The Interoperable «Liquid Bonus» Blockchain Ecosystem


In 1981 American Airlines launched AAdvantage, the world’s first and one of the most successful mileage-based frequent-flyer program to attract new customers and encourage customer loyalty. Since then, the number of companies wishing to repeat this American Airlines success is growing steadily.

Nowadays, every consumer is daily targeted by numerous proposals to sign up a loyalty program or to take part in a promo that promises either attractive discount or a generous gift. Many have already accepted plastic cards from frequent flyer programs, gas stations, hotels, retail chains, loyalty coalition programs, cards issued by individual restaurants, fitness clubs and even by a small weekend market kiosks.

Delighting retail marketers, IT and software houses annually announce all new solutions and technologies devoted to CRM and loyalty programs. It may seem that modern digital possibilities are endless. Many have already used to Big Data, making conclusions about potential consumer needs, others are serious about the introduction of artificial intelligence, which shall monitor every buyer constantly helping with the “right” decision-making process.

At first glance, digital millennium has already absorbed and dissolved the consumer identity, leaving no obstacles for the final victory of computers in the struggle for absolute customer loyalty. But in fact, the real situation is significantly different from popular marketing theories.

Every loyalty program looks like a Swiss clockwork when it is unique and alone. But with the emergence of numerous competing systems, which are built in the same manner, using similar algorithms and all capable of quick adoption with the ability to copy the methods of successful competitors, the loyalty theory rapidly looses its efficiency. At the same time, with the era of developed logistics and online shopping, it is becoming increasingly difficult for retail marketing to steer the customer’s focus away from a banal savings in the “here and now” mode.

Most loyalty programs are proud of millions of subscribers, but only few percent actively use them. Perhaps the fact of joining the program does not indicate its efficiency, but the true reason for consumer to sign-up and remain loyal is out of habit and convenience, but the program allows just an extra benefit?

I have my personal shopping experience connected with two well-known competing retail networks and changing one of them to another. Since I have a large family (we raise four sons) and my usual bill is much higher than the average, I am offered to sign up for a loyalty program almost every time I purchase. I refuse for the sole reason – I value my personal data far greater than any possible discount, even though it is cumulative. Nevertheless, I have remained 90% loyal to the first store for 10 years and I remain loyal to the second one during three years now. The main reason for my loyalty is that I am fully satisfied with the product range, price policy, level of service and, what is also important, I enjoy its location. And the true reason for changing the store was moving to a new apartment in another part of the city. I admit that hundreds of other consumers sign up for loyalty program in my store having no aim of tying themselves to a particular brand or service, but just because, unlike myself, they value their personal data lower than discounts and gifts gained. And they are not bothered by numerous SMS and emails as a consequence of program participation.

There is a firm retail industry stereotype that any buyer can change his preference and remain absolutely loyal due to the value and timeliness of proposals.

Perhaps I can agree that loyalty program’s arguments are being a true catalyst for demand. But in case consumer getting more discounts and gifts when buying from the same store, can simultaneously track competitive promotions and make a quick purchase aside being influenced by aggressive marketing campaigns, valuable gifts can no longer serve as determining factor for customer retention. Despite significant budgets allocated to high-tech projects aimed for collecting and analyzing Big Data, for building artificial intelligence systems that can track customer preferences and predict their needs, in reality, many retail chains continue to differentiate through promo campaigns that provide direct discounts on goods. Buyers have quickly got used to the new Internet opportunities, and thanks to social networks and online marketplaces, consumers are working out a new approach to optimized purchasing.

In my opinion, the tendency of associating a discount with currency is even worse for retail. The «cashback concept» is no longer surprising. Moreover, many consumers have already started to perceive this option as mandatory. This trend is most pronounced in credit card and other cashless payment schemes. Indeed, it is more convenient for banks and payment systems to operate with currencies than using points and miles. In addition, banks are interested in transaction fees thus cashback accounting replacing points serves as an additional incentive for their business. On the other hand, simplified evaluation of discounts denominated in currency and cashback schemes are nullifying the entire loyalty game designed to entice consumers to the process of accumulating bonuses and other privileges. Cashback simplifies the redemption process but rolls retail competitors into a spiral of open price wars.

Retailers’ ambitions of expanding the loyalty programs coverage together with increasing availability of complex IT systems, leads to a steady increase in the number of loyalty proposals.

By increasing the number of registrations, consumers are losing their ability to effectively manage their program savings, which in turn negatively affect the number of rewards. According to the American marketing studies, the cumulative unredeemed points for all U.S. programs is estimated to be valued at roughly $100 billion. Moreover, according to a recent marketing study BOND BRAND Loyalty Report 2017, produced in collaboration with VISA, “The average total Program enrollment has grown 31% over the last four years to 14.3 Programs per Member in the US but only 6.7 are active”. This is just 47% from the total number meanwhile in 2014 this figure was 72% (decline from 7.8 to 6.7 programs in which members are active).

