This article attempts to explain the difference between the revolutionary disruptive innovation of bitcoin and the evolutionary efficiency innovations of industry workflow tools, and why calling them both “blockchains”, even as a generic term, is incredibly confusing.
For the rest of this post, I will use the phrase “industry workflow tools” instead of industry blockchains, as some of the emerging solutions being proposed in this space are not blockchains (eg, R3’s Corda is not a blockchain but Digital Asset’s solutions are – however, both companies are proposing industry workflow tools).
Over the past year I’ve been asked my thoughts about ‘loyalty points on blockchains’ many times. The thinking seems to be bitcoin -> digital currency -> digital tokens -> loyalty points and at first pass it feels like a natural extension of a theme. People read about cryptocurrency trading and interoperability then think “Wouldn’t it be really cool if I could exchange my loyalty points for other ones, or if I could buy and sell them with real money?”.
This post attempts to describe how I understand the purpose of loyalty points, and in this context, how applicable blockchains are as a technical solution.
Over the past year I have come across many blockchain ‘proof of concepts’, that take existing business ideas or challenges and apply a specific technical design (blockchains) to the solution. The usual problem/solution decision process has been turned on its head:
Digital tokens have come to the fore recently, firstly with excitement about cryptocurrencies such as bitcoin, then with digital tokens being used to represent different assets on a blockchain. What are they? How can you digitise a token? Why is it important?
When I hear the word ‘token’ I think of round plastic things like a casino chip, or something which I can use to exchange for a beer under a specific system or in a specific marketplace.
We will explore the original usage of the phrase ‘digital token’, then take a look into the world of cryptocurrency tokens, differentiating between blockchain-native tokens like BTC on Bitcoin or ETH on Ethereum, and asset-backed tokens like IOUs on Ripple.