Page 76 - Pay Magazine s2014

74
digital money
What the Blockchain Can Do for Gift Cards
consensus of the ledger at any given time.
4. It enforces agreed-upon asset transfer rules from the simple (“only the current owner of an asset can transfer it to someone else”) to the very complex, as found in business contracts or regulations. For instance, con- ditions under which an asset may pay interest or expire.
5. It is resilient, as it is running on many computers, each performing the same task of ensuring accuracy.
Of course, because the blockchain is a collection of computers main- taining the same data, it is more expensive than a centralized architecture, and its use is only relevant to valuable data.
Why It Matters
It turns out that retail gift cards, or closed-loop prepaid, is the kind of industry that could benefit tremendously from such a secure public ledger, which can solve two key problems:
1. Security. The static codes used to protect gift card assets (balances) must be secured. Entities from merchant to processor to aggregator to reseller to apps to gift buyers and gift receivers, gift trading platforms, etc., all currently share with each other static card codes that are easily compromised. Because these codes never change, this
blockchain 101
A blockchain can be thought of as a secure and trustworthy distributed database program. Security and trustworthiness is achieved by running the same program at once on several different computers, with its data protected by cryptography and kept in precise sync across all computers by a consen- sus algorithm. It’s called a blockchain because data are updated through transactions organized into blocks chained together, with the longest chain representing the data that all computers use to validate new transactions.
AggregAtorS
reSellerS
proceSSorS
MerchAntS
gIft receIver wAllet
buSIneSS cuStoMerS
exchAngeS
thIrd-pArty AppS
conSuMer buyer wAllet
process is equivalent to send- ing around the secret key of
a lockbox hoping no one keeps a copy. The blockchain, on the other hand, doesn’t use shared
secrets but instead uses public key cryptography: Assets are sent to the recipient’s public address that only the recipient knows how to unlock with his