Cryptocurrency rewards are not new, but they have a fascinating history. In particular, they can enable loyalty to be encouraged or even be used for “behaviour change intervention”. Finally, according to Lurp’s WangCEO of Bifrost, cryptocurrency rewards can be used to “modify behavior”.
The economic motives that drive human behavior play a crucial role in the adoption of blockchain technology. The various loyalty and incentive programs implemented within the blockchain and crypto industry are proof of this.
Tech companies have long offered bonuses to engineers and developers who find software bugs. Ethereum, for example, has had bounty programs for a long time. Crypto supporters believe that blockchain technology can take this practice to the next level.
Crypto rewards for bounty hunters
An early example of incentivized activity in the crypto sector occurred during the Initial Coin Offerings (ICO) craze of 2016-2017. Indeed, pseudo “bounty hunters” around the world then shared media content in exchange for tokens.
These bounty hunters earned rewards by completing actions and could participate in multiple reward programs simultaneously. The highest paying programs naturally attract the most knowledgeable and daring bounty hunters. Thus, projects most often used bounty programs to create buzz for their ICO.
Loyalty Incentives in Crypto
Tokens can also be used in traditional brand loyalty programs. Loyal customers are an important part of the business. The more effective the loyalty program, the better the customer experience. Crypto supporters also believe blockchain could revolutionize loyalty programs.
According to research from Deloitte, blockchain could help make loyalty programs more and more customer-friendly. This would be possible by reducing costs, making earning and using points a real-time experience and securing them.
Publicly traded digital asset manager Bakkt found that 72% of loyalty program members bought cryptocurrencies at least once in the past six months. More than half said they understand the value of earning digital currency loyalty points. Likewise, various projects and companies have rolled out crypto-based loyalty programs. Among them are crypto-based cashback programs, DeFi stake rewards, credit card rewards, NFT appreciation rewards, etc.
Interventions designed to bring about behavioral change
However, bounty programs and loyalty incentives are only the tip of the iceberg when it comes to token-based incentives. A token-centric economy can also act as a behavior management system, where targeted or desired behavior is induced and reinforced by coins.
Outside of the crypto context, these incentive programs have used tokens that can later be redeemed for rewards. Using tokens to reinforce certain behaviors is called operant conditioning, or operant conditioning in English, and is often used in primary schools.
Historically, this type of behavior change incentive has used many objects as tokens. We can cite tickets and poker chips or figurative bonus points, stamps, tally marks, etc. However, it is important to clearly define the behavior to be reinforced and the way in which the chips can be won or lost.
Many such entities operate like the American pizzeria chain Chuck E. Cheese, where you earn a certain number of neutral tickets or tokens. These can then be exchanged for a desired prize, such as toys, money, privileges, etc.
In addition to loyalty and incentive programs, blockchain-based tokens are increasingly being adopted in an effort to influence social outcomes. This has been defined in academia as “behaviour change interventions”.
Interventions aimed at changing behavior through tokens can, among other things, help populations in vulnerable situations, improve supply chain management or even form the basis of central bank digital currencies (CBDCs).
Crypto rewards: tokens as a driver of change
Behavior change interventions are considered “coordinated sets of activities designed to change specific patterns of behavior”. A token at the heart of a token-based economy must be designed to influence the drivers of behavioral change in real-world ecosystems.
Individuals and organizations should aim to adopt the activity tracking activities and all behaviors encouraged by the system’s tokenomics. This is all the more true since these tokens require a significant change in social behavior.
However, these token-based behavior change interventions present many challenges. For example, interoperability will be a big issue. Thus, social impact practitioners, token engineers, cryptoeconomists and experts in related fields will help identify principles, protocols, tools and ethics related to tokens as tools for change.
Moreover, these interventions hold the promise of changing behavior toward targeted goals related to the many existential questions facing humanity today. For example, the response to climate change as well as the implementation of Environmental Sustainability Goals (ESG), which are required by governments and companies.
The importance of on-chain incentives
The best kind of cryptocurrency-based incentives are those that are completely on-chain, because that’s where the transparency and security are. This is because users seek transparency so they know they are being rewarded correctly. And they want to make sure that the network they basically work on is also secure.
Cryptotechnology represents a new and exciting mechanism for digital rewards, whether in the form of bonuses, loyalty, behavior change interventions, etc. We are already seeing a number of long-term loyalty programs based on digital currencies.
Crypto Rewards: Blockchain projects that offer on-chain incentives
HORROR: This on-chain incentive platform allows developers to launch pools to reward investors for performing certain blockchain-based activities, such as providing liquidity in a pool on a decentralized exchange or staking their NFTs.
Bifrost Rainbow Boost: The Rainbow Boost program recently launched by Bifrost aims to incorporate aidrops, NFTs and whitelisted privileges. Rainbow Boost allows you to tag, credit and encourage participants in the Bifrost channel; the latter’s addresses then receive “Raindrops” when they perform actions deemed beneficial to the entire network.
Culture Token: This project offers rewards within a token-based economy for participation in cultural activities.
Cycle4Value: This blockchain-based system offers token-saving rewards for the number of kilometers cycled.
Optimism Collective: It is a blockchain-based governance platform where participants can vote on the distribution of incentives, with the idea of financing public goods.
How crypto is revolutionizing loyalty through rewards
If businesses want to succeed in this digital age, they will need to reward their customers. Incentive programs based on cryptocurrencies can potentially reduce their costs, increase transparency or even security, among others.
Incentives can give participants ownership of the network. They can also encourage them to play an active role in network development through verifiable on-chain actions.
The more users engage with the network, the more value they tend to create for it. By developing a fair way to quantify encouraged on-chain behavior, incentives can be designed in a way that creates better community consensus.
About the author
nap WEnglish has over 5 years of blockchain product and development experience as a Sina Weibo full-stack engineer and cross-border blockchain manager. Lurpis is co-founder and CEO of Bifrost, CEO and founder of Liebi Technology, and a founding member of PAKA Fund LP.
He is also a Web3.0 Bootcamp instructor.
Over the past two years, Lurpis and his team have launched liquid derivatives of assets such as KSM, DOT, MOVR, among others, while their slot auction liquidity protocol has already secured 10 Parachian slots Polkadot and 11 Kusama for various projects (including Moonbeam). Lurpis is dedicated to building a fully decentralized future across chains.
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