Corporate Currencies

Detailed Comparison of Corporate Cryptocurrency and Conventional Discount-bonus-loyalty Tool

Let’s go through the three chronological stages of abstract corporate currency and compare how it works today and how it can work in the near future, “on the crypto”:

  1. Phase of Issuance
  2. Phase of Value Circulation
  3. Phase of Redemption

I believe that the retailers’ upgrade of discount-loyalty schemes to the cryptocurrency format can free consumers from the feeling of being constantly fooled by prices. It is possible, indeed, that consumers will once again become a direct force of demand.

[1/3] Phase of Issuance: Corporate Currency Gives Origin and Primary Distribution of Value

From a technical point of view, a conventional system is a software module already incorporated into a standard enterprise management system. In the majority of cases, the physical user medium is an online account and/or a plastic card, which is native to any modern cash register.

At the beginning, incorporating cryptocurrency is going to require extra effort. The field is new and, for many, even suspicious. However, some semi-ready integration solutions already exist, so the budget for the installation should not exceed €10k. But in the future it will pay off with interest, as it’s not necessary to closely maintain the system. While security problems are solved “at the root”, the development and quality improvement will continue, “by themselves”. The only physical media is a mobile app; card options exist, but they will always remain too expensive.

So, consider the cards dealt and the apps installed. A typical condition of the value issue: “you, the consumer, buy or promise to buy this, here and now or before this time — and you will get this much, to be redeemed right there.” In the case of consent, either a debt note or a deposit is created on the issuer’s books.

At this phase, a cryptocurrency approach gives one cardinal advantage: a crypto can do all of the things listed above, plus much more powerful emission control. In other words, corruption among employees is almost completely excluded from the picture. The creation and introduction of a corporate cryptocurrency into circulation can be divided into a number of control stages, and, paradoxically, this won’t create additional complications.

It’s important to note here that while I’m telling this story in the context of retail — to make it easier to visualize — all of this also applies in both B2B and the sale of expensive B2C, where the discount fraud and abuse of sale policies have titanic proportions.

So, let’s fix it here: it’s easier to prevent discount fraud using corporate cryptocurrencies. Cryptos leave tracks so it is also much easier to investigate crimes that have already occurred.

[2/3] Phase of Value Circulation: Corporate Money at Large

Discounts and bonuses are always barricaded by conditions; in fact, they’re based on conditions. Conditions are the whole point: “if you do X, then only do we do Y”. Walls of conditions are built between different categories of people and goods; walls are built even in time: the money can be paid at the time of purchase, but can also go only once a quarter; the money can be infinitely divisible, but can also be conditioned to accumulate during a month or a quarter.

Conditions are primary, so the final technical solution is not just incompatible with other sets of conditions; it is likely to be unthinkable in other conditions. The same logical construction can be realized as a knot-rope which can be used only from above, or as a stepladder which is applicable only from below.

Cryptocurrencies, in their turn, are quite universal. But why would one need such universality? Is it necessary at all? Why would one want to turn a discount card into an accumulative one?

Let’s start with the fact that this property of universality was inherited along the way, free of charge, in and of itself. The creation of corporate cryptocurrencies tech was not anyone’s goal — nobody thought of it. Cryptocurrencies were not made for companies or business projects at all, while programmable legal entities (which can effectively legalize corporate cryptos) are just a side effect of the greed-development processes in the gambling industry.

Next. In fact, before such universality is actually applied in practice, no one understands what it can give. Universality can be harmful and dangerous at first, as long as no one knows how to use it. IT departments can and will get it wrong. But in the end, universality will reduce costs and allow experiments to be conducted that would otherwise be prohibitively expensive.

For example, we can think of a whole class of experiments where customers and employees use the same currency. Customers get it for loyalty to the brand (purchases), while employees get if for achieving somewhat the opposite goal — optimization of the company’s costs associated with the same purchases.

Moreover, with corporate cryptos at hand, discounts can be understood more broadly — the standard context becomes hopelessly boring. Rare goods and services are sold in purely one stage. There is always some post-sale activity.

For example, the asset management company sells the service of joining a mutual fund, at the first stage of the deal. At the time of the transaction, it’s not clear what will come of it. The seller (asset manager) will have to work hard and maximize the profitability of the fund, and the buyer (investor) will have to be patient and give the manager enough time. If one fails, both lose.

At the end of the agreed period, the second phase comes, and something like a “discount” is calculated. It is formally expressed as the difference between expected and actual asset management success fees. And this “discount” is a two way road, since it materially affects both the client of the company and the employee of the company. The two must mutually adjust their risk tolerance (for more details, please click the link above).

If a corporate money circulates in the form of a cryptocurrency, the unification of two and even more “discount markets” is quite possible ideologically and very easy technically.

Thus, a corporate cryptocurrency is not just a more flexible tool than conventional discount systems; it is essentially a builder of new profit centers.

[3/3] Phase of Redemption — When Something Totally New is Born

Ordinary corporate money works in the mode of the so-called fixed exchange rate (currency peg). For example, the company states that your current accumulated discount is €X, and you do treat this amount as €X. But it is not €X. It’s some Euro amount that can be obtained with a certain probability, strictly less than 100%. Let the probability that you will have to leave town immediately (so your discount “burns”) is 1%. Let the probability that you will have time to sell the card to a neighbor for half the price is 50% (he just may not happen to be home). This makes the exchange rate of 1 pseudo-Euro €0.9925.

In practice, the average rate is much lower, of course, simply because your time to execute needed redemption transactions is extremely limited. In addition, the issuer can “default” and simply refuse to provide a discount or money on the bonus card. Completely rigid pegging does not ever happen. Even central banks that “tie” their national currencies to the dollar or euro cannot do this with complete precision.

In this sense, the corporate cryptocurrency isn’t any better — it can also be pegged to something with some moderate precision.

But what traditional corporate “money” can’t do is to be liquid. There are rare exceptions. For example, iTunes gift cards are traded on special bulletin boards in third-world countries because Apple sells different content in different countries and people want to bypass such restrictions. But even in the case of Apple, the liquidity there is ridiculous. There are hundreds of cryptocurrencies with much smaller spread and deeper markets, not to mention the comfort of trading.

Cryptos are very liquid.

One does not need to completely let a corporate cryptocurrency go. There are many successful examples when countries have introduced convenient and acceptable currency exchange rate corridors. And the very facts of market makers’ impacts on the walls of this corridor is a clearly readable signal for the market participants. In certain situations, the influence of the free market, if it is temporarily undesirable, can be reduced. For this, there are many long-proven methods. One way or another — a live, freely traded corporate currency can be a useful component of the sub-economy. Fairly large companies are likely to get a lot of sweet fruit of partial economic sovereignty.

So, corporate cryptocurrency is a way to securitize brand loyalty; that is, a direct, calculated, undeniable addition to the valuation of the company.

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P.S.

What about the complaint I expressed in the preface?

I’m pretty sure that when (and if) discounts on supermarket cards are securitized and released on crypto-exchanges, and the market determines their price in real time, I will get a more convenient shopping experience. Prices will include the relentless result of the hardwired feedback system. Maybe, it will seem more fair.

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