The Difference Between Tokens, Reward Points and Club Med Beads

Are ICOs really all that new? What are the differences between some of these new tokens and traditional gift cards, Amazon membership reward points, and other simple “store credits?” For that matter, what is the difference, between, say Civic CVC tokens and Club Med Beads?

As stupid as the question may appear to the blockchain illuminati, I am hearing it being increasing voiced by extremely smart people in the community and I think it deserves real consideration. Let’s dig in.

1. Store Credits can be erased by simple database entry.

DELETE FROM Customer_Points WHERE Customer_Name=’Fred Krueger’;

The first major difference between ICO Tokens and simple “Store Credits” like Amazon Express Membership Reward Points or even Frequent Flier Miles, is that the later can be erased by a simple operation at the database level. This operation could be done intentionally by a database operator, maliciously by a hacker, or simply unintentionally as a result of an error or stray piece of code — but it’s entirely doable.

The implications are that you can’t exactly trust these database entries long term as sources of value. Miles expire. Databases get Hacked. Companies get sold and new management can easily simply make policy changes where these “points” no longer have value.

On the other hand, Tokens are cryptographically unique. If I have a private key such as


that key unlocks a specific public key in a similar format. No database operator can change or erase that correspondence. And if that key matches to a token entry on a blockchain, the token holdings can be verified independently of the actual company even existing. This means they can be used as a store of value.

2. Store credits cannot be easily transferred.

Partially by design, but also because they stored at the individual account level, store credits are not easily transferable. Try giving your airline miles to a friend. It’s doable, but it usually takes a few days, and it’s far from instantaneous.

On the other hand, if I want to give you some CVC tokens (I own a few), its just a few clicks on my mobile phone. Bing. You now own CVC. This makes them potentially useful as a medium of exchange. I’ll give you a few CVC tokens, you give me a cup of coffee, a legal consultation, a car ride.

3. Store credits don’t have specific programatic uses within a complex technological ecosystem.

In something like the CIVIC ICO, the currency, CVC, is programmatically tied to certain events and processes within the CIVIC ecosystem — namely the automated buying and selling of identity information information at the network level.

This is more than simply “I will pay for the service with tokens instead of cash”. This is a deep usage, machine to machine transactions of the token within a complex eco-system. The best ICOs have thought this through at least on paper, quite carefully. Filecoin is a great example. Propy and Civic are two others. In all three cases, the legal teams behind the ICOs clearly have made the argument that these tokens are needed for the model considered to actually work.

Whether in practice this is 100% needed is a different story. Could CIVIC keep a database of identities and manage its complex identity eco-system centrally? Yes. But then, all the participants would have to trust CIVIC 100%. One can make the argument that for the eco-system to grow, the network must not rely on a single node. And I believe there is some real truth to that. As Miko says, we could be moving to a wholesale new decentralized world.

4. Store credits always have the same dollar value.

Amazon points, frequent flyer miles and other “store credits” are by definition pegged to a “fiat” currency like the dollar. As long as they don’t expire, I can expect to get the same dollar benefits from my 25,000 American Way Miles in a month as I do today.

This is not the case with crypto-currencies. They go up, and, recently, they do down. This makes them candidates for investment and speculation, for better or worse. There is no hard cap on Amex reward points issued, or American Airlines miles. But there is a finite amount of Bitcoin, CIVIC and other tokens. Depending on supply and demand the price will vary.

This is not necessarily a good thing or a bad thing — it’s just a reality, and a core differentiator. It means the crypto-currency can be used, like other currencies, as an asset.


Tokens are related to store credits, but they are fundamentally different. They can’t be deleted or modified by a central authority, they can be easily transferred, they can be used as an asset class for storing value with possible appreciation over time. Some of them have deep uses within complex ecosystems — but this is not 100% necessary.

As for the club med beads, they were clearly an invention ahead of their time. Like tokens, they were divisible, transferable, and had a very specific function within the club med eco-system. As an investment…meh.

Comments welcome!