Silvana Da Luca
By now everyone has heard of Blockchian technology, but many still associate it only with its most famed application, the Bitcoin.
But Blockchain is bigger than that. Its application goes well beyond cryptocurrencies and finance, and it will very likely change the way companies and entire industries operate.
What is blockchain technology?
The Blockchain system is one way to make a “distributed” or “shared” ledger. Ledgers are the foundation of accounting. They came about along with writing and the creation of currency. Their medium has been everything from clay, to stone, papyrus and paper. With the development of computer technology, digital ledgers mimicked the cataloging and accounting of the paper-based world. Paper-based institutions are still at the heart of our society (for example: money, seals, written signatures, bills, certificates and the use of double-entry bookkeeping).
Dramatic increases in computing power, breakthroughs in cryptography and the development of special algorithms have allowed for the creation of “distributed” ledgers.
In its simplest form, a distributed ledger is a database held and updated independently by each participant (or node) in a large computer network. Record of and changes to the ledger are communicated to the various nodes on the network, but not by a central authority. Instead, every single node on a “peer to peer” network processes every transaction, and then there is a “vote” on conclusions derived from the transactions to ensure that the majority agrees with the conclusions.
Once there is consensus, the distributed ledger is effectively updated, and all nodes maintain their own identical copy of the ledger.
Distributed Ledgers are dynamic with aspects that go far beyond static paper-based ledgers. The key aspect is that this new form of ledger enables us to formalize and secure new kinds of relationships in the digital world. So, for example, the current infrastructure and expense of establishing “trust” via notaries, lawyers, banks, regulatory compliance personnel, and governments is avoided by the nature and qualities of distributed ledgers. The result is a system for digital interactions that does not need a “trusted” third party or intermediary.
Let’s look at the biggest challenges that companies face nowadays. As big data’s volume increases, the ability to access, process and manipulate that data, quickly and efficiently, becomes compromised. At the same time, because of the sheer size of data in all of its environments, lifecycles and formats, the challenge of keeping data secure also increases.
On the consumer side, the two biggest issues with digital transactions are lack of transparency and lack of trust. Consumers therefore tend to feel less loyalty, less engagement, and are more reluctant to participate in transactions that are supposed to be “secure.”
Blockchain technology is the solution to all of these problems.
Private key cryptography provides a powerful ownership tool that fulfills authentication requirements. Possession of a private key is ownership. It spares you from having to share more personal information than necessary for an exchange.
The idea that cryptographic keys and shared ledgers can incentivize users to secure and formalize digital relationships has imaginations running wild.
So what does this all mean to the media consumer? It likely means more access to more content from more creators on a much more personal and secure level. For content creators, it means a much simpler payment and distribution system, plus digital security.
One of the most obvious applications of Blockchain in the media is its ability to support payments that can be processed without the need for an intermediary payment institution or its fees. Without a middleman, when digital objects can be cryptographically associated with their creators, there is no need for distribution channels. Think about that for a moment. This technology can put all kinds of media directly in control and management of its creators with the potential to erode the financial model that media companies and conglomerates have been using for the past century. This technology directly questions the need for iTunes, Amazon or Spotify. Or for record companies. Or for publishing houses.
Another application of Blockchain technology is in providing digital security. Generally, digital objects can lose value because they are easily copied. We see this especially in the area of pirated music, movies and TV. Because Blockchain makes it possible for creators to register origin of work and set sharing permissions, pirating potential disappears. Let’s put this into perspective: the U.S. economy loses $12.5 billion in total output annually as a consequence of music theft. Just sound recording piracy leads to the loss of 71,060 U.S. jobs.
Because Blockchain precludes the need for middlemen, the technology creates new opportunities for corporations to get closer to customers and consumers. Individual creators will connect with consumers directly, compelling big media companies to operate more nimbly, offering more varied and interactive pricing models for content based upon individual consumer preferences. For instance, you will be able to buy just a fraction of a magazine, or only a part of an article that interests you without being forced into subscriptions or having to pay for the entire publication. Because payment and distribution will be simpler and less expensive to manage with Blockchain, media companies can concentrate on creating quality content while shrinking their accounting and sales departments.
One of my favorite aspects of a Blockhain ecosystem is the lack of arbitrary censorship. With unlimited intellectual freedom, readers can have access to any and all sources of information while authors will be free to express their minds. For media consumers this is a huge shift in the way we receive information: we now read newspapers and magazines, and watch TV that someone else curated for us; someone else chose each content piece that we consume. But what if no one curates our information? What if we could decide whether to read the top news (as rated only by other consumers in the ecosystem), or we could read the worst news of the day? What if there is no established “authority” to dictate our taste? I would personally like to see a future in which mass consumer taste is not shaped by a handful of media authorities and where our children can choose for themselves what to consume.
Who will be the winners of the Blockchain applications in the media field?
Content creators will benefit the most since this technology puts them in the driver seat: they will have full control over their creations without the need of a distribution system or a middleman, while getting compensated fairly and immediately. Consumers will benefit from censorship-free, fair, flexible and easily accessible market for intellectual products. Aggregators, on the other hand, will lose market monopoly and will need to adapt to this new digital word if they are to survive at all.
Here’s what this looks like in practice.
In the music industry, Ujo Music (https://ujomusic.com) is a service that uses Ethereum’s Blockchain platform to allow musicians and other artists to not just record and publish their music but to establish rules on how they want it to be used, which is aimed at solving global royalty payment and licensing problems across the industry.
Publiq (https://ito.publiq.network/en), another Blockchain platform focused on the advertising and publishing side, aims to create “economic and intellectual wealth for everyone” and “tremendous value for both users and advertisers.” The model allows writers and creators to distribute content on the Blockchain and get paid immediately. It is interesting to me (and I will write on this subject more) that this is a non-profit foundation.
On the advertising side, New York Interactive Advertising Exchange (https://www.nyiax.com) is a marketplace where brands, publishers and agencies can buy and sell future ad inventory in partnership with Nasdaq. If anyone is wondering why Nasdaq is jumping into this so quickly, the global advertising markets for 2017 has reached $550 billion; it’s estimated to reach $207 billion spend in the US alone.
Blockchain technology obviously holds many advantages for both businesses and consumers. So what are the biggest roadblocks to adopting this technology?
Most projects in Blockchain are in the theoretical phase, with their realization expected to be years away. Designing and implementing the ecosystem is a slow and complicated process that takes years to complete. And perhaps the biggest hurdle we see is that it doesn’t yet scale easily. For example, an Ethereum-based Blockchain processes 20 transactions per second (compared to 45,000 transactions per second for Visa).
The question that immediately arises is: why can’t the Blockchain process transactions faster? Currently, all Blockchain consensus protocols (Bitcoin, Ethereum, Ripple, Tendermint) have a challenging limitation: every fully participating node in the network must process every transaction. The number of transactions the Blockchain can process can never exceed that of any single node participating in the network. Now, if we try to increase the size of each node so that it can carry more transactions and more information, this will start kicking people off the network until only large companies can afford to remain. It’s the equivalent of adding more computing power to store data. Yes, we could operate in “half-node” mode but this compromises the searchability of data; or, we could limit what kind of information each nodes carry, which of course strips away the advantages that Blockchain offers in first place, and the reasons why we want to use it. These challenges will eventually be solved but as of now, scalability is a problem. Nevertheless, Blockchain technology will find its place in media and transform the face of the industry.
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