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  • June 12, 2025
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Launch your Loyalty Point Scheme in 30 Minutes

Tokenization is transforming loyalty programs. It provides a more adaptable, safe, and expandable method for managing rewards. It is highly beneficial for merchants and businesses looking to improve customer engagement and streamline operations.

Loyalty point tokenization converts traditional rewards into digital tokens for easy transfer, trade, or redemption across platforms. This enhances user experience, transparency, and engagement. Tokens, interoperable across various loyalty programs and industries, allow efficient accumulation and redemption of rewards, thereby increasing the value of loyalty points for customers. Tokenization removes intermediaries in reward transactions, lowers business costs, and enables more appealing rewards for customers. Blockchain-based tokenization securely stores customer data, protects privacy, and boosts trust in the loyalty program. Tokenization allows for immediate transactions, enabling customers to instantly earn and redeem rewards, thereby improving user experience and satisfaction.

Why Choose Algorand for Tokenized Loyalty Programs?

Algorand is a layer 1 blockchain, which serves as the foundational layer of blockchain technology. Algorand also features its native currency called Algo. Fees are low for creating assets, making transactions, and other actions on the Algorand network. For example, the minimum fee for a transaction is 0.001 Algos, which is equivalent to 1000 microAlgos. The performance is also exceptionally high, making it ideal for real-time loyalty point transactions on the Algorand Blockchain.

Process of Launching a Tokenized Loyalty Program on Algorand

Enabling loyalty points through Algorand tokenization involves certain steps and engagement points:

  1. Setup Algorand Development Area: Establish a connection with the Algorand network, either the mainnet or testnet.
  2. Create Algorand Account: Generate an Algorand account to issue and manage the digital loyalty tokens.
  3. Token Creation: Use the Algorand Standard Asset (ASA) functionality to create a new token representing loyalty points.
  4. Distribution of Tokens: Distribute the newly created ASA tokens to customers’ Algorand accounts based on earned loyalty points.
  5. Redemption of Tokens: Set up a redemption mechanism through an application or website.
  6. Engagement Points: Maintain regular engagement with customers via email notifications, in-app messages, etc., to maximize the tokenized loyalty program’s impact.

Each step should be carefully planned and executed to ensure the success of your blockchain-based loyalty program. Compliance with relevant regulations and laws is also essential.

Developing on Algorand Blockchain

Developing on the Algorand blockchain involves using tools like AlgoSDK to interact with the blockchain. Developers can create smart contracts, manage transactions, and handle digital assets programmatically. This enables a wide range of decentralized applications including blockchain-based loyalty systems.

To begin development, install the algosdk library and import it, an essential step in initializing your Algorand project: 

const algosdk = require("algosdk"); // Import AlgoSdk Library

Algorand Accounts

Creating Algorand Accounts for Loyalty Token Management

Algorand accounts are necessary for creating and managing Algorand Standard Assets (ASAs), which represent loyalty points in tokenized form. These accounts ensure secure storage and transfer of tokens.

A developer can create an Algorand account using:

  1. Public Key: Used to view account details, create assets, and initiate transactions.
  2. Private Key: Used to sign transactions for security purposes.
  3. Mnemonic Phrase: Used to recover account information if the public address is lost.

To create an account on Algorand, we can utilize the generateAccount () method provided by AlgoSdk.

let creator = algosdk.generateAccount();

let receiver = algosdk.generateAccount();

To continue further development process, we need to create an Algo Client using the server, port, and token.                                                        

const token = "YOUR TOKEN HERE";

const server = "https://testnet-api.algonode.cloud/";

const port = "PORT HERE";

// Algo Client creation

let algodClient = new algosdk.Algodv2(token, server, port);

To view account information, follow this example.                                     

const findAccountDet = async function (accountAddr) {

    let account_info = await algodClient.accountInformation(accountAddr).do();

    console.log(account_info)

}

Algorand Standard Asset (ASA) for Loyalty Points

Algorand Smart Assets are versatile tokens on the Algorand blockchain that can represent various digital or real-world assets, including loyalty points. Creating an ASA is straightforward and does not require complex smart contracts, making it accessible for businesses.

