Cashflow problems and bad debts have been the bane of the performance marketing industry for as long as it has existed. Many workarounds have been tried and tested, with none of them proving to be an equitable solution for both parties. RefToken will solve this issue by enabling instant, guaranteed payments for each conversion an affiliate provides via a) instant payment issued by the smart contract governing the program, and b) holding the merchant's affiliate budget in escrow, ensuring solvency of the affiliate program.
Following implementation of the Raiden network RefToken will leverage state channels to bundle micro-transactions in an off-chain, confidential manner to improve network efficiency. The key advantages to state channels are:
A real world implementation example of state channels would be a casino, where a running total of commissions generated by a referred player are calculated at the end of each wager until the session is ended, at which point the final balance will be posted to the blockchain.
State channels are an important technology that has the potential to greatly improve the scalability and privacy of many categories of blockchain applications; in conjunction with sharding and other privacy-preserving cryptographic technologies, they are an important ingredient in helping decentralized systems to achieve the properties that mainstream individual and institutional users expect and deserve.
In order to demonstrate the advantages that RefToken's instant payment system has over competing solutions, here is a list of them, along with their single fundamental flaw.
Monthly Payments: This is by far the most common payment implementation, however this places all the risk on the affiliate, as they only get paid following 30 days of financial outlay, this therefore creates a strong incentive for merchants to withhold payments should their general business be in decline.
15 Day Payments: This reduces the above mentioned affiliate risk and merchant incentive by 50% each way, but is still an unbalanced solution.
Commission Prepayment: This solution was becoming popular in 2016, and involves a merchant pre-paying an affiliate approximately 1 month's worth of commissions (as negotiated by the two parties). This solution has been in decline due to the large amount of fraudulent affiliates that are collecting prepayments off programs only to never deliver any traffic
Listing Fees: This is a soft measure where an affiliate requires an amount of money to be paid for the alleged costs related to listing a merchant or the creation of media. As per commission prepayments, this places the exposure squarely on the merchant, and has also resulted in some amusing 'listing fees' running into five figures.