Unclaimed bonuses spoil financial indicators of issuing companies, because any points and miles are essentially deferred customer liabilities, implying free provision of goods or services in the future.

Being fully centralized systems, loyalty programs are forced to limit the volume of unclaimed points at the customers’ disposal by validity limitation and imposing of other restrictive conditions. Forced expiration of accumulated but unredeemed customer benefits is a strong de-motivator for every affected consumer. Unfortunately, no centralized loyalty ecosystem can provide an option of keeping accumulated points or miles by withdrawal unredeemed savings out from loyalty program.

The best way to solve the deferred liability management problem is the decentralization of loyalty programs. The most common and well-known decentralization attempts are coalition programs, which have already proven their effectiveness and high consumer demand in practice. Nevertheless, remaining centralized ecosystems, coalition programs proved incapable of becoming truly global and comprehensive solutions because of their organizational and administrative barriers.

Thanks to the rapid development of information technology, advanced cryptography, computer networks with distributed ledger and modern transactions have emerged. The banking sector turned to be the first facing the influence of new crypto technologies. In 2018, no one is surprised by the introduction of reliable financial transactions in a decentralized environment, having millions of untrusted Parties with no trusted Arbitrator represented by a government, bank or payment system.

Going beyond the laboratories, the blockchain technology began to rapidly change the world’s financial landscape, the ecosystem of property and copyrights registry, supply chains and related contractual relationships, state services and elections, as well as many other industries. Retail has no exception. Despite numerous blockchain implementations for retail, it is still lagging behind the banking sector and some other applications, but it shall definitely catch up.

The integration of numerous disparate loyalty programs into a single global decentralized ecosystem based on blockchain technology shall become a truly revolutionary breakthrough in the development of the loyalty industry.

At first glance, the idea of loyalty decentralization may seem unworthy and even absurd. Indeed, loyalty programs have always been designed as closed systems and continue to antagonize themselves as competing products. Nevertheless, if we consider the evolution of decentralized payment solutions emerging in the financial sector, which consist of many closed environments, offering the same set of competing services, it will be clearly seen that just few years have passed from a complete denial of decentralization to its multiple implementations.

Blockchain has failed to find its retail industry niche due to performance limitations.

In fact, developers have been focusing on building blockchain solutions for international settlements which are not as demanding on the speed of transactions as retail systems. Higher-performance blockchain systems capable of retail requirements began to appear late 2017. Liquid Bonus is based on the next generation blockchain solution and designed to transform relationships between consumers and loyalty programs to a new qualitative level. The Liquid Bonus is a complementary tool for any existing loyalty program. It also brings an opportunity to easily join the decentralized loyalty ecosystem for those retailers who have not been able to allocate the appropriate resources for building and launching their own centralized loyalty program.

The blockchain-based decentralized Liquid Bonus ecosystem shall allow retailers to supplement illiquid internal points or miles with external loyalty tokens or Liquid Bonuses giving buyers more freedom and motivation in accumulating and redeeming rewards. It is also important that retailers will be able to get rid of unclaimed points and other rewards, avoiding expropriation of points – the true consumer loyalty repellent.

The diagram, illustrating the common interactions between participants of the Liquid Bonus ecosystem is shown on the following picture:

It is very essential that Liquid Bonus blockchain is complementary to any existing loyalty program or coalition. The Liquid Bonus ecosystem does not represent a contradiction to the existing business models of loyalty programs or any other marketing initiatives, which will continue to operate in the same mode as long as it is beneficial to their owners.

Participation in the Liquid Bonus Loyalty Association and interface with Liquid Bonus blockchain shall cause no customer information disclosure to others. The exchange of proprietary points or miles with external interoperable Liquid Bonus tokens will be managed exclusively by every participating retailer or brand. In such case, the exchange transaction fee (if any) will be determined by every Participant in accordance with the business model applied. At the same time, the operation of the Liquid Bonus Loyalty ecosystem and all decisions on its development shall be taken by the Association of Participants.

We are sure that this approach will open new horizons for both retail market players and their consumers.


Previous articleAaron Wagener on cryptocurrencies with a purpose: Decentralising data is the future of IoT
Next articleWill the real Celebrity Crypto please stand up?
Julius B. Kuznetsov is a Founder and Managing Director of FINSTICK Innovations LLC (, a startup aimed for advanced developments in the emerging fintech and blockchain industry. Incorporated in 2017, FINSTICK Innovations is backed by highly motivated professionals in cryptography, mobile payments, smart-cards, telecommunications and value-added services. With our average 20+ years of field experience and several invention patents, our team is bearing the best Russian practices of software design and development, optimization of algorithms, conceptualization and integration of complex IT systems.