Creating an ASA is a straightforward process that doesn’t require complex smart contracts. This makes it easier for businesses to implement their tokenized loyalty program. Creating an ASA is a straightforward process that doesn’t require complex smart contracts. This makes it easier for businesses to implement their tokenized loyalty program.

Create ASAs

The type of asset that is created will depend on the parameters that are passed during asset creation and sometimes during asset reconfiguration.

const createLoyaltyAsset = async function () {

    const suggestedParams = await algodClient.getTransactionParams().do();

    const txn = algosdk.makeAssetCreateTxnWithSuggestedParamsFromObject({

        from: creator.addr, // Asset creator address

        suggestedParams,

        defaultFrozen: false,

        unitName: 'LOYALTY_POINT', // Asset unit (BTC)

        assetName: 'Loyalty point', // Asset name (Bitcoin)

        manager: creator.addr,

        reserve: creator.addr,

        freeze: creator.addr,

        clawback: creator.addr,

        assetURL: "LOYALTY URL", // Information url

        total: 1000, // Total issuance

        decimals: 0, // Divisible amount

    });

    const signedTxn = txn.signTxn(account.sk); // Sign transaction

    await algodClient.sendRawTransaction(signedTxn).do();

    // Wait for confirmation

    const result = await algosdk.waitForConfirmation(

        algodClient,

        txn.txID().toString(),

        3

    );

    const assetIndex = result['asset-index']; // Created asset index

    return assetIndex;

}

ASA Management:

  • Manager Address: Authorizes asset reconfiguration or destruction.
  • Reserve Address: Holds non-minted assets.
  • Freeze Address: Can freeze or unfreeze holdings.
  • Clawback Address: Transfers assets for compliance or contract breaches.

Clearing any of these addresses disables its respective feature permanently.

Distribution of Loyalty Tokens

To distribute loyalty points as ASAs among customers:

If any of these four addresses is set to “”, that address will be cleared and can never be reset for the life of the asset. This will also effectively disable the feature of that address. For example, setting the freeze address to “” will prevent the asset from ever being frozen.

Distribution of ASAs

To transfer ASAs among accounts as follows                                    

const transferLoyaltyAsset = async function(){

    const suggestedParams = await algodClient.getTransactionParams().do();

    // Opt In function

    const optInTxn = algosdk.makeAssetTransferTxnWithSuggestedParamsFromObject({

        from: receiver.addr, // Receiver address

        to: receiver.addr,

        suggestedParams,

        assetIndex: "ASSET INDEX",

        amount: 0

    });

    const signedOptInTxn = optInTxn.signTxn(receiver.sk);

    await algodClient.sendRawTransaction(signedOptInTxn).do();

    await algosdk.waitForConfirmation(algodClient, optInTxn.txID().toString(), 3);

    const xferTxn = algosdk.makeAssetTransferTxnWithSuggestedParamsFromObject({

        from: creator.addr, // Sender address

        to: receiver.addr, // Receiver address

        suggestedParams,

        assetIndex: "ASSET INDEX",

        amount: "AMOUNT" // Amount that transfer

    });

    const  signedXferTxn = xferTxn.signTxn(creator.sk); // Sign transaction

    await  algodClient.sendRawTransaction(signedXferTxn).do();

    await algosdk.waitForConfirmation(algodClient, xferTxn.txID().toString(), 3);

}

Conclusion

By leveraging Algorand’s powerful tokenization capabilities, businesses can seamlessly integrate loyalty points into their operations, enhancing customer engagement and long-term retention. Launching your own blockchain-based loyalty program using Algorand can be quick, secure, and highly effective.

With this step-by-step development guide and the scalability of Algorand’s blockchain technology, you now have the tools to implement a cutting-edge loyalty rewards program.

Learn more at: Algorand Developer Portal

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