5 Things You Didn’t Know About Loyalty Programs and the Blockchain

5 min readSep 2, 2021

The popularity of loyalty programs can’t be understated, many people use them get more value out of their favorite brands and to be rewarded for their buying habits.

For companies, loyalty programs serve to help retain customers:

“Companies are changing the way they treat customers. It is more expensive to get customers than to keep them. This change is good for consumers. Loyalty rewards are focused on keeping customers more engaged.” — Ripe for Disruption: The $126 Billion Loyalty Market Opportunity

With the fast evolving technology of blockchain, both companies and consumers will benefit as loyalty programs migrate to take advantage of this advancement in data management, privacy, and trust.

Some businesses are getting rid of traditional customer loyalty. Instead, they are using blockchain technology to replace it.

As with any new industry disrupting the old order, the ramifications of how blockchain tech will impact loyalty programs is just beginning to emerge; but, despite the fact that what may come the is still unknown, the following five things are the most emergent areas of synergy between blockchain tech and loyalty programs.

Five Ways Loyalty Programs Can Take Advantage of Blockchain Technology

1. Non-fungible Tokens (NFTs)

NFTs are digital tokens that can be used in all sorts of ways.

Unlike cryptocurrencies, which are all identical, each NFT is unique and different from the next. NFTs are a special type of crypto-token that represent a unique asset or item. NFTs are digital assets that represent real-world objects and have unique identifying codes (like a loyalty program’s number).

NFTs are great for creating a unique experience for customers. They also provide brands with a new way to gamify their brands, auction unique items, prove scarcity of limited editions and even trade collectibles.

NFTs are being used to attract younger audiences to brands and increase brand engagement.

2. Point Flexibility

Monetize your points by trading them on the blockchain.

Customers yearn for flexible rewards that fit their lifestyles. Blockchain technology has created new types of rewards and are enabling a more flexible use case, like being able to swap rewards between programs.

Blockchain technology currently under development by DragonBite enables users to manage and convert unspent loyalty points into cryptocurrencies, like BITE token.

3. Decrease Cost to Manage Loyalty Programs for Business

The cost of launching a smart contract on a blockchain and issuing tokens is a fraction of the cost of a traditional loyalty program.

Blockchain ledgers are already in place, any company or person can build a DApp on top of the dozens of popular blockchains operating today.

Companies using a blockchain loyalty program don’t need to internally maintain a ledger of every transaction, making the program more efficient and less costly.

Since blockchain tokens are digital, they can be transferred in seconds with much less risk of fraud in the system and more security overall for both the consumer and the enterprise.

Utilizing the security infrastructure of a blockchain and the logic of smart contracts makes launching loyalty programs on this technology more economic to scale.

4. Security and Fraud Protection

Blockchain can record all transactions and keep them secure. This can make it easier to track loyalty and offer rewards that go to the right people.

Distributed ledgers, thanks to the way it works, is hard to alter. This is a good thing because it helps eliminate loyalty fraud.

Fraud is a big problem with loyalty programs. Fake accounts steal points or even prepaid cards for loyalty programs. Blockchain would solve this problem; it offers a more secure way to make sure that people are not stealing points.

The blockchain is a distributed ledger, which means it is replicated and spread over a network of different computers. This makes it almost impossible to change.

5. Increase Program Efficiency

“And in a world where brand experience and instant gratification are standards, efficient loyalty programs are tantamount to customer retention.” — Forget Bitcoin: Blockchain May Hold the Key to True Brand Loyalty

Loyalty points can be transferred more easily using blockchain.

Airline miles are a good example of this. The airline miles can be exchanged for hotel points, or swapped — loyalty points can be traded between users. This could be beneficial for travelers who have hotel points that they can’t use.

Loyalty points could be traded or transferred quickly and with minimal to no human administrative activity in the middle because it can all be done via a smart contract protocol, like the automated market making that has spawned the likes of decentralized platforms like Uniswap.

The velocity of transactions is a side benefit for businesses too: redemption of points of points allow for liabilities to be swept off the books while simultaneously maintaining up-to-date and accurate records.

Wrapping Up: Bringing Smart Contracts to Consumer Loyalty Rewards Programs

Merchants are already making changes to their loyalty programs. Today companies like DragonBite lead the way in move of loyalty programs to the blockchain.

In the future, blockchain will be a major part of the processes for all loyalty programs. It will be interesting to see how this new technology grows and scales as more and more companies adapt it to their existing loyalty programs.

Ready to experience the future of loyalty points, then check out what DragonBite is up to….

DragonBite is a fully integrated ecosystem of decentralized financial services built on interoperable technologies, and with many aspects of the ecosystem collectively controlled by its members. Its governance mechanism is predicated upon two digital tokens called $BITE and BITE Point.