LoyaltyLive was a recent conference supporting the convergence of loyalty and blockchain, bringing together thought leaders from both worlds for knowledge exchange and education. I attended the conference as an "optimistic skeptic," hoping to uncover the ways that blockchain will disrupt the loyalty industry.
The world's brightest are moving fast in this space, and I wanted to share my biggest takeaways from the event.
1. Bitcoin is now ten years old!
The birth of bitcoin is considered to be October 31st, 2008, when bitcoin's mysterious founder Satoshi Nakamoto published a nine-page academic-style paper called "Bitcoin: A Peer-to-Peer Electronic Cash System." On May 22, 2010 the purchase of the two Papa John's pizzas by Laszlo Hanyecz from another bitcoin enthusiast marked what is believed to be the first "real-world" bitcoin transaction. Hanyecz traded 10,000 bitcoins for two large Papa John's pizzas. That transaction is estimated to now be worth around $63 million!
And believe it or not, Bitcoin is not something only used by questionable characters on the dark web to carry out nefarious activities. The value of a single Bitcoin reached nearly $20,000 USD in late 2017 and is now considered mainstream. But some of the boom has already worn off and Bitcoin is currently trading at just over $6,000 USD per coin.
But Bitcoin is not the only game in town. In early 2018, over 1,600 unique cryptocurrencies were being actively traded. And even though we’ve reached the 10-year anniversary of the invention, many still state we are still in the equivalent of 1992 for the internet. There’s much more to come.
2. Blockchain is not bitcoin.
Bitcoin is a cryptocurrency enabled by a blockchain technology. Blockchain is the fundamental method of distributing the database records across thousands of computers where all have a simultaneous copy of all the records. No single record change can be made without complete consensus of the blockchain. This is called a "Distributed Ledger" which is essentially unhackable.
3. Electricity is a big deal!
Bitcoin itself is estimated to consume as much electricity as the entire country of Nigeria on a daily basis. Many blockchain farms are strategically located close to power plants.
4. Ethereum is a company you should learn about.
They have created the world's most prominent platform for implementing blockchain solutions. Ethereum invented "smart contracts" which allow business rules and logic to exist on the blockchain. The previous generation Bitcoin type model was only a mathematical computation using cryptology, which resulted in the creation of a token.
5. If you've never heard of ICOs, don't worry, the craze is over.
8 months ago, Initial Coin Offerings were popping up everywhere and were funding start-up money as a type of enterprise crowdsourcing. But the market has already experienced there is no current demand for the cryptocurrencies purchased through these ICOs and therefore no value to gain. In addition, governments are beginning to make it more clear that these could be considered financial securities and may fall under the regulation of the SEC.
6. The future of the world is now "trustlessness."
A term that means you can do business on a blockchain without having to trust another individual business or entity. Trust is created by the chain itself.
7. No one has figured this out yet.
No prevailing loyalty business cases were presented in this recent and first-of-its kind conference. The general consensus seems to land on the idea that solutions we may end up seeing utilizing blockchain will likely be back-office applications. In fact, they may not have any visible user experience impact to a customer in a loyalty program.
8. Due to computational complexity, today's blockchains can only handle less than ten transactions per second.
Compare this to Visa who alone can process 24,000 transactions per second! Slow transaction time is a core issue yet to be completely solved.
9. The fundamental underpinning technology model is already shifting.
Engineers are looking for a way to gain quicker consensus on authorizing a transaction. Consensus is the key to creating authenticity and the core value-prop of blockchain. To speed this up requires short-cuts, however the inside engineering secret is that Ethereum 2.0's "Proof of Stake" model may create vulnerability to security issues due to these shortcuts.
10. Cryptokitties are a thing!
And someone actually paid over $100,000 for a digitally created electronic pet kitten.
Are you looking for additional information on blockchain and loyalty? Here are a few recommended readings: