4 Reasons Retailers Will Develop Their Own Cryptocurrencies
In the fall of 2017, a rumor started circling that e-commerce giant Amazon was developing its own cryptocurrency. This stemmed from the company registering several suspicious domains, including amazoncryptocurrency.com and amazonethereum.com. Many speculated that Amazon was either building an Ethereum-based cryptocurrency or setting up an exchange, and while nothing has materialized yet, it’s a remarkable glimpse into the future of tokens. Read on for four reasons major retailers will almost assuredly develop their own cryptocurrencies in the near future.
Blockchain-based assets can be utilized as better, more efficient methods of distributing value for various business operations. For instance, a blockchain-based loyalty system converts arbitrary, expense-only loyalty points into tradable, traceable assets that open new ways to measure and incentivize customer loyalty. Appsolutely has experienced the power of putting traditional rewards onto digital platforms. When the company worked with The Bistro Group, which holds franchises of Denny’s and TGI Friday’s in the Philippines, on their customer rewards system, the restaurant group’s revenues increased 33%, and that’s just for digital customer loyalty. Imagine the possibilities with blockchain and its features that allow for further traceability and targeting.
Aside from the amount of money that a cryptocurrency will raise for a company and the value it will represent for the company’s systems, a retailer that develops its own cryptocurrency will allow for the creation of an ecosystem that provides one-to-one engagement with customers and better marketing offers.
Last year, Burger King in Russia introduced Whoppercoin. Patrons earn one Whoppercoin for every Ruble (1 USD = 57.7 Rubles) they spend, and get a free Whopper for every 1,700 Whoppercoins they earn. Unlike traditional loyalty points though, the supply of one billion Whoppercoins can be freely traded online via blockchain platform Waves. This gives Burger King Russia an edge over otherwise tired loyalty programs, which have resulted in 100 billion+ loyalty points sitting unused, whether that’s because they don’t know the points exist or they’ve disengaged from the company. By using a cryptocurrency-based loyalty program, consumers don’t miss out on rewards and, in turn, tend to have a more loyalty to companies.
Retailers that tap into the power of blockchain technology experience more efficiency with tracking transactions and processing. Due to blockchain’s ability to record all transactions safely, effectively, verifiably and permanently, retailers have a far greater chance in preventing hacking and fraud. Every year, US companies lose around $15.4 million and 500,000 jobs to cyberattacks. Hacking blockchain is an almost impossible feat, given that hacking one specific transaction would require hacking all the others on the chain before it gets detected across thousands of nodes that confirm blockchain transactions.
Beyond security and tracking, at the heart of blockchain’s power, is its main purpose -- the recording of all transactions on a publicly verified chain. Right now, a huge part of companies’ expenses involve the hiring of a bevy of auditing, financial, taxation, and related services just to ensure that the accounting books are verified. This is doubly true for retailers, due to the sheer volume of transactions they have. Blockchain makes a lot of those services redundant, unlocking additional resources that a company can use for more vital operations. Look to big players like IBM and their push to make global shipping more efficient via blockchain for an idea of how this focus on new efficiencies will seep into the world of retail.
Another reason that retailers will begin developing their own cryptocurrencies is they will see it as a new avenue for value storage, transfer, and creation. In addition to fiat and virtual currencies, which are value systems over which they have little control, a retailer’s own cryptocurrency can help increase revenue through loyalty programs. A retailer can decide whether they want to use its own cryptocurrency as a utility token similar to a commodity with expansive use in their online and physical stores, or as a security token that will assign equity-like stakes to supporters of that retailer. Either way, the blockchain allows for a verifiable and trackable system of getting new revenue and funding that can work better than the existing systems.
The possibilities that are afforded by blockchain and cryptocurrency are only beginning to be well understood. With the cryptocurrency market forecasted to hit the $1 trillion USD mark this year, the market is growing fast. Whether or not Amazon ends up developing its own cryptocurrency or an exchange, it seems extremely probable that many major retailers will begin developing their own cryptocurrencies in the near future. Like what has happened with cloud computing, once blockchain companies create flexible systems allowing retailers to easily create their own cryptocurrency and blockchain solutions, more retailers will jump at the opportunity to be part of the cryptocurrency revolution.
Patrick Palacios, CEO of Appsolutely