What is a blockchain?
Just over ten years ago, someone the world knows only as Satoshi Nakamoto published a whitepaper that described how to solve what had been until then a seemingly unsolvable problem: how do you create an unbreakable, immutable ledger or database without having a central authority to maintain it?
The specific problem he framed had been thrown into sharp focus by the 2008 financial crisis. The Nakamoto whitepaper described how to create a ledger that didn’t have a central authority controlling it, one that allowed financial value to be transferred between parties (peers) without any banks being involved. Trust on a trustless network. It had seemed impossible. His proposal was that a token be used to represent the value on the ledger (he named it Bitcoin) and that the ledger be held together using cryptographic techniques, in an unbroken chain of transaction blocks: a blockchain.
The technology soon became known as distributed ledger technology (DLT) and the principles described in that whitepaper laid the foundations for a Cambrian explosion of DLTs, each built by competing groups of paid or unpaid “cypherpunks”, and each different from the other in subtle ways that affected, speed, transaction cost, utility and so on. These tokens, aka digital assets (DAs), became tradeable and the value of the entire “crypto” space was by the end of 2017, worth around 800 billion US dollars.
The wonderful thing about DLT, it turned out, was that you could store more on a blockchain than just a record of financial transactions.
What can you do with a blockchain?
The wonderful thing about DLT, it turned out, was that you could store more on a blockchain than just a record of financial transactions. The Ethereum project started soon after Bitcoin’s birth. Created by 17-year-old boy genius Vitalik Buterin, this project proved that it’s possible to keep a record of the state of things using DLT – the notion that “smart” contracts could be embodied in code, and executed based on immutable rules, with immutable outcomes.
The Ethereum blockchain is part of the grand sounding Ethereum World Computer. Every computer participating in the network, everywhere in the world, is actually a piece of one enormous, globally distributed computer – one world computer made up of thousands of other computers – capable of running its own apps, each executing smart contracts based on agreed rules. Ethereum brought us another incredible new reality – that machines can do business with other machines, even transferring value between them.
Meanwhile, since 2012, a major Silicon Valley fintech business – Ripple – has been working with banks to rebuild the financial rails that underpin the world’s cross border settlement industry (worth 27 trillion dollars annually). Today, Ripple has hundreds of banks – including central banks like the Bank of England and the Saudi Arabian Monetary Authority – on its books, as it zeroes in on one of its principle aims – that of being a major contributor to the Internet of Value.
The democratisation of money, and the ease of moving it around (including micro-transactions) are key DLT concepts for publishers.
We’ve lived with the Internet of Information (things like websites and software as a service) since the late 90s; we now have the Internet of Things (Alexa, smart meters, home security and so on); but we still cannot move money as quickly as we can send a text or an email. In fact, it takes literally days to send money between many countries, and there are almost 2 billion completely unbanked people on our planet. No central bank can reach these people.
Any examination of blockchain projects wouldn’t be complete without a mention of Hyperledger. A few years ago, IBM got really interested in blockchains and sponsored a project to create an enterprise grade, permissionable blockchain solution that any business could download for free and use in any way it wished – including creating smart contracts, interacting with other blockchains and even the creation of entirely new digital assets. Today, Hyperledger is a global collaboration, hosted by The Linux Foundation. It includes leaders in finance and banking (including Ripple), the Internet of Things, supply chains, manufacturing and technology.
The democratisation of money, and the ease of moving it around (including micro-transactions) are key DLT concepts for publishers.
Trends worth watching
Perhaps the biggest impediment to the adoption of blockchain – particularly its core design principle of tokenisation by using a digital asset to represent the value of just about anything – has been the lack of regulatory clarity by governments. But this is changing rapidly. Countries like Malta, Thailand and others have shown regulatory agility and have passed laws that foster innovation and investment in digital assets. Now, the USA is catching up. In February this year, Wyoming became the first US state to pass significant regulatory clarity into law.
With increased regulatory clarity removing any stifling effects governments are having on cryptocurrency and DLT projects, the brakes are off. DLT solutions are proliferating apace and some of these may have a direct impact on publishing in the near term. Here are four to watch:
- Streaming Payments
- Access Control
- Disruption of Advertising
- Privacy and data
DLT is bringing new models ever closer, ones that will significantly change the revenue landscape for publishers.
