Alexey Oschepkov

TPM/Web Dev

Corporate Currencies

Corporate Currencies and the Securitization of Brand Loyalty


Many businesses arsenal themselves with discounts, reputation and loyalty points, and employee bonuses, which are, in its essence, the introduction of corporate money. It’s time to reformat these tools and use the full power of cryptocurrencies.

At a minimum, this will reduce the chance of employee fraud.

With a smart approach, this toolset will not only significantly reduce costs and increase flexibility; it will also open up new dimensions for doing business. The company can gain the freedom of a market maker and a monetary policy conductor, and the corporate cryptocurrency becomes a liquid exchange tool — a way to include the direct forces of supply and demand in the sub-economy of the company’s business.

Instead of Preface: My Consumer Complaint

Over the past few years, my family and I have lived in several countries. After each move, we had to get reacquainted with the local food market. Cuisines are different, the key products are different, brands are different. What you get used to in one place, may not be available in another at all or have a substantially higher price. And while adults can give up some habits and adapt, kids tend to be very capricious.

The obvious observation is that it takes at least two or three supermarket discount cards to get going, otherwise financial losses are quite noticeable. Somewhat less obvious experience suggests that the larger and more dynamic the city, the less you, as an end user, participate in the market.

This is not a typo, let me clarify.

As it was in the past — as it is described in old economics textbooks — I’m supposed to have a choice to try different brands in each category and choose the ones I like. Price, of course, plays a major role in this quest. Brands reasonably assist by grouping themselves up into acceptable price classes, so I’m not bogged down in the calculation of penny benefits. If the price creeps up within the acceptable range, I will “suffer” but remain loyal. If not, I reluctantly take the time and reconsider my choices.

It doesn’t seem to work like that nowadays. Day-to-day discounts create variations in price that cause, in fact, the supermarket to be the one that essentially chooses what I buy, not me. It even chooses when I buy; for example, this happens if they make weekends the days for these promotions. This volatility has nothing to do with the shelf life of the products — I checked.

The complete computerization of supply chains and store management is already decades old. In recent years, the almost full “digitization” of each consumer (through discount cards) has complemented the already digital procurement and inventory management; it’s provoked the full-scale manipulation of prices that never cease, not even for a day. These days, it’s impractical to try to keep record of what cost how much, where and when. I have no choice but to keep focusing on the instant terrain of circumstances, under the hail of “special offers”. I insist: this effect is not the result of my greed or poverty; the price difference is essential to anyone.

Obviously, retail chains simply use software developed by third-party companies (probably, many are based in Silicon Valley). This software, of course, tends to have more and more modules whose behavior is not understood by the developers themselves, due to both “deep learning” and Murphy’s laws. The number of such suppliers are, naturally, orders of magnitude less than that of grocery chains, so the coders are increasingly straying into a global oligopoly, as happens in any other IT sector. It’s the out-of-control brain childs who now buy food from farmers, not supermarkets, and certainly not you or I.

OK, I admit that for many readers, the above would seem out of line with reality. Indeed, in quiet, small and medium-sized cities, one can manage to settle in a few calm consumer harbors. I am sure, however, that the tsunami of manipulations will soon cover all areas, down to every deep province.

Unlike humankind, who rarely change their habits, reluctantly and slowly, algorithms mutate constantly, quickly, and often — for no apparent reason. Thus, the feeling that we are being deceived will only grow. The contagion of “flexible prices” spread from air transportation down to retailers who just sell goods in small, few-dollars-worth packages.

Don’t take these words as luddite statements, please. There’s no turning back, obviously. But there is always a way forward and, quite possibly, not far off along the path, there lie some qualitative breakthroughs and high mountain passes.

One obvious area to look at is corporate cryptocurrencies. That is how we fight fire with fire: we move on to the system that is yet another hundred times more complex, we add some strength and armour to the demand side, so we may improve the situation for everybody.

What is Corporate Cryptocurrency?

By corporate cryptocurrency I mean a separate blockchain-based token or a family of tokens, issued by the company (legal entity) on a ready-made third-party distributed substrate, such as Stellar.

Corporate currency can be used as a tool for payments, value accumulation, and most importantly — for automatic execution of conditions (more on this below).

Companies (quite rightly) do not care about the ideas of decentralization. However, as corporate cryptocurrency uses a decentralized platform — that is a very unusual type of carrier of value — so the external form significantly affects the internal content. As a result, there are cardinal functional differences from traditional schemes.

At the moment, it is difficult to say with certainty, but I see a “big gathering” in the near future: millions of separate discount schemes will come together on two or three global distributed platforms, where each one of them will possess universal features.

Explanation of the scheme: If you have a feeling that the corporate currency is like hitting nails with a microscope, you’re right. Your new blockchain-based bonus system will have the same functionality as the international monetary fund. But why care if you don’t have to pay for it? Why bother if isolating the simple, primarily needed things from the rest of the tool range of functionality is not difficult?

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.

Securitising Brand Loyalty

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.

Makeup for Your Business



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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