Fold pays out rewards in real-time at an exchange rate calculated at the moment of your transaction. If you’re familiar with bitcoin rewards programs, you’ll know this is special because most programs calculate your rewards rate at a later date, sometimes even at the end of the month. They often do this at a rate of their choosing, which means you don’t know how many sats you’re getting, and you lose out on any upward price action during the month.
We consider real-time rewards central to the Fold experience and beneficial to our cardholders, however, it does introduce some risk to Fold. Fold periodically converts the interchange earned from each card swipe into bitcoin in order to pay out rewards. This is done at regular intervals as opposed to instantaneously. With average hourly volatility sometimes reaching up to 12% and daily even higher! This means Fold may buy bitcoin at a higher exchange rate than when it was earned. For example, a cardholder swipes their card and earns bitcoin at a one exchange rate, but by the time Fold converts the interchange earned from that card swipe to bitcoin for rewards the price has increased.
Additionally, relying on a single price feed for real-time rewards creates risks, as a single exchange can encounter bugs and other issues that produce inaccurate prices. At one point Coinbase showed a single bitcoin was worth $887 billion! This means that users can end up with less sats than they should for a given reward, which is no good.
Fold has implemented a solution to mitigate these risks and to continue offering real-time rewards. Instead of relying on a single price feed, we take several exchange rates into account. Further, we account for volatility to hedge against instances where the price has increased between the time a user swipes their card and when we acquire the bitcoin with a small price buffer, which better allows us to sustain our real-time rewards program. We will continue to improve the speed and process by which we maintain real-time rewards, which means our experience will only get better.