What Is NFT Coupon and How It Can Prevent Fraud
What Is NFT Coupon and How It Can Prevent Fraud
Discover how NFT can potentially revolutionize the coupon industry and prevent fraud.
I had the opportunity to witness a coupon fraud happening before my eyes. I was at a checkout queuing while a couple in front of me was trying to redeem a rather thick stack of coupons. They were told their coupons were no good – they were fake. Obliviously, the couple was shocked and in disbelief. They may be victims of coupon fraud.
In a different story, a Virginia Beach couple pleaded guilty to committing a $31 million coupon fraud scheme. Moreover, honest consumers also suffer from this problem when they are denied the use of possibly legitimate coupons, citing concern over fraud.
These stories come to show how coupon fraud is a serious conundrum but blockchain may be able to point to an enlightened path at the end of the tunnel.
What is NFT Coupon or Voucher
A coupon or voucher stored in an NFT token on a blockchain – that’s essentially what an NFT coupon is. Imagine you have a physical coupon with a serial number from a store. The serial number is meant to keep a limited stock of the coupon and to track its usage. Now, instead of a piece of paper, the store owner could create an image file or any text file and encapsulate this coupon in an NFT token. This token could contain details of the coupon and a serial number too. In fact, you could have more than just a serial code which makes it more versatile. The store owner could include a list of coupon metadata like expiry date, date printed (minted), validation at only certain store locations, and more.
Difference Between NFT Coupon and Traditional Coupon With Barcode
NFT coupons are digital data stored on a blockchain where we could verify its source, while traditional vouchers with barcodes can be either physical or digital which makes them easily forged.
We can verify their authenticity and ownership of NFT coupons on a public blockchain, providing a transparent record of ownership and transaction history. On the contrary, coupons with barcodes require specific POS hardware and software to scan the codes to verify their validity. This translates to higher overheads and capital expenditure.
In terms of transferability, NFT vouchers can be easily transferred or sold to other individuals without having to worry about fraud since we can trace the origin of each coupon on the blockchain. Or, coupon issuers could control their blockchain coupon distribution by preventing transferability. Either way is difficult to manage with traditional coupon systems.
Nevertheless, NFT coupons do require blockchain wallets to manage them, this includes the redemption process. Vouchers with barcodes can be printed or accessed through digital devices, making them more accessible to a wider range of users.
How to Create an NFT Coupon
The store owner would need to create a blockchain smart contract to create (or mint) these NFT vouchers. Using the Ethereum blockchain is the obvious choice. However, coupon issuers may be taken back by the hefty gas fees that they need to pay each time they mint a coupon on-chain. But with the array of Ethereum-compatible blockchains (EVM chains), they may choose a chain that offers much lower gas price.
Besides gas fees, voucher issuers may not have an IT department that is ready to indulge in blockchain technology. Nonetheless, these two hurdles can easily be overcome by using Mintnite – an online platform that enables store owners to mint their NFT coupons without programming. The best part is, it supports various EVM blockchains which means one can pick any chain that offers the lowest gas price.
Stop Coupon Transfer At The Blockchain Door
NFT coupons are so flexible that coupon issuers could program their smart contract to issue non-transferable coupons. This is essentially converting the NFT coupon into SBT (Soulbound Token) coupon. Soulbound Token is a type of NFT token that prevents the recipient of the digital coupon to re-transfer it to someone else, thus the term soulbound. The video tutorial below demonstrates how you can create a non-transferable digital coupon using blockchain.
NFT Coupon Redemption is Quick And Painless
Part of the reason why coupon fraud is rampant is due to its convenient nature in usage. A customer can conveniently hand over a fake physical or digital coupon where the store has no method to verify its authenticity.
But NFT coupon redemption isn’t far behind in its convenience while packing a punch in security. The customer only needs to display their NFT coupon on their Web3 wallet installed on their smartphone. Better still, the store could use a simple message signing app to verify the authenticity of the customer’s wallet – just in case they just flashed a fake wallet (a screenshot) on their mobile.
When using the message signing app, the store assistant only needs to generate a QR code containing a unique message for the customer to scan using their digital wallet. The customer then needs to sign the message in their wallet. Once signed, the signing app will receive a confirmation that the customer’s wallet address is authentic. The video below demonstrates how a signing app works with MetaMask wallet.
Burning After Reading
Coupon issuers can delete NFT coupons after redemption by calling a burn function (command) in the smart contract. It basically removes the entire token and its voucher payload from the blockchain. This can be performed by the ERC721 NFT or SBT contract with access control on Mintnite.
Caveat Of NFT Coupon
NFT coupon is a compelling solution to resolve coupon fraud problems but it’s only worth the use when you’re issuing coupons with significant monetary value. Coupons with high value and with limited quantities are best to be NFT-ed when it’s worth the trouble for fraudsters to counterfeit them. Otherwise, you could be using a sledgehammer to kill an ant.