Loyalty, Co-creation, and Binance

tl;dr: Binance’s community vote shows a possible future of product co-marketing and loyalty programs.

Binance is one of the most important players in the crypto trading world.

Their influence as a trading exchange is massive and their CEO, CZ, is one of the prime movers and shakers in the crypto world.

They are also famous (notorious) for the fact that they have moved legal jurisdictions multiple times as crypto laws have evolved and changed.

If you read CZ’s blog post When Remote Work Isn’t Enough: Shifting Towards a Decentralized System Architecture , you will get a sense for the speed and agility of his operational framework.

Loyalty through Economic Alignment

A few years ago, Binance was one of the first crypto financial institutions to issue their own token, BNB.

The token is consistently in the top 10 of coins globally and was one of the first ways that a token was used as a form of “loyalty card.”

BNB token holders get discounts on trades plus other benefits. Though Binance doesn’t share profits directly (that would make it a security), it is freely floating so there’s opportunity to earn from price appreciations.

But one of the more interesting ones is the ability for BNB token holders to vote or “stake” their tokens to influence the company’s business decisions.

You see, when there’s a new crypto project that launches, it may generate a token, but that doesn’t necessarily mean that it’s easy to get. In fact, it’s usually not easy to get. There’s a challenging technical set up and interfaces are terrible.

To help create liquidity around the token and allow people to buy and sell them, there are exchanges.

A brief detour into the world of exchanges

In the future, there will be Decentralized Exchanges (DEXes) running on protocols like 0x, Uniswap, and Kyber. These are safer because they never take custody of customer funds. But for now, the downside with DEXes is speed (and liquidity, to be fair). Current generations of blockchains are not fast enough to handle the trading volumes that centralized exchanges (like Binance) can process.

Notwithstanding Jake’s data, the dominance of centralized exchanges exists today. And as the primary on-ramp from fiat currency to crypto, it is definitely one of the black marks on the industry. But, they are just better for now.

Ok, back to Binance.

Gamifying Token Listings

When a token is launched, the project team behind the token is keenly interested in driving awareness and adoption of their token to help “bootstrap” the network. The more people who buy your token, the more funds you have to pursue your dreams and develop the tech as you see fit.

Since getting tokens natively is difficult, Binance comes in and, in some respects, gets to be a “kingmaker.” They decide which tokens get listed and which do not. The same is true of other centralized exchanges.

But what Binance has done- something I heard about this from my friend Todd at Chromia– is created a tournament format that pits two tokens that want to be listed on Binance against each other.

Then, they turn the community loose, allowing them to vote on which product (in this case Chromia or SwiftCoin)

For the moment, let’s assume (and it’s a big assumption) that the votes of BNB token holders are transparently verified and accurate, here’s what happens:

From the Binance website

“Participant Rewards

• If SwftCoin (SWFTC) wins the vote and is listed on Binance.com, all participants that voted for SWFTC will split a total reward pool of 165,000,000 SWFTC, based on the number of votes from each participant. 
• If Chromia (CHR) wins the vote and is listed on Binance.com, all participants that voted for CHR will split a total reward pool of 13,500,000 CHR, based on the number of votes from each participant. 
• Users that voted for the runner up will then split a pool of 3,100 BNB, based on the number of votes from each participant. 
• 
  
• Airdrop allocation per winning vote = (1 / Total number of votes received by the winner) X Winner Airdrop Pool.
• 
  
• Airdrop allocation per runner-up vote = (1 / Total number of votes received by the runner-up) X Runner-up Airdrop Pool. 

There are so many things about this offering that I like, it’s difficult for me to keep my excitement in check.

First of all, it incentivizes BNB acquisition. If you don’t have a BNB token, you can’t vote.

Second, it enlists the marketing efforts of BOTH competing projects to promote the vote to all of their networks which, naturally, helps Binance grow and BNB adoption.

Third, it empowers BNB token holders by giving them a voice in the future direction of the platform.

Fourth, it rewards financially and builds loyalty among their customer base for the long-term.

Loyalty Programs in the Future

One of my favorite things about crypto tokens is the way they can be used to programmatically incentivize activities which foster loyalty.

It was something I wrote about in both the CMO Primer for the Blockchain World and the Decentralized Marketing Organization: How Crypto-Marketers Can Increase Token Value by Empowering Community Members.

Binance’s creative use of their token to drive a type of “lock-in” where it might not otherwise exist (due to portability of crypto assets) is a glimpse of future loyalty programs.

Those, I suspect, will be more about a relationship based on real value (co-participation in product development) than “sticky assets” (you can’t move your United frequent flyer miles to Delta).

Regardless, if customers are the most important part of the equation, giving them an opportunity to have “skin in the game” and benefit as a company grows is a competitive differentiator that token-supporting projects offer.

I’m excited for the types of loyalty programs we’ll see in the future as these models begin to mature.