Really interesting AMA Im currently having with the Smith and Crown team:
scresearch [8:46 AM]
hi Rob, great to meet you! We are wrapping our heads around the system and want to make sure to represent it well. I've been heads down in the info packet and talking to colleagues.
[8:48]
So here's a couple things we think are true. Please make sure we have them right :smiley: 1. There is a set amount of incent tokens--no more are created. When the WP or info packet says "issuance" it means Bitscan releases them from reserves, not creates new tokens.
[8:49]
2. When a merchant enters the network, s/he decides on a percentage amount of the sale that will be given to the consumer as a reward. Presumably, there are limits on this e.g. the merchant can't choose you to give 100% of the sale back in the form of tokens, but the merchant can choose an amount. The merchant must also start taking tokens as a form of payment.
rob [8:50 AM]
Hi Guys, so to your questions:
[8:51]
1. Correct.
scresearch [8:51 AM]
3. Presumably, goods are priced in the fiat equivalent of tokens (lest the merchant must constantly update token prices as it fluctuates)
rob [8:52 AM]
2. As we have coded it right now a merchant could issue 100% of a transaction value back to the customer in Incent.
[8:52]
A merchant can also adjust the % discount against Incent redeemed against a purchase
scresearch [8:53 AM]
@rob thanks for the responses! re: 2 - does that mean the merchant must buy the tokens from Bitscan? (otherwise, isn't there an incentive to issue as many as possible)
rob [8:54 AM]
BUT in neither case is the merchant required to handle or account for Incent. We issue and settle on their behalf as primary broker. Unless they wish otherwise we always settle with the merchant in local tender (edited)
[8:55]
3. The goods and services are always priced in local tender
scresearch [8:56 AM]
re: 3 - that makes sense, so the merchant doesn't need to worry about the value of the incent token at all
rob [8:57 AM]
re: 2. That's exactly what happens: BitScan issues Incent at the P-O-S as instructed by the merchant and the fiat equivalent of what we issue is re-directed to our bank in settlement.
[8:58]
re: 3 - Correct. Its Blockchain under the bonnet. The aim is to be very low drag.
[8:58]
TBH this goes for the consumer too. Their tokens are represented as value in the tender of their choice.
scresearch [8:59 AM]
ok, re: 2. That what prevents merchant fraud or runaway token issuance - they bear the cost of issuing the token
rob [9:00 AM]
Correct, and this happens programatically.
scresearch [9:01 AM]
if the merchant tokens are all fungible, does that make this more of a network loyalty program rather than a merchant loyalty program?
[9:01]
if the token issued by one merchant is redeemable by any merchant in the network
rob [9:02 AM]
Its what gives us to the confidence to issue tokens on their behalf, then reflect that demand back into the secondary market by buying tokens we just issued back out of circulation. WE KNOW THE MERCHANT REMITTANCE IS ON THE WAY.
scresearch [9:02 AM]
exactly
rob [9:04 AM]
Re yr last: I guess, but we are happy for this to be merchant configurable. In the case of a corporate that wants to protect an eco-system we will show their customers whatever they want us to.
scresearch [9:05 AM]
but the merchant can't issue a token redeemable only at their business, like a 'colored token'
[9:05]
ah, unless it's enterprise level perhaps
rob [9:06 AM]
More generally, however, our aim is to move them away from the thesis that their is value in restricting reward utility and portability, to one that that recognises the impact of openness on reward value, and leverages this as the means of encouraging repeat custom
[9:06]
Right.
scresearch [9:07 AM]
will the merchant be able to choose which currencies trigger the token issuance? (e.g. BTC, fiat) or is it restricted to cryptocurrency POS?
rob [9:07 AM]
TBH is all about moving the dialogue away from the tokens and towards the concept of value
[9:08]
Actually, it will be fiat.
[9:08]
That's what we have coded. The MVP assumes a mainstream consumer will, in the first instance, always pay in fiat
scresearch [9:09 AM]
so would the 2.5% commission be on top of the cc fees merchants pay in POS fiat?
rob [9:09 AM]
Once they are in possession of reward value they can settle any portion of a future transaction with a mixture of Incent and fiat
[9:10]
Yes. Our commission only applies to the rewarded fraction of the purchase or redemption
scresearch [9:10 AM]
yeah, I like the paradigm shift. There have been some very successful experiments with local currencies based on similar principles. Restricting a money supply does not equal an increase in value.
[9:10]
ah, that makes sense
rob [9:11 AM]
Good!
scresearch [9:15 AM]
and to confirm, there is no utility to the tokens, they are purely a payment mechanism (and more accurately, a payment rail if merchant and customer only see the value of their token holdings)
rob [9:17 AM]
Not sure what you mean by 'no utility'
scresearch [9:18 AM]
Is it fair to say the following? In this kind of loyalty program, merchants are purchasing $1 worth of loyalty tokens in the belief that as the network grows, this will become $1+ worth of tokens that customers want to spend in the network. This appreciation in value makes it different from a discount program, in which a merchant would give back $1 but know that the $1 will only remain $1.
