This is Part Two of our article covering employee loyalty programs and blockchain.
Specifically, this Part covers blockchain’s applicability to employee loyalty programs and some of the hurdles in the application.
Take a look at Part One when you get a chance.
Blockchain for Employee Loyalty Programs
Before applying a blockchain to an employee loyalty program, or any other application, we need to make three considerations.
(1) benefits of blockchain; (2) benefits applicable to this specific area; and (3) difficulty of applying blockchain to this specific area.
First and foremost, we need to consider the benefits of blockchain.
Second, whether any benefits are applicable to the specific area
Lastly, the difficulty of applying blockchain to the specific area.
A blockchain is an immutable and irreversible digital public ledger which allows a distributed network of computers to verify the authenticity of transactions without the need for a central authority .
Blockchain provides the following benefits:
- Decentralization (No one Party controls the blockchain)
- Immutability (The data recorded on the blockchain cannot be changed)
- Incentivizing Behavior (Users can be encouraged to secure and use the network through rewards)
- Lowtrust (Counterparties need less assurances to interact with each other)
- Transparency (The blockchain software is open source and anyone can examine on-chain activity)
- Censorship-resistant (No one party can stop another user on the network from making a transaction)
- Data Stewardship (Users retain control over their accounts through Public Key Infrastructure)
- Distributed (No central point of failure)
- Disintermediation (Users do not rely on third parties to conduct their activities)
- Traceability (All on-chain activity can be tracked)
- Efficiency (Data on the blockchain can be transferred nearly instantaneously with little to no fees)
- Asset creation (Assets or representations thereof can be created, tracked and managed on-chain)
- Security (Fraud and cyberattacks are less likely to occur); and
- Rule Verification (Users on the network verify that on-chain activity meets the inherent rules of the network) .
Benefits Applicable to the Specific Area
From the benefits listed in the previous section, the most applicable to an employee loyalty program are: (1) incentivizing behavior; (2) transparency; (3) immutability; (4) asset creation; and (5) disintermediation .
Incentivizing behavior is applicable to an employee loyalty program because a blockchain can incentivize users (e.g., employees) to engage in certain behavior (making contributions to “innovation-related activities”) to receive rewards (“tokens”)  (Compare with Proof-of-Work mining in ).
Transparency is applicable to an employee loyalty program because a blockchain is a public ledger wherein anyone can examine its transactions, as such, all employees can track contributions to the organization and what behavior is or is not rewarded .
Immutability is applicable to an employee loyalty program because once data is recorded on a blockchain, it cannot be removed or modified, thereby allowing employees to know what is the authoritative record for their activity and that it has not been tampered .
Asset creation is applicable to an employee loyalty program because an employer can create, mange, and track activity through tokens and determine when tokens are redeemable for real-world rewards by examining the blockchain .
Disintermediation is applicable to an employee loyalty program because an employer need not rely on a third party vendor to manage an employee loyalty program for its employees .
Difficulty of Application
The difficulty of creating a blockchain-based employee loyalty program on a scale from 1 to 5, the difficulty is ~2–3.
For a blockchain-based employee loyalty program, only a basic blockchain is required because the manager of the employee loyalty program only needs to examine the state of the blockchain at a specific time. There is little to no need for a blockchain with features beyond recording transactional data unless the manager wants to have rewards redeemable on-chain.
The main issues that are likely to arise are: (1) hiring blockchain developers; (2) having the requisite funding; (3) understanding the business and/or regulatory environment; and (4) end-user knowledge.
First, a business that does not have an in-house blockchain development team will have to seek out blockchain-as-a-service (BaaS) or software development companies to develop their blockchain. This process can be time-consuming and wrought with uncertainty because the business has to conduct due diligence on all potential companies (and somehow evaluate their blockchain expertise) .
Second, before embarking on a blockchain-based employee loyalty program, a business needs to ensure it has allocated enough funding to develop its blockchain without hampering its primary business model .
Third, in creating a blockchain for a specific application, the business needs to make its in-house or outside blockchain development team aware of the business and/or regulatory environment it operates in and design the blockchain with this environment in mind. For example, if the business is under the jurisdiction of the European Union (EU) and the State of California in the United States, the business’s blockchain development team will have to design the blockchain in compliance with the EU’s General Data Protection Regulation (GDPR), and both California and US Federal law .
Fourth, to create a successful blockchain-based loyalty program, the end user, in this case, the employees, must understand what benefits blockchain provides, and why it will lead to employees gaining greater recognition for their contributions .
A blockchain-based employment loyalty program’s difficultly on a scale from 1 to 5 is ~2–3
In applying blockchain to a specific area, we need to make three considerations: (1) benefits of blockchain; (2) benefits applicable to the specific area; and (3) difficulty of applying blockchain to the specific area.
After making these three considerations, a business can better evaluate what value blockchain will add before embarking on a long and unrewarding development path.
Regarding employee loyalty programs, the applicable blockchain benefits are: (1) incentivizing behavior; (2) transparency; (3) immutability; (4) asset creation; and (5) disintermediation .
Lastly, applying a blockchain to an employee loyalty program is a low difficulty project because the business managing the employee loyalty program only needs to track the state of the blockchain at a specific time, which only requires a basic blockchain that tracks transactions .
Hereafter, we hope to see more blockchain applications in employee loyalty programs or customer loyalty programs given the low difficulty of applying blockchain in this area.
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Originally published on 2018-12-26 on Medium.