The arrival of the Web3 era has given rise to the innovation of user loyalty systems.

User loyalty, which reflects the user's satisfaction and stickiness with a platform or service, is an important indicator for players in the Internet industry. There are different approaches and strategies for cultivating and maintaining user loyalty in different Internet eras.

In the Web2 era, the user loyalty system relies on a centralized ledger system, points system, and membership equity. How will that evolve in the Web3 era with the decentralized technology?

In the Web2 era, user loyalty was mainly achieved through the points system and membership equity provided by the centralized platform. It provides users with personalized content and services by collecting and analyzing users' personal information, behavioral data, social relationships, etc., establishing a trust system for users based on credit scores, certification marks, and feedback, thereby increasing user loyalty to the platform or service. However, problems have also emerged when projects build their loyalty management systems:

Information Security

This system has helped the project accumulate a large number of users, but it also comes at the expense of users' privacy. Once the data is leaked, the losses will be immeasurable. According to IBM's 2023 Data Breach Cost Report, the average cost of a data breach hit an all-time high of $4.45 million in 2023. This represents a 2.3% increase compared to $4.35 million in 2022 and a 15.3% increase from $3.86 million in 2020.

Decentralized Trust Building Process

The loyalty system of each project requires users to build data and points from scratch, which means that users must invest time and energy in each project to gradually establish trust and loyalty from 0 to 1. This decentralized establishment process increases user cost and reduces willingness.

Non-transparent and Unfair Membership Equity

The system of points and corresponding equity obtained by users is non-transparent and unfair, which makes it difficult for users to understand the specific uses of points and how to realize their rights and interests. This may lead to users’ distrust in the loyalty system, affecting their active participation and long-term loyalty in a negative way.

Isolated Points and Equity System

The points and equity systems of each company are not interconnected with each other, making it difficult for users to effectively manage and utilize these resources, which makes the user experience unsmooth and limits the overall effectiveness of the loyalty system.

Difficult to Use and Manage

Due to the fragmentation and non-transparency of the loyalty system, users find it hard to enjoy their equity. Without a unified platform or standardized management tools, users need to spend a lot of time and energy tracking and understanding their roles in different projects, which reduces convenience and usability.

The above disadvantages of the Web2 loyalty management system have existed for a long time until Web3 redefined the way of building user loyalty with decentralized technology.

The blockchain-based Web3 breaks through the traditional framework and features decentralization, transparency, and security, redefining the way of building user loyalty.

In the Web3 era, the formation and maintenance of user loyalty have undergone innovations in the following aspects:

Decentralization

Users no longer rely on centralized platforms or services but use blockchain technology to achieve decentralized collaboration and governance to ensure the security and privacy of their data and enhance their freedom and rights.

Openness & Transparency

The loyalty system has become more open and transparent in the Web3 era. User rights, including the right to know, ownership, and use, have been recognized. Through the immutability and transparency of blockchain, users can understand the loyalty system in real-time. This information is stored on the decentralized blockchain network, ensuring security and irreversibility. This transparency provides a basis for users to build trust and also promotes healthy interactions between loyal users and the project.

Portability & Cross-platform Interoperability

The mechanism of Web3 eliminates the need for users to create different accounts on each platform, providing users with a seamless experience across various projects and allowing users to use the same account to become loyal users of various projects.

This trend has also driven the upgrades of some projects focused on Web3 growth, including Galxe and TaskOn’s Points feature. Different projects can set Points when publishing campaigns. To a certain extent, the higher the Points in a user's account, the higher his loyalty to the project. This function greatly reduces the user's understanding cost, increasing the willingness of loyal users to participate. For some projects where it is difficult to establish a complete user loyalty management system, clever use of these tools can achieve twice the result with half the effort.

Composable & Programmable

In Web3, different smart contracts can cooperate and interact with each other to form composable services and functions. The user's loyalty system can be composed of multiple smart contracts, each contract is responsible for different aspects, such as points, equity management, etc. This composability allows developers to freely combine and adjust contracts according to specific business scenarios, thereby better meeting user needs and increasing user enthusiasm for participation.

Decentralization in Web3 has improved the quality of the user loyalty system. What is the effective way to maintain and motivate user loyalty?

• Token

Tokenization is a widespread practice to improve user loyalty, such as leading projects in DeFi, CEX, and NFT. For example, LooksRare and Blur use token issuance to maintain user loyalty. Top-ranked CEXs such as Binance and OKX also have their own tokens and provide different transaction fee reductions based on the amount of currency held by users. These tokens are not only governance tokens, allowing users to participate in decision-making and construction, but also value tokens, allowing users to enjoy benefits. By issuing tokens, the platform attracts more users and creators, increases liquidity and activity, and enhances brand influence and community building.

Users are no longer just consumers of a platform or service, but become its common owners and contributors through the tokenization mechanism, sharing its growing benefits and value, and increasing their participation and sense of belonging.

• Equity NFT

NFT, as a unique digital identifier, cannot be copied, replaced, or stolen, creating a unique mechanism for user loyalty rewards. In the Web3 field, the loyalty system with equity NFT as the core has been widely adopted. Users can redeem higher membership benefits through NFT, and even obtain physical rewards. In addition, NFT holders can use NFT to vote in decentralized governance and participate in ecological development decisions. Some professional services, such as Loyalty3 and Vatom, are committed to providing one-stop NFT equity system services. Vatom even provides services in a paid model. Therefore, we can see that the equity NFT market has quite promising potential for acceptance.                

In the Web3 era without the constraints of centralization, the user loyalty system grants users greater autonomy. At the same time, the loyalty system is also taking on various innovations. In this digital ecosystem full of innovation and freedom, various tools have sprung up, making it increasingly convenient to build a user loyalty system. The rise of Web3 not only provides users with more choices and flexibility but also creates a more attractive user experience.

This is a digital transformation about autonomy, convenience, and innovation, more than a simple technological upgrade. Users and projects will jointly write a new legend of loyalty system in the Web3 era.