It seems as if overnight, the media industry has gotten the blockchain bug. Today, there are events, panels, articles and conversations about how blockchain will save journalism and advertising and marketing. In fact, Adweek has one of its very own. But before we decide whether or not this technology will be media’s savior, we wanted to answer some pretty basic questions. We’re also introducing a weekly blockchain newsletter, which you can sign up for here.
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What is blockchain?
At its core, a blockchain is a digital ledger shared among any number of stakeholders with an interest in keeping better track of information and transactions. Everybody gets a copy of the same distributed information. Nothing can be removed. And because a blockchain is a decentralized system, a consensus of stakeholders has to agree before something is added to the ledger.
Because it promises to create a more democratic and decentralized model for sharing data, blockchain technology has the potential to improve transparency among companies, countries and individuals that move along some sort of good or service—anything from a piece of paper or a coffee bean to a financial product.
So … what’s the block, and where’s the chain?
Whether it’s Bitcoin transactions or data about how a shipment of flowers is making its way from Senegal to the Netherlands, the block is the mechanism that records information to the blockchain. Some people like to compare it to an Excel spread sheet or a Google Doc. Those blocks come together to make up the blockchain, which is the overall digital record of transactions. Every time one is completed, the next can be created. So far, this has been a lot slower than some parts of the internet, partly because certain blockchains need to have every party agree before it’s added in order to help make it transparent and secure. That makes the chain the overall list, a record of all transactions.
Why does blockchain matter now?
It’s a combination of things. On the one hand, there’s a lot of money flowing into the sector, thanks to public and private initial coin offerings. (ICOs, as they’re called, are an unregulated way for companies to offer investors cryptocurrency rather than traditional shares of stock.) On the other hand, more companies are starting to experiment with how they might use blockchain for their business. In fact, 40 percent of respondents in a recent Deloitte survey were willing to invest at least $5 million on blockchain projects this year. Some companies are using them to experiment with shipping projects; others are using them for advertising networks. Then there’s the giant that’s about to step into the room. This spring, Facebook announced it’s setting up a blockchain team led by David Marcus, who previously ran Facebook Messenger, and Kevin Weil, who was previously Instagram’s product chief. Facebook also moved Evan Cheng from director of engineering at Facebook to director of engineering for the company’s burgeoning blockchain division.
Are there are different types of blockchains?
Yes. There are public blockchains, which are open to anyone to send transactions on or to verify or observe what’s happening at any given time. Two of the most popular public blockchains are the Bitcoin blockchain and one for Ethereum, another cryptocurrency. There are also companies, such as Aion, which debuted in April as a way to help other companies build their own blockchain products and services. (TechCrunch likened it to what Linux has done as an open-source platform for operating systems.)
You also have private blockchains. These are often used for more niche purposes like a business managing data or interacting with its customers. For example, Northern Trust, the financial services firm created one with IBM that it’s been testing for more than a year to store data such as biometric information and other records. In June, it also won a patent for storing meeting notes on the blockchain.
And there’s a third type: consortium blockchains. These are a combination of public and private, where a blockchain is private, but it’s governed in a more democratic way where each party involved has a chance to have a say in what gets added.
New types of funding, new technology, few regulations, few clear use cases—why is this all so confusing?
Think of it like the early days of the internet. The world of blockchain technology is still the wild, Wild West. By early June 2018, the total value of initial coin offerings had already outpaced the previous year. And while the past year has seen a record number of ICOs, some have been legitimate, but others are sketchier. In July 2018, for example, two Nevada men settled a lawsuit by the Securities and Exchange Commission over illegally profiting from an ICO after they made about $1.4 million in 10 days by selling shares of a company called UBI Blