6 Reasons to Use Cryptocurrencies as Performance Incentives for your Employees

2 min

All successful businesses need to implement suitable incentive policies for their employees. Traditional incentive plans include share option programs, bonus programs and other similar arrangements. Notwithstanding, one major drawback of shares is that they normally require liquidity events, like initial public offerings (IPOs), before employees can convert them into fiat currency. Despite the legal ambiguities, many businesses across the world are using cryptocurrencies to incentivize employees.

Understanding Crypto Incentive Plans

Incentive plans based on blockchains come in many forms. Some of them involve the tokenization of conventional benefits (i.e., awarding digital tokens to staff, which they can convert into ‘tangible’ assets – like bonds, currency or shares). Other plans use advanced platforms, which can automate the administration/customization of staff benefits in a cost effective, impartial manner. Whatever type of incentive plan is used, here are six features of blockchain platforms that can help your business:

1) Decentralization

Before data can be committed to blockchains, it has to be corroborated by node networks using appropriate consensus protocols. Moreover, modern blockchains can silo the data of network participants, so that they only access information they are allowed to see. As far as employee incentive plans go, this offers assurance to employees that benefits are being distributed fairly. Also, it gives employers confidence that their employees will not be able to access each other’s remuneration/personal data without authorization.

2) Security 

Using an ingenious mixture of basic consensus protocols and sophisticated cryptography, blockchains are a safe way storing electronic data. When it comes to employee incentives, this offers assurance to both employees and employers that the appropriate data is held more securely than it is on conventional HR databases.

3) Adaptability

Just like all businesses, no two blockchain platforms are the same. It is possible to customize them to support various competing features and outcomes. Some platforms allow you to buy bitcoin with credit card. Also, they can lower administration costs for incentive plans and facilitate access to payroll in real time. Better still, they can simplify the process of awarding staff bonuses and offer liquidity in secondary, closed markets (see point 6 below).

4) Gamification

Employee incentives share similarities with gamification platforms, which use fun concepts to encourage employees to succeed. Studies have proven that monetary rewards often reduce people’s drive to finish tasks. For this reason, lots of gamification platforms motivate participants using points. These points are linked to specific rewards that offer ‘real’ value (the opportunity to accumulate points to dine with the company’s CEO, for instance). The appeal of bitcoin is that it traverses both fields. You can buy cryptocurrencies, then exchange these for fiat money. Also, crypto is sufficiently abstract – and separate from paper money – to be suitable for use in points based systems. This means it has merit as both a gateway to conventional cash, and as a currency unit for gamification. 

5) Versatility

Businesses could decide to offer digital tokens to their staff, which they can convert into real currency or assets once certain milestones are reached. This could include time based milestones, or the achievement of annual profit targets. Suffice to say, incentive plans based on tokens have the advantage of not reducing the shareholdings of founders.

6) Liquidity

The most important difference between equity and tokens is that digital tokens are instantly liquid – providing they are listed on at least one exchange. In other words, tokens have a certainty value from the outset, whereas equity options only demonstrate their value subsequently. For instance, once employees receive their tokens, they can sell them straightaway to other people who want to buy cryptocurrencies – as long as the crypto exchange has sufficient trading volume. This offers instant cashflow to staff, who would otherwise have worthless options, due to a business not fulfilling its expectations.

Final Thoughts

Every business should consider using a crypto incentive plan for its employees. This applies to publicly listed, large businesses, just as much as it does to innovative, high growth startups. Profitable businesses attract, nurture and hold on to talented staff, however this can be difficult for young businesses that lack the funds to pay the same wages as their larger, more established rivals. Crypto incentive plans that complement a company’s broader vision are beneficial in this respect – correctly acknowledging the vital role of staff in a company’s early life, while making capital available for investment in core business areas. 

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