For all the chatter about blockchain in retail, how is the distributed ledger technology best known for powering cryptocurrencies like Bitcoin really going to change the industry?
Retail loyalty programs could be a great fit for blockchain’s innovations, which could put an end to today’s siloed rewards plans, Brandon Gilchrist, Microsoft software design engineer and blockchain engineer and security researcher for Oakland Blockchain Developers said on a Softvision webinar. Gilchrist points to the airline and hotel industries as retail’s loyalty model for the future. Consumers can transfer their loyalty points between hotels, airlines and even shopping platforms as these industries are separate but related and operate in concert. “That’s the way loyalty programs will work in future,” he said, and blockchain’s decentralized nature could drive that evolution.
What’s more, empowering consumers to standardize their data is a win-win for everyone. Think of the complexities of an airline merger, Gilchrist said. A consumer might have loyalty accounts with both but maybe she goes by “Nicole” on one and “Nicki” on another. Merging all of that data typically becomes an unwieldy and time-consuming process that can create annoying duplicates and more. “On a blockchain where you have one account across all services, it’s much easier and solves this problem in a really elegant way,” Gilchrist added.
Plus, retailers that transition existing loyalty programs to a blockchain stand to gain “huge advantages” when consumers control their own data nodes instead of the costly infrastructure required for retailers to manage and secure massive stores of pooled data, Gilchrist said.
However, retailers must prepare themselves for the new and different ways that loyalty on blockchain will play out. “It creates an economy around a loyalty program that doesn’t exist currently,” Gilchrist explained, as consumers hold, exchange and trade points—new behaviors not typically seen with today’s loyalty offerings.
Because blockchain is evolving so quickly, many retailers might be tempted to wait on the sidelines to see if the technology fully takes hold. “This space is moving faster even than internet did two decades ago, Gilchrist said. “Retailer have to stay on top of advancements in the space.” The biggest challenge right now, he added, is the “pace of innovation.”
One such advancement is a new feature by the Steem blockchain that enables new posts to remain mutable for seven days, an update that could ease some concerns over the “immutability” that distributed ledger technology is known for. Currently, most of the major blockchains “aren’t good at retail returns,” Gilchrist explained.
Zero knowledge proofs also are helping to boost consumer privacy on blockchain, he added.
On whether retailers should bring blockchain developers in house or partner with external parties, Gilchrist said he believes these developers can be a significant asset to a retailer’s core development team. “Blockchain developers think differently. They’ve gone through a paradigm shift that most developers haven’t,” Gilchrist said. “It’s a security-first space. If you look at how blockchains are developed—they never develop past what they can secure, in contrast to the Internet of Things, which built ton of features and then thought safety, maybe.”
Because blockchain presents such a “different development approach,” retailers must proceed thoughtfully with a view to how the technology could evolve down the road. “You have to be careful in what you’re doing and consider not just what your use case is now but for the future, too,” Alexandra Moxin, CEO of the Cartera Group, said. “You’re defining a market as you’re creating it, and have to be nimble to keep up with changes that maybe you didn’t anticipate.”