Blockchain – or distributed ledger technology (DLT) – is something everyone is talking about, but few people understand. We assembled some of our favourite blockchain experts to set us straight about the up-and-coming technology and how it might be used for media companies in the future
This month’s FEED Round table guests are:
FEED: So what IS blockchain?
Cliff Fluet: Blockchain creates a new kind of internet, one that is digital, but prevents duplication or unilateral changes, one that manages transactions, but without a central controlling authority and one that is transparent so it’s accountable. The first-use case was to enable digital money without a bank, such as Bitcoin, but not only can it store and transfer money, it could revolutionise digital businesses that rely on charging fees for online transactions through its power to minimise fraud and create trust.
Collin Müller: Blockchain is a computer system, collectively run by all users, which enables them to transact securely and exchange value without a trusted middleman, such as a bank or a trading platform.
Joe Naylor: The blockchain is a long list of notes. Any participant can submit whatever they want, and as long as the new submission does not conflict with anything else that was submitted earlier, it is accepted into the blockchain. The novel part is that a group of people, or more accurately their computers, can agree on which submissions were accepted without having to trust each other.
Maria Tanjala: Blockchain is a ledger, a database that records information such as transactions, the ownership of a song, a photograph, an academic paper and so on. A block is thus a permanent store of records which, once written, cannot be altered or removed.
The decentralised character is key – being distributed on so many computers, it’s hard to hack the information recorded, as everyone has equal access to the entire history of the database. And that’s what also makes it transparent because it offers visibility to everyone within the system. It’s also irreversible, meaning that you can trust the set of rules made at the beginning, that everyone subscribed to.
At Filmchain, we record the set of instructions on how people in the film industry are recouping their investment. Also, we record each transaction made to each beneficiary, so that every investor, director, producer, actor or crew can verify the payments themselves. As we say, “Don’t trust us, check the ledger yourself!”
FEED: Where on the hype curve are we with blockchain?
Cliff Fluet: There has been plenty of hype, particularly around digital currencies and blockchain-powered tokens. In late 2017, the price of Bitcoin increased to around $20,000. People not only speculated on the value of digital blockchain-based currencies, but speculated on the value of tokens of utility issued by companies in the space. Whilst the business of digital currencies has stabilised somewhat, the application of blockchain technology is growing with the transactions themselves being programmable and automated for ever more innovative solutions.
Collin Müller: The biggest hype is over. We’re in Gartner’s ‘Trough of Disillusionment’, right where the real work starts. Many projects and start-ups are working on blockchain solutions that will create sustainable value in the next two to three years. And national governments, as well as the European Commission, are working on regulatory frameworks that provide the right ‘living conditions’ for blockchain companies and solutions.
Joe Naylor: I would also say that we are headlong into the ‘Trough of Disillusionment’. There was a lot of capital poured into the space from 2017 to 2018, including a lot of dumb capital. That led to quite a bit of fraud, unfortunately. But I suspect that once the dust settles, there will be legitimate blockchain-enabled applications and services that provide value within the constraints of what the technology actually enables.
Maria Tanjala: We’re very hype agnostic, so we’re not making any predictions. Cryptocurrencies became common knowledge at the end of 2017 and the beginning of 2018 when there was a boom of transactions and trading, but that doesn’t mean much. Every day the network is growing bigger, and this network never stops; that’s what matters.
FEED: What do people most need to understand about blockchain? And what are the biggest misconceptions?
Cliff Fluet: One misconception is that it is somehow ‘new’, when the technology dates back to a white paper published in 2008, and the first bitcoin transactions were made just under a decade ago. There’s also an inherent confusion with the digital currencies and blockchain technology itself, with the unsavoury uses some have used Bitcoin for or the lack of regulation in financial markets somehow being conflated with blockchain being unlawful. The underlying technology will have far-reaching effects when the focus is on what it enables rather than how it does it. Lastly, the biggest misconception is that it is magic, rather than what it really is – an ingenious solution to a number of real problems in a digitised world.
Collin Müller: Most people equate blockchain with cryptocurrencies, but cryptocurrencies were just the first class of applications running on that basic infrastructure.
People need to understand that blockchain technology is about to change our world at least as much as the web did in the past 20 years. Blockchain technology changes the way we have been organising human societies for the last 5000 years. Since the dawn of the first big cities we relied on middlemen when a group became too big for everyone to know and trust everybody else. With blockchain, we can organise global networks of strangers without any need for middlemen.
Joe Naylor: The single biggest misconception is that blockchain is software that will solve some problem – or every problem. But blockchain does not do anything; it is simply a new kind of database, and currently not a very good one in terms of speed, costs and efficiencies.
FEED: What opportunities are there for media companies and content creators in using blockchain?
Cliff Fluet: Most will agree that the worldwide web was the ‘internet of information and communications’ and that allowed media content to go around the world as fast as networks could carry it. The opportunity for the blockchain is that it could represent the ‘internet of value’. By being, in and of itself, a robust payment platform it could allow rights owners to disintermediate brokers and/or payment providers that deduct a percentage simply for ‘reselling’ goods in an online environment. The sale of digital goods is complex and not nearly as ‘cost free’ as people might assume.
Collin Müller: The media sector is one of the best examples for economies dominated by strong middlemen. Google, Facebook, Netflix, Spotify and a few others control the media market and extract as much value as they can, leaving very little for participants at the edges.
