Deepak Jain, Co-Founder and CEO, Swych Blockchain Labs
“I need the perfect gift for her!” We’ve all yearned to come up with an awesome gift for an upcoming anniversary or birthday that our loved one would love, fits her taste perfectly, she doesn’t have it already, and it won’t gather dust in a drawer somewhere. Perhaps she would like that sweater she is eyeing, but can I pick the perfect color or size? Or maybe she would like last season’s hot book, but has she already read it?
The gift card is a great option but, like any millennial, she hates receiving plastic cards. How often has she received one for a shop with no outlets nearby, for a store that sells clothes she hates, or for a restaurant whose food she finds inedible! Since gift cards represent roughly $130 billion of sales a year, chances are this happens in every household.
Could a misunderstood technology, blockchain, solve this perennial problem?
Blockchain is a young technology, but it’s already been employed or considered for a wide variety of uses. This “distributed ledger technology” uses computer networks to render information verifiable, unfalsifiable, and immutable. Because all the points of the network must agree about the system’s data, there’s no single point of failure at which a bad actor may introduce fraudulent information. This resistance to manipulation makes blockchain ideal for transferring value between different states.
How does this apply to the gift card market?
Like VHS tapes, CDs, DVDs, MP3 players, alarm clocks, and boarding passes before, plastic gift cards are poised to be relegated to history with a smarter, faster, theft/fraud-resistant, and more personal digital reincarnation. Some current limitations imposed on card use may serve to protect users—their gift is theirs, and shouldn’t be stolen by an anonymous hacker hundreds or thousands of miles away—yet the rules governing redemption still frustrate and disappoint.
A blockchain makes fraud functionally impossible and renders such onerous rules unnecessary.
Suppose you have a globetrotting friend or family member overseas and you’d like to send them something personal. Suppose further you’ve forgotten their birthday and are only reminded when you see a social media alert. You could send them money, but in addition to being impersonal, most conventional wire services include delays between sending and receiving a payment. This even applies to direct deposit, and, besides, how many friends’ foreign bank account numbers do you know? Sending physical gifts or even plastic gift cards across the border is not an ideal solution because of shipping costs, potential delays, and the dreaded risk of the gift not arriving on time!
A digital solution though, now that is the perfect answer.
Gift cards are essentially methods of value transfer, but they’re safer than cash. Because they can only be used at the intended retailer, it becomes very difficult for money launderers to take advantage. A digital solution on blockchain can make the gift card even safer. With smart ways to identify both the sender and the recipient as they interact with the system through mobile apps or websites, we can weed out hackers and fraudsters.
By tracking and analyzing each transaction on the blockchain, it becomes possible to identify possible misuse and install countermeasures. Being able to reconcile every dollar on the blockchain through automatic settlements can reduce costs and delays. In cases like this, blockchain makes the difficult easy and the impossible possible.
Would the users of a blockchain gift program need to understand the technology? The concepts underlying blockchain, involving as they do sophisticated mathematics and computer science, can be difficult to explain, and this complexity often makes blockchain projects daunting.
Thankfully, using a gifting program would require no special knowledge. Just as you can navigate the web without understanding HyperText Transfer Protocol (HTTP), you could send, transfer, and transform gifts without once hearing the phrase “blockchain.”
There are few worse things than being thought ungrateful: You wouldn’t want your loving aunt to know that her conception of your gift taste is off. Though blockchain might allow a convenient switch, there’s nothing in a blockchain transaction that would alert the gift-giver that their recipient has transformed their gift to one retailer into credit to spend at another retailer they preferred.
So rest assured: Your heartfelt thank-you note to your aunt would be honest. Gift card redemption could represent one of the first mainstream and consumer-accessible implementations of the blockchain. The thought behind the gift will continue to count, but the days of plastic gift cards and dissatisfied recipients will be passed. That will be a day to celebrate.