a system facilitator, not a replacement for an existing system. 

Blockchain’s main attraction is that it works with legacy through smart contracts that transmit transaction records accessible to permission users that integrate them into their systems.

These legacy systems continue to perform functions outside of what they specifically need blockchain to enhance or improve on a transactional basis.

Three major levels where cost saving should be identified are system management, transaction, customer acquisition.

Blockchain in rewards and loyalty points can work in these areas, where it can lessen system management through smart contracts that report secure, tracked, transparent transactions to legacy systems, reducing costs associated with errors and fraud.

A favorable byproduct of reducing these costs permits loyalty rewards program providers to drop minimum points requirements at which customers are allowed to redeem points.

For customers, the ability to use points more readily and quickly will increase redemption transactions, reducing costs per transaction. 

Blockchain in rewards and loyalty points

2. Making the process near real time

Some of loyalty rewards program doesn’t make it in time and the reasons are deliberate such as a loyalty rewards program provider has specific policies in place before authorizing the release of “pending” points,


Many are for logistical reasons, such as the lack of coordination between a loyalty rewards program issuer (a credit card, for example) and a loyalty rewards program provider. 

With the help of the Blockchain in rewards and loyalty points, it can enable transactions to be recorded and accessed by multiple involved parties in near real-time and also increase the chance of loyalty rewards program providers who can cut through coordination inertia to credit points faster.

Customers crave faster redemption so that loyalty rewards providers that miss an opportunity to make this happen also potentially miss an opportunity to create a memorable customer experience that would enhance loyalty. 

3. Providing a secure environment

Blockchain creates an immutable and time-stamped distributed database entry of every single transaction.

It prevents them from double spending, fraud, abuse, and any other type of manipulation of the transactions.

They are not only tougher to hack, but also know the ability to provide security on multiple levels.

First, all points are tokenized, which gives them unique identities that are extremely difficult to counterfeit.

Second, to access or corrupt information recorded on a blockchain, more than 51 percent of its nodes must be hacked.

Loyalty programs are already a source of vulnerability from a security perspective due to PII and other quasi-identifiers and pseudo-identifiers that they collect about their customers.

Blockchain in rewards and loyalty points does not hold this information, but, instead, records the transaction of it in a secure, irreversible manner. 

4. Creating unique business opportunities

 Loyalty rewards programs provide different opportunities with well-developed programs.

It will have unique opportunities to offer value-added services to other businesses. 

For example, a small business for which a bank provides merchant banking and treasury management services will gain access to the bank’s flexible (smart) loyalty rewards interlinked network.

Blockchain in rewards and loyalty points

In addition, the bank can now offer the merchant the opportunity to join the overall interlinked network as a provider on the merchant’s own terms through its own tailored rewards app.

Now the merchant, which previously did not have a loyalty program with scale, would have the option to offer its clients loyalty points that could be redeemed within a wider network.

The bank is adding a value-added service to its small business client while the loyalty network gains another vendor that can interact with other loyalty rewards programs to which they previously did not have access.


In conclusion, blockchain is able to streamline the execution and administration of loyalty rewards programs,

giving all participants near-real-time transparency, within the permission constraints of the program provider,

which taken altogether should result in significant future cost savings and implementation of a blockchain-based loyalty rewards program in the medium term.   

Cryptic Ocean is a blockchain technology company that provides end-to-end blockchain development and blockchain consulting services to multiple business domains.

Our goal is to assist corporations adopt new technologies and change difficult problems that arise throughout technology evolution.

Contact us for the most effective solutions regarding the utilization of blockchain technology to resolve the toughest challenges faced by the globe nowadays.


Who has the best loyalty rewards program?

Designer Shoe Warehouse (DSW) has long run a traditional loyalty program that rewards customers with points for each purchase and includes tiers of rewards that customers can unlock as they spend more.
Their program runs seamlessly. 

What is loyalty redemption?

The loyalty redemption rate is the percent of points that have been issued and that were redeemed for rewards. 

How do you create a successful loyalty program?

Blockchain offers few creative tips like unique rewards, rewards with intrinsic value, keeping it simple, personalized innovation, rewards points – traditional yet effective, and staying connected with customers. 

Why do loyalty programs fail?

Failure of the loyalty programs happens due to poor loyalty program design, inconsistent communication, lack of clear and significant goals or objectives. 

If you found this article interesting, here you can find more Articles.


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