▲ 2 points

Ask HN: How do digital currencies differ from card points?

by codazoda·8y ago·3 comments·view on hn ↗

I know that card points are not crypto currencies but they do seem like a type of digital currency. Points, however, don't tend to fluctuate with a type of market. Could they? What prevents them from doing so?

3 comments

Card points is based on a reward system that you virtually earn. Their value is only relevant to the card and to the participant(s). It is not a currency. Cryptocurrency is digital money built using blockchain technology. Both is similar and that you can essentially convert them to buy things, but that is where the similarities end. Card points is created by the Credit Card's marketing department (most likely) after factoring in the cost-benefit to the card for the company. Cryptocurrencies are created to circumvent the whole banking system that used the Fed as the "points creator". The cyrptocurrencies come into existence using value -- computing power to data mine. Card points come into existence by someone waving a magic wand, just like the U.S. currency. Honestly, if you are asking this question you probably don't know the difference between currency vs. real money. Check out Mike Maloney on Youtube's "Hidden Secrets of Money" https://www.youtube.com/watch?v=DyV0OfU3-FU.

Points can fluctuate by dictate from the redemption group. If you follow the points guy blog, you'll see they transfer "points" back into "dollars" by looking at redemption rates. Sometimes, you redeem 1 point for $0.01 in goods; some programs, the effective rate is $0.025. TPG's schtick is to help you navigate that. I imagine those conversion values fluctuate.

Otherwise, I'd imagine one thing preventing this is the lack of transferability in a lot of points programs. Plus, the limited acceptable partners where you can spend them.

I'm sure there are more -- just wanted to start the discussion.

Are you asking in terms of economics or technicals?

Cryptocurrencies are distributed and basically impossible to take down or hack through the front door (as an individual). They are less easily attributed to a person or owner.

Virtual currencies are hosted and managed by some single entity, if they go bankrupt so do your points. They tend to not have value outside of where you can redeem them. Some businesses don't allow transferring of reward/loyalty points, which makes it illiquid.