Building Gift Cards 2.0 on the Block Chain – Guillaume Lebleu – Medium

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  How to build gift cards on BLockchain
  ! ## $ Building Gift Cards 2.0 on theblock chain An overviewThe problem with gift cards 1.0 Everyone’s bought or received a gift card at some point in their lives.Gift cards are very popular with merchants and consumers alike.They’re an excellent last minute gift for friends or family and used com-monly for corporate rewards and incentives.The stats say they’re good for business, too. According to CEB, 65% of consumers spend 38% more than the face value of their gift cards.Here’s the technical backstory that hardly anyone knows.Gift cards in their current form are very insecure. Let’s take a closerlook. A plastic gift card is typically composed of two codes: A 16–19 digit card number printed on the front or back of the cardand encoded on the magnetic stripe. It’s usually enough info to re-deem the value on the card. A 4–8 digit PIN, sometimes hidden behind a scratch-o ff   label orgift card package. It’s typically required to check the balance andsometimes to redeem. ãã  Digital gift cards are essentially these codes without the plastic.Where do the codes come from? The codes are typically generated by the issuing merchant’s gift card processor and transmitted in electronicform through secure channels to distributors who may print them oncards for sale at retailers, or further transmitted in digital form to ag-gregators and resellers (Gyft is one), until they end up in the hands of a buyer and ultimately the gift card recipient. From the moment thesetwo codes are issued to the moment they are redeemed, these numbersnever change.  Each party in this chain of exchanges must be trusted to keep the codessafe from thieves. Unfortunately, gift card codes do get compromised, which results in a bad customer experience and financial loss for theissuing retailer. Retailers themselves estimate that 62 percent of giftcard losses are attributable to dishonest employees and 13 percent tocounterfeit or skimmed cards.Once a code is compromised, it might not be detected until redemption,and upon redemption. But upon detecting that a code was compro-mised at redemption, it is impossible to look back provably identify theparty who broke the chain of trust.Gift cards are unlike credit and debit cards. Credit and debit cards re-quire a standard infrastructure between thousands of financials institu-tions and millions of merchants. This ubiquity has led to the emergenceof a few large global networks and associated protocols and APIs. A giftcard, on the other hand, is a singular instrument typically redeemedonly with the merchant who issued it. This has allowed a much wider variety of gift card APIs to coexist.In addition, wallets such as Google Wallet or Apple Wallet each havedistinct APIs to load gift cards.  Ultimately, this fragmentation of APIs results in a poor user experience.For instance, a few issuers may support balance check or transactionhistory while many don’t, meaning a consumer buying or receiving agift card may have to go to a store and try to redeem a potentially empty card to know whether it has funds or not.What’s to be done about all this insecurity and lack of standardprotocols? An introduction to Bitcoin and theblock chain Understanding Bitcoin is key to understanding the value of moving fi-nancial assets such as gift cards onto the Bitcoin block chain.I’ll start with addresses, then explain transactions, then the block chain. A fairly accurate metaphor for a single Bitcoin address is a transparent public lockbox  .It’s a lockbox, meaning a private key is required to unlock and movethe bitcoins in it (to another public transparent lockbox)It’s public and transparent, meaning anyone can see how many bitcoinsare received or sent from it, and anyone with the public address may send bitcoins to it.
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