Ingenious approach to extrinsic motivation - give something, then use the threat of taking it away to 'motivate' people to do what you want them to do. It's an old idea, but one that has not seen as much use as you would expect in things like student grading or occupational performance assessments. Though tied up in language of the endowment effect, the essence of this method is punishment rather than reward, and we tend to be more punishment-averse than reward-seeking, so it works 'better'. It's still rampant behaviourism, presented in a cognitivist wrapper to make it look shinier. 

As with all forms of extrinsic motivation, this does two things, both inimical to learning. Firstly, it leads to a focus on avoiding the punishment, rather than on the pleasure of the learning activity itself. I don't see this as a great leap forward from rewarding with grades in a learning context - it just makes it even more extrinsic and even more likely to destroy any intrinsic motivation a learner might have had in the first place so that, once punishment has been avoided, the value of the activity itself is diminished and, mostly, the things that make it useful are forgotten. Secondly, it is an even worse assertion of power than a reward. Again, I don't see this as having any meaningful value in a learning context. It teaches greater compliance, not the topic at hand. That's a bad lesson, unless you think that education is preparation for life in which you should be a compliant tool that reluctantly does the bidding of those in power through fear of punishment. A society organized that way is not the kind of society I want to live in. Surely we have grown out of this? If not, surely we should?

The notion that people need to be forced to comply in order to learn what we want to teach them is barbaric, distasteful and, ultimately, deeply counter-productive. Countless generations of learners have had their love of learning viciously attacked by such attitudes, and have learned with less efficiency, less depth, and less value to society as a result. It's a systemic failure on an unbelievably massive scale, embedded so deeply in our educational systems we hardly even notice it any more. Done to one person it is bad enough but, done systematically at a worldwide scale, to ever younger generations of children, it hampers the intelligence and compassion of our species in ways that cut deep and leave us bleeding. Despite this, most of us still manage to come out of this without all of our innate love of learning completely destroyed. Our intrinsic motivation can be a powerful counter-force, just occasionally what we are taught aligns well enough with what we want and need to learn, we discover other ways and things to learn that are meaningful and not imposed upon us, and there are quite a lot of great teachers out there that manage to enthuse and inspire despite the odds stacked against them. Few if any of us survive unscathed, though most of us get something useful here and there despite the obstacles. But we could be so much more.