The Solution - BLOCKCHAIN

The forerunner in the cryptocurrency space – Bitcoin, is powered by Blockchain technology and has rapidly gained traction in the world. Blockchain is a term for a distributed, P2P network. It is append-only, immutable, and only updatable with the consent of the peers within the network, which is performed using the built-in consensus mechanism. It is a global network of peers in which each peer holds a copy of the distributed ledger.

Bitcoin paved the way for the next generation of blockchain technology, Blockchain 2.0, Ethereum. Ethereum is one of the most significant innovations in the altcoin space that came to life in 2015. It represents the second generation of Blockchain technology with more functionality to enhance money transfers and go beyond.

The next phase that revolutionized most sectors is the entry of smart contracts. A smart contract is a program that is secure, unstoppable, and represents an agreement that is automatically executable and enforceable. Nick Szabo who coined the term in the late 1990s defined a Smart Contract in the following way: “A Smart Contract is a computerized transaction protocol that executes the terms of a contract.

The general objectives are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitrations and enforcement costs, and other transaction costs”. Smart Contracts offer cost-saving benefits by reducing transaction costs, automating manual processes, and simplifying complex contracts.

In Smart Contracts, code is law meaning that there is no need for a third party to control or influence the execution of the contract. As mentioned by Szabo, it is self- enforcing. This provides a greater level of trust compared to many other traditional payment and Escrow services because the users aren’t required to trust the organization, but instead the open-source code that is reviewable and contains the encoded business logic.

Blockchain technology has shown significant prospects for many industries and the insurance and wellness industry is one such industry. As a disruptive technology, blockchain is ideally positioned to solve the problems faced by most rewards and loyalty programs. And here are the reasons:

• REDUCED MANAGEMENT COSTS THROUGH

  SMART CONTRACTS

  On blockchain networks, smart contracts allow for a reduction of system management costs. Through a blockchain-based loyalty system, many processes that previously required human approval and permission can be automated. Additionally, automation reduces the costs associated with human error and fraud. As a result of the reduction of system management costs, customers also qualify for fewer points requirements for redemption. In doing so, customers are encouraged to make more redemption transactions, increasing the perceived value of the loyalty program. In this way, the retailer running the loyalty program is likely to improve customer retention.

• POINT PROCESSING IN REAL-TIME

  It is common for legacy loyalty rewards systems to take a long time to credit customer accounts with points. The key reason for this is logistical. Often there is a lack of coordination between loyalty reward program providers and their issuers (such as the credit card company that records a transaction) so they can credit the points to the member's account. This problem is solved by blockchain technology, which allows multiple stakeholders to access and record transactions in near real-time. It only takes a few minutes for these blocks to be mined and transactions to be included in these newly mined blocks. Customers can then be rewarded with points by the loyalty rewards program provider. In order to do this, the program provider must provide seamless and immediate access to rewards for customers. By allowing them to do this immediately, the likelihood of a positive customer experience increases and, consequently, the likelihood of increased loyalty.