The Free-Rider Problem in Coalition Loyalty
Imagine a network where merchants earn coins and customers can redeem them anywhere. Now imagine a merchant who only accepts coins—never issues them. That merchant gets free customer traffic funded by other merchants' issuance budgets. They contribute nothing to the pool that makes the network valuable. This is the free-rider problem, and it can collapse any coalition if left unchecked.
RynoWallet's solution is the Minimum Issuance Ratio, or MIR. It is the network's fairness rule, and it is simple: you can redeem (accept) up to 3 times the value of coins you have issued in the same month.
How MIR Works: A Concrete Example
Let's say your shop issues 200 RynoCoins to customers in April. Your monthly redemption ceiling is 200 × 3 = 600 RC. This means customers can redeem up to 600 RC in discounts at your shop during April. If your shop sees high redemption traffic (customers from other network shops coming to spend their coins), you simply need to issue more coins yourself to keep pace.
Your merchant dashboard shows your MIR ratio in real time. A ratio of 0.3x means you have issued 200 RC and redeemed 60 RC so far—comfortably within the 3x ceiling. A ratio approaching 3x is a signal to issue more coins before redemptions are paused.
The New Merchant Bonus
New merchants on the network receive a generous 1:5 ratio for their first 30 days. This means in your first month, you can accept up to 5 times the coins you issue. This gives new shops the breathing room to onboard customers, set up earning rules, and experience the network's foot traffic before the standard 3x ratio kicks in.
After 30 days, the ratio normalizes to 3x—still generous for any actively issuing shop.
Why 3x Is the Right Number
A 3x ratio means that for every ₹1 in discount value you fund (by issuing coins), you can receive up to ₹3 in customer spend driven by the network. In practice, most active network merchants run at a 0.3x–1x ratio, well below the ceiling. The 3x ceiling is a safety valve, not a constraint you will commonly bump against if you are issuing coins consistently.
The ratio prevents a pathological case—a shop that refuses to issue coins but happily accepts large redemptions—from exploiting the network. It does not constrain normal, honest merchants in any meaningful way.
What Happens When You Approach the Ceiling
If your shop is approaching the 3x ceiling, the merchant dashboard shows a warning. Redemptions are not immediately blocked—you have time to adjust. The resolution is straightforward: issue more coins. Either issue more per transaction or lower the issuance threshold to give coins at smaller bill amounts. More issuance raises your ceiling immediately.
In practice, approaching the ceiling is a good problem to have—it means your shop is receiving significant foot traffic from the network. The fix (issue more) has a direct business benefit: more coins issued means more customers with a reason to return to your shop specifically.
MIR and the Health of the Network
From a network-wide perspective, the MIR ensures that the total value of coins circulating in the system is backed by real issuance commitments from merchants. This is what keeps 1 RC = 1 INR credible. Customers trust that their coins have value because the platform enforces that every merchant accepting coins is also contributing coins. Without this rule, the network economy would inflate and the coin's real value would erode—destroying the loyalty program for everyone.
Think of the MIR as the reserve requirement in a banking system. It is the structural rule that keeps the currency honest.