[9:20]
as in, holding them doesn't confer additional value. Having 100 tokens gives me a free upgrade for a coffee. Or I can redeem 100 tokens for exclusive goods and services that fiat currencies can't buy. It is intended as a payment currency, just like BTC.
[9:21]
@rob appreciate the responses, by the way. We're putting Incent up on our site (smithandcrown.com), just want to make sure we fully get the value proposition right. Lots of ICOs going up these days too.
rob [9:21 AM]
token value really makes no difference to the merchant in the way you are characterising it. They never hold it and we do the conversation at the POS in both directions
scresearch [9:22 AM]
right. I suppose we're trying to understand why a merchant would want to sign up if there's an additional 2.5% (not on the entire sale, just the issuing token). Why part with $1 in order to give the customer $1 worth of tokens?
rob [9:23 AM]
The value proposition for the merchant, as we see it, as that for little expense he is able to incentivise behavior he values with a reward so valuable, relatively, to conventional options, that customers will return to him because they want more of this value.
[9:24]
And that's the Q. This product is pay as you go loyalty. A merchant is paying forward (or sacrificing margin) for the benefit of establishing an enduring digital connection with his customers
scresearch [9:25 AM]
in this context, the behavior he is incentivizing is buying the merchant's goods, and the customers come back in order to get more of those goods or spend the reward the merchant gave them.
rob [9:25 AM]
You's be surprised how many regard this as a refreshing change when viewed against the infrastructure and accounting overhead, and forward tax liabilities that characterise traditional schemes.
scresearch [9:26 AM]
isn't the digital connection weakened if the token can be redeemed with another merchant? Or will the UX link the merchant with customer is some other way.
[9:26]
yeah, I think you understand the payment processing business quite deeply--and that industry is far more complex than people think.
rob [9:27 AM]
ultimately the UX is configurable. But remember, by opening our consumer optionality a merchant gets to cross market to eveyone else's customers. Think, instant coalition.
[9:30]
*our s/be up
scresearch [9:31 AM]
and because the market value fluctuates (facilitated by Bitscan, but with supply/demand forces driven by merchant adoption and token redemption), a consumer could even choose to speculate on the token. If they acquire a token, it could increase in value over time if demand for it increased.
rob [9:33 AM]
Yes. We obvs have to be really careful with that claim but noting that this token only has one function and is finite in supply, more and more demand is - all other things being equal - likely to make nice things happen to price.
scresearch [9:35 AM]
yeah, ok that makes sense. Relative to traditional programs, this has the advantage of not creating future liability, not needing to design a loyalty scheme, and being more user-friendly to customers (though, it does involve more up-front costs because the merchant pays and it means the merchant issues something that could be spent by another merchant). Based on your experience in the industry though, the advantages outweigh the disadvantages.
rob [9:35 AM]
I like the idea of having mainstream merchants pay to put an appreciating asset in the pockets of mainstream consumers. I cannot think of a more powerful tool in cryptos journey 'across the chasm'
scresearch [9:37 AM]
and relative to a cash-back scheme, it has the advantage of attracting customers who can speculate and creates a more intimate connection (token that is part of a network that both customer and merchant are part of). It shares the property of involving up-front costs, but if customers have faith in the network, they want to acquire a token that might be worth more in the future.
rob [9:38 AM]
Absolutely. In the worst case the merchant has left a very good impression on a customer that never returns - which would be strange. in the best they do return and he/she has a customer for life at negligible cost.
scresearch [9:38 AM]
yeah, well put. And introduces a system that uses cryptocurrency as a rail but not necessarily a user experience
rob [9:38 AM]
I prefer the term save than speculate - but accept that this is semantics.
[9:38]
Right
scresearch [9:40 AM]
and I would imagine market research supports that customers probably tend to redeem their points at issuing merchants if the points aren't *universally* accepted as currency (different than a cashback program that a company like chase might run with retailers)
rob [9:40 AM]
In the first world ordinary people have no mechanism to save. ZIRP has killed the concept.
scresearch [9:41 AM]
they should invest it in crypto :slightly_smiling_face:
rob [9:42 AM]
Traditional loyalty has a huge interest in promoting the fact that this restrictive paradigm is successful. The only really successful loyalty scheme in existence, and the unused plastic in our wallets, proves that this is a weak proposition.
[9:43]
And by 'really successful loyalty scheme' I'm referring to Air Miles - which have real value to consumers because of..... drum roll please.... their portability.
[9:43]
!!!
Really helping me to step through the value proposition on offer...
RW.