Blockchain is the best available tool for organising markets without middlemen. Therefore, it is our best chance for shifting power and money from the central dominating platforms to the edges of the media ecosystem – ie. to creators, advertisers and consumers.
Joe Naylor: If properly linked to court-recognised copyright registration instruments, data recorded on a public blockchain can serve media companies’ and creators’ efforts to clear rights for licensing purposes and help eliminate uncertainties and mistakes when asserting claims of authorship and copyright ownership.
Maria Tanjala: Blockchain is catching up as an outstanding innovation in film, TV, digital and art. There are vast areas where it can increase transparency and efficiency – allocation of revenues on smart contracts, real-time reporting, governance, micropayments, rights management tracking, VOD on the blockchain, and influencers’ incentives through tokens are some of my favourites.
FEED: What real world examples have you seen where blockchain was a great solution?
Cliff Fluet: A number of companies are using it to track and create a register of their existing digital image inventory and to create protocols that allow metadata to be captured the moment a piece of work is put on any online platform. Others are seeking to establish scarcity in the world of digital art by creating the opportunity for authors or photographers to set into the blockchain limits upon how many ‘editions’ there can be for a particular work.
In the music industry, a number of companies and artists are looking to use the blockchain to enable payments, collaboration and administration all at the same time, and disseminating monies generated directly to the artists in almost real time.
Joe Naylor: Bitcoin, in the beginning. Unfortunately, hodlers and wildly volatile transaction fees undermined its ability to serve as a viable payment platform for the masses.
Maria Tanjala: Provenance is a blockchain solution for supply chain transparency, tracking of tuna coming from Indonesia. They use blockchain to track physical products and verify attributes from origin to point of sale. They hit hard with statements such as “When your fish supper supports slavery”.
Others would be Aventus, a protocol that is bringing transparency to the world of fraudulent ticketing, and Alice.si, which is bringing transparency to the very opaque world of charity donations – if they get widely adopted, I will donate to charities again. Lastly, the use of blockchain to provide and track identity for millions of people who don’t have IDs and are unbanked is a great noble cause.
FEED: What are some of the inherent risks and problems in blockchain?
Cliff Fluet: Blockchain technologies are inherently robust, but the real risks are a failure to understand its application to the areas of law that the technology touches, from data to intellectual property and financial regulations. One needs a deep understanding of the commercial, legal and regulatory frameworks – or needs to be able to find and hire the experts who have that understanding.
Collin Müller: Today, ‘proof-of-work’ algorithms, as used in Bitcoin and Ethereum, are the only secure consensus mechanisms in blockchain systems that are truly open and permissionless, without any central authorities of any kind. Those proof-of-work mechanisms are very inefficient with regards to energy consumption and are not suited for widespread applications with a global scale. The blockchain community is working hard to find alternative consensus algorithms that have less energy demand.
While blockchain technology could actually be one of the best tools to enable privacy and data cooperation at the same time, there are a few inherent problems with GDPR compliance. The most prominent is GDPR’s ‘right to be forgotten’, which requires data sets to be deletable. One of the basic principles of blockchain technology is that transactions exist ‘forever’ in a blockchain database once they have been added. The blockchain community should work together with regulators on clever system design and best practices that nevertheless fulfil the requirements of the GDPR.
Joe Naylor: Blockchain technology is only useful to prevent others from misrepresenting or fabricating the history of a shared timeline of events or files. This does not guarantee completeness as participants can refuse to inscribe some events, which can lead to a split of the community. Blockchains are only tamper-proof as long as the community is financially invested in consensus.
Maria Tanjala: Although we believe that our industry is ripe for disruption, we acknowledge that it’s a leap of faith from manual jobs overseen by people to trusting in a code. At the same time, rights holders are keen to access more data and transparency, so many of them are ready to give technologies a try.
We currently develop on a private Ethereum blockchain, but public blockchains come with risks such as the loss of wallet keys, and there’s a level of education people need to acquire in order to be on top of all the aspects.
FEED: What kinds of new services could blockchain technology enable?
Cliff Fluet: We’re at the foothills of our understanding of the technology right now. With its combined power for asset transfers, as a trust enabler and with smart contracts, the best is yet to come.
Collin Müller: In the near future, so-called security tokens will probably have the most widespread impact. Security tokens can represent ownership of assets such as real estate, companies, machinery etc. They have the potential to democratise investing by bringing down fees and making assets much more ‘liquid’ and more easily tradeable.
For the media sector, blockchain could help get rid of intermediaries in content distribution and advertising, which could lead to more transparency, faster processes and more value at the ‘edges’ of the network for content creators, advertisers and consumers.
Joe Naylor: This question goes to the root of the problem with the blockchain space – a new technology looking for problems to solve.
The blockchain essentially provides notary services in an automated way, and thus is cheaper than old-school notary services. As such, it might be used as a low-cost alternative to traditional copyright registrations. However, for that to be of any value, government bodies such as the United States Copyright Office would have to be part of that solution so that it would carry legal weight within the courts.
Maria Tanjala: A big challenge is how to best deal with and remunerate creatives for user-generated content. Users create a lot of content that is widely promoted on the platforms or services we use every day, but they get nothing in return. Creating a fair ecosystem with clear governanceis is where we believe blockchain-based solutions will make a great impact.
This article first appeared in the May 2019 issue of FEED magazine.