Points programs have been a part of customer loyalty for decades. Slowly, and then all at once, points exploded into web3 as well.

• Web3 Academy devoted an entire newsletter to onchain points, saying that “onchain points are the new meta.”
• Similarly, Li Jin, GP at Variant Fund, notes that “seemingly overnight, points have entered the crypto zeitgeist as a new tool that app builders are leveraging to enhance user retention and engagement.”

The $POINTS token was created in December 2023 as an offshoot of conversation on the Warpcast community site, as part of these larger conversations around points programs in web3.

Being able to price or purchase things with loyalty points onchain, via $POINTS or other mechanisms, opens up new possibilities for creators and platforms that implement memberships and subscriptions.

This guide shows how creators, platforms, and consumers could use $POINTS or similar tokens in conjunction with Unlock Protocol.

Purchasing things with $POINTS — How would this work?

Unlock Protocol has a feature that’s commonly referred to as “Swap and Pay.” The Swap and Pay feature in Unlock Protocol is designed to simplify the process of purchasing paid onchain content or services. With Swap and Pay, users can pay with any ERC-20 cryptocurrency, even if the content creator has specified a different preferred token for payment.

Using this mechanism, $POINTS can be used to purchase nearly anything onchain.

With “Swap and Pay,” when a user opts to pay with a token, Unlock Protocol initiates a swap that automatically converts the user’s chosen cryptocurrency (such as $POINTS, in this case) to the one specified and preferred by the content creator for payment.

Unlock Protocol automatically swaps the user’s chosen ERC-20 token ($POINTS) to the one requested by the content creator. So, even if a membership, subscription, or ticket is priced in USDC or another token, $POINTS can be used to purchase it.

How to enable Swap and Pay for $POINTS as a creator

To enable the “Swap and Pay” feature on their membership with Unlock Protocol, a content creator needs to follow these steps:

• Implement a checkout process that uses Unlock Protocol: The creator integrates their service or platform with Unlock Protocol. This usually involves setting up a smart contract (”Lock”) using the Unlock Protocol dashboard, which controls access to their content or service. You can learn more about setting up a checkout process with Unlock Protocol in the Unlock Guide on Selling and Minting Memberships.
• Specify a preferred token: During the setup process, the creator specifies their preferred token for payment. This is the token that the user’s $POINTS will be converted into.

Unlock Protocol uses smart contracts to manage the swapping and payment process. When a user decides to purchase a membership, subscription, ticket, or other content and pays with an ERC-20 token such as $POINTS, the smart contract automatically handles the conversion to the creator’s specified payment token. Once the swap is completed, the transaction is processed, the user gains access to the content or service, and the creator is paid in their preferred payment type.

How to pay with $POINTS using Swap and Pay as a purchaser

The beauty of the Swap and Pay mechanism is that a creator can set up their membership or subscription using any onchain payment type (either an ERC-20 or a chain’s native token), and the protocol will automatically handle accepting payment in $POINTS.

Once a user navigates to the content or service that is serviced by Unlock Protocol’s checkout mechanism, the user will be prompted to purchase a membership. If the user has $POINTS in their wallet, $POINTS will automatically show up as a valid payment option.

After selecting to pay with $POINTS, the user is shown the details of the transaction, including the amount of $POINTS that will be swapped and the equivalent amount in the creator’s preferred payment token.

The user then approves the swap, and the Unlock smart contract automatically exchanges the $POINTS for the creator’s preferred token at the current exchange rate.

After the swap is completed, the user will be granted a membership and have access to the locked content or service.

Pricing memberships in $POINTS from the start

The example above shows how Unlock Protocol could be used if a purchaser wants to use $POINTS to purchase a membership that is priced in a different currency. But what if a creator or event organizer wants to price their offering natively in $POINTS?

To price a membership or subscription that is directly purchasable with $POINTS, the creator can set the price of the membership in $POINTS using the $POINTS contract address.

When setting up a new smart contract using Unlock Protocol, click on the Currency field when setting up your smart contract.

Then, paste in the contract address for the $POINTS contract and click Import.

Your membership will now be natively priced in $POINTS.

The implications of $POINTS and onchain loyalty

The interoperability shown here is a concrete example of the beauty of implementing loyalty points directly onchain. While $POINTS is an example today, moving more loyalty programs onchain in an interoperable manner would have several implications:

• Increased flexibility and value for consumers: Consumers would have greater freedom to choose how they use their loyalty points, potentially increasing the perceived value of these points.
• Enhanced interoperability between different loyalty programs: This would facilitate easier exchange and redemption of points across different platforms and industries for consumers.
• Potential boost in customer engagement: With more options for redemption, customers might engage more actively with loyalty programs.

The interoperability of loyalty points onchain opens up exciting possibilities. As more loyalty programs move onchain and become interoperable, consumers will enjoy increased flexibility and value, while loyalty programs will benefit from enhanced interoperability and customer engagement.