A cryptocurrency that can provide electricity. The implications for loyalty programs in the future.
22 June 2022
David Schneider

Is Crypto collapsing?

Over the last month the web has been exploding with prophecies of a crypto market collapse. Bitcoin, the world’s largest cryptocurrency, fell to an 18-month low in June.

While this may or may not be the beginning of the end for cryptocurrencies (at least in their current form), it does act as an important lesson for anyone involved in loyalty program strategy. Evolution is critical to success. Loyalty program design, including any currency, must be able to adapt and evolve to changing market and consumer needs.

Loyalty currencies

As loyalty consultants we are fascinated by all aspects of loyalty programs including their history. What is evident when researching the history of loyalty programs is that a very similar pattern emerges. The primary loyalty program currency changes over time.

The history of loyalty program currencies include trade marks, checks, tickets, coupons, certificates, stamps, miles, points and, more recently, cryptocurrencies and tokenised assets (such as NFTs and fractional shares). Many loyalty experts are exploring these new technology iterations and how they could form part of their loyalty program design.

Outside of loyalty programs, there is ongoing debate whether cryptocurrencies are sustainable in the long term or if they are just a fad. Transactions can sometimes be slow, expensive and consume high amounts of energy. Another argument against the long-term viability of cryptocurrencies is around their value. In essence, cryptocurrencies are valued based on market speculation.

A distinguishing factor for many cryptocurrencies versus fiat (government-backed) or commodity-based currencies is that their value is not often tied to a physical asset. Often, a cryptocurrency does not provide value to the holder outside the digital world. Due to their speculative nature, many cryptocurrencies have and continue to fail. Early entrants such as Bitcoin remain the most successful. Since Bitcoin, new types of cryptocurrencies have become available – from digital ones to stablecoins pegged to fiat currency or some other real-world asset. E-Stablecoin is one example a conceptual stablecoin which stands outs.

What is the E-Stablecoin?

Firstly, stablecoins are a cryptocurrency concept that are designed to hold a stable value relative to external assets. Token value is tied to an external asset. This could be a country’s currency or a gram of gold. Pegging the value of a token to the value of a physical asset often requires trust in a centralised authority. This ultimately goes against the decentralised ethos of cryptocurrencies.

Researchers from Lawrence Livermore National Laboratory have developed a physics-based cryptocurrency called the E-Stablecoin. The cryptocurrency token can be used for transacting like other cryptocurrencies. Even more fascinating is the fact that this cryptocurrency is ‘minted’ with the input of approximately one kilowatt-hour of electricity and can be turned back into useable electricity. The process to convert data to electricity is run by smart contracts and a decentralised data storage cloud. The researchers suggest pegging the price to one kilowatt-hour of electricity creates a stable and thrustless system which does not depend on an institution or third party.

What does E-Stablecoin mean in the context of loyalty program strategy?

The potential introduction of cryptocurrencies like E-Stablecoin could signify a new currency for the right loyalty program design. It could allow electricity to be transmitted between users around the world without the need for interconnecting wires or a common grid. Instead of discounts or cashback, companies may be able to offer E-Stablecoins as part of their loyalty program rewards. They could be used for transacting, donating power to those in need or redeemed for electricity. While still in the conceptual phase, E-Stablecoins represent an interesting evolution in the world of cryptocurrencies and, for loyalty experts planning the future of their customer loyalty management, a new reward currency for consideration.

<a href="https://loyaltyrewardco.com/author/david-schneiderrewardco-com-au/" target="_self">David Schneider</a>

David Schneider

David is a Loyalty Director at Loyalty & Reward Co, the leading loyalty consulting firm. Loyalty & Reward Co design, implement, and operate award-winning loyalty programs for global brands. David has worked in global advertising and media roles for over seventeen years with a focus on CX. He has delivered award-winning work for  brands such as BMW of North America, Toyota Motor Corporation Australia, Anytime Fitness, Suncorp and GSK. David applies his skills across all aspects of the business, including loyalty program design, strategy development, customer experience, lifecycle management and the effective collection and use of data.

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