Introducing the Me Protocol: The Open Rewards Layer for the Digital Economy
- 99% of rewards programs are closed and limited, leading to over 60% of rewards going unused and forgotten.
- The Me Protocol allows anyone the ability to instantly create Open Rewards that can be freely redeemed across any connected party, unlocking $100 billion of unrealized value.
- It connects rewards programs in a ‘frictionless’ and ‘trustless’ way, through an API-based system, requiring zero knowledge and without the need to join a rewards coalition.
- Rewards become instantly interoperable, so brands can keep their existing programs while increasing their value by 5x.
Rewards as Tools for Increasing Customer Lifetime Value
Loyalty rewards programs have existed for centuries. One of the first instances of loyalty rewards reportedly began in 1793, when American merchants issued copper tokens to allow customers to redeem discounts on their next purchase, thereby incentivizing customer retention. Not long after, stamps replaced copper tokens, and people could redeem them against a catalogue of products.
In the 1980s, American Airlines launched the Frequent Flyer program, which marked the beginning of the modern loyalty rewards era. Instead of boosting revenues by acquiring customers through travel agents (which was the predominant channel at the time), the rewards program allowed American Airlines to directly incentivize repeat purchases, thereby increasing the Lifetime Value of customers.
This laid the foundation for the first rewards coalition program, where American Airlines partnered with Holland America Line, Hertz, and British Airways. The coalition rewards model has since spread to other sectors, allowing consumers to exchange or use their rewards across partnering businesses.
The ability to use rewards across businesses creates more perceived value for the consumer, making it easier for businesses to operate effective rewards programs. In contrast, closed rewards programs have more limited offers, making them less attractive for consumers and more difficult for businesses to sustainably generate value.
The Problem with Creating Open Rewards through Traditional Coalitions
Airline coalitions (as mentioned above) are an example of ‘open rewards’ programs involving multiple vendors. Coalitions provide a sort of open rewards program because consumers can use rewards from one brand on offers from other brands participating, making them more attractive to consumers.
While providing benefits, such traditional coalition programs have been burdened by costly administration, limitations in variety, low agency for participants, brand dilution, and internal conflicts, just to name a few. It is no wonder that less than 1% of relevant businesses participate in coalitions. Attempts to create systems or marketplaces for building ad hoc loyalty partnerships and custom coalitions fail to understand that businesses do not actually want to have to create rewards coalitions in the first place.
So, while these traditional coalitions may be better than closed programs, they are not that open or optimized for maximizing return on investment (ROI) for all participants.
The emergence of blockchain-related technology has introduced new opportunities for businesses to develop open rewards programs in part through the tokenization of reward assets. The technology can enable unlimited scalability, higher levels of transparency, greater traceability, simpler management, and a decentralized structure to equalize agency among participants. In fact, it can do away with the need for coalitions altogether.
The Challenge with Tokenized Rewards in their Current Incarnation
Despite the promise, simply tokenizing a reward does not mean it will function as an effective ‘open reward.’ Currently, approaches suffer from two main challenges:
Consumer-side Accessibility & Usability Problems: Simply creating a tokenized version of a reward that can be technically exchanged doesn’t mean it will actually be exchanged or is economically redeemable across brands. Where do holders go to redeem their rewards? How do they exchange them? Most consumers will not bother to search for loyalty redemption options, find a decentralized exchange (DEX), and then calculate what they need to swap to get the rewards they need to redeem for the offer they want. Most consumers still don’t understand tokens or blockchains, so how can they make sense of the tokenized version of their rewards?
Business-side Exchange Dynamics and Liquidity Management: Just because a company wants to release a tokenized version of their reward does not mean these tokens will be easily exchanged or that they will bring shared value for all stakeholders. How is the value of a reward token ascertained? How do we ensure that the exchange of reward tokens benefits both brands and consumers in an open system? How do we balance inflow and outflow and drive new customers to brands so they are incentivized to adopt open rewards? How is liquidity established and managed in a low-friction way so that even tiny brands can have their interoperable rewards?
The Solution for Universal Adoption: Me Protocol
Making blockchain-based open rewards universally adoptable requires building a supportive ecosystem with the necessary technologies and usability layers to make them successful. Central to this ecosystem is the Me Protocol, which utilizes a new market-making approach to enable the frictionless adoption of open rewards.
The Me Protocol is a blockchain protocol built to connect the world’s reward systems. Its modular infrastructure enables ‘trustless interoperability’ between individual reward systems. This means that anyone — whether a brand, company, individual, government, non-profit, DAO, etc. — can build instantly interoperable rewards into their products and services, without any limitations. At the core of the Me Protocol is a special kind of Automated Market Maker (AMM) for rewards, including a set of pools, with all the functionalities to create, manage, and utilize them.
The Me Protocol connects rewards programs in a ‘frictionless’ way, through an API-based system, requiring zero domain knowledge and without the need to join a rewards coalition.
- No need to negotiate with other parties or partner.
- No need to form a coalition, it replaces coalitions altogether.
- No brand dilution from a central reward.
- No need to buy another brand’s rewards.
Key Features for the Me Protocol
The Me Protocol’s design is modular, extensible, and its features are specifically engineered for the nuances of rewards assets. Among the key features are the following:
- Dual-value Algorithm — A proprietary algorithm invented to govern the Me Protocol’s AMM, specifically designed for the nuances of rewards.
- Liquidity Management — Sophisticated liquidity management means parties can control the liquidity for their assets without needing third-party LPs.
- Direct Redemptions — Users do not need to ‘exchange’ their rewards when redeeming offers. The Me Protocol ‘skips’ the swapping process.
- Integrated Bounties — Bounty pools are baked into the protocol and can release rewards for fulfilling tasks assigned by parties, such as promoting a brand on social media.
- Integrated Treasury — No need to maintain off-protocol treasuries.
Cross-platform Interoperability — Rewards generated on one platform can be used across the ecosystem.
The Me Protocol Ecosystem
To find out more on how to build open rewards on the Me Protocol, check out Part II: The Me Protocol Ecosystem: Solving Usability and Frictionless Adoption!