Fundamental to any business model is the question of where the money comes from. DLT is bringing new models ever closer, ones that will significantly change the revenue landscape for publishers. In 2018, the reshaping of the world’s international payment rails by Ripple has spawned a startup, Coil (coil.com). Backed by Ripple and founded by Stefan Thomas, their former CTO, Coil aims to enable streaming payments on the new Internet of Value. With streaming payments, publishers would be able to collaborate with content creators to share revenue directly with them in real time, whilst visitors would simultaneously only pay for the content they consume. Such a fluid microtransaction model would severely disrupt the stiff publisher / subscriber model that dominates the space today.
The blockchain concept of decentralisation-by-design will remove the need for a central authority (a subs bureau) that holds records about customer data and access rights. Gaining the right to engage with content without paying up-front is sure to be a disruptor that shakes up publishing.
The original digital asset, Bitcoin, belongs to the Bitcoin blockchain alone and is the name given to the token on that blockchain. A Bitcoin can be valued in the fiat currency of its owner's choice, although its value is often stated in US dollar terms.
Now that any blockchain can be created (from scratch or by, for example, using Hyperledger), we can already see a landscape dotted with thousands of blockchain projects. Here, the fundamental principle of tokenisation is relevant. Imagine a blockchain that contains records of the locations and types of content held by a publisher. Such a publisher could tokenise this content, and consumers of the content could pay for access by buying those tokens and spending them in return for access.
Expect to hear from a disruptive access-rights-by-blockchain vendor in 2019.
Gaining the right to engage with content without paying up-front is sure to be a disruptor that shakes up publishing.
Insofar as anyone can describe an internet industry as traditional, the “traditional” model of digital advertising that spawned mega-data aggregators with stratospheric profits (such as Google and Facebook) is being challenged by startups like the Basic Attention Token (BAT – see basicattentiontoken.org) and Fenestra (www.fenestra.io).
BAT is interesting because it seeks to improve the efficiency of digital advertising by creating a new token (the BAT) that can be exchanged between publishers, advertisers, and users. The Brave browser, which is growing in popularity, has native support for the BAT token. According to their website, their service creates a transparent and efficient blockchain-based digital advertising market. Publishers receive more revenue because middlemen and fraud are reduced. Users opt-in to an inclusive and rewarding private ad experience. And advertisers get better data on their spending.
Fenestra is helmed by Ashley MacKenzie, the son of former Sun editor Kelvin MacKenzie. It aims to disrupt digital advertising with a Hyperledger-based, permissioned blockchain solution, by providing publishers with better trust, revenue, transparency and faster settlement, and also, by providing advertisers and agencies with a single, configurable ledger across their entire media supply-chain.
Publishers receive more revenue because middlemen and fraud are reduced.
The advent of GDPR brought with it a number of principles that on the face of it could make it tricky for blockchain based service providers to operate inside the EU.
For example, GDPR requires there to be an identified data controller acting on a subject’s personal data, whereas a blockchain, being a potentially globally distributed network of nodes running the same rules on identical copies of the same data – often anonymously – has no data controller (no central authority) by design.
GDPR also mandates the right to be forgotten, whereas a blockchain requires that data is never deleted (immutability).
But these and other conflicts are resolvable – personal data can be completely encrypted on a blockchain such that only the data subject and the publisher have its cryptographic “keys”. Exercising a right to be forgotten could be as simple as a data subject generating new keys and locking the publisher out.
Privacy blockchains are a reality already, so expect a disruptor or two to find their way to your ear with interesting offerings that promise to remove the pain and complexity of privacy and data compliance – at a price.
The ultimate publisher blockchain bundle?
Perhaps an ultimate service bundle will emerge in the longer term. One that promises to interoperate with SAAS providers, but to hold all subscription and personal data, all transaction records and access control rules in a decentralised blockchain, potentially removing the not insignificant cost and complexity of maintaining licenses and relationships with subs, CRM and other SAAS providers – often held together by spaghetti strands of API calls and expensive, bespoke interconnections.
Someone out there is surely working on it.
Exercising a right to be forgotten could be as simple as a data subject generating new keys and locking the publisher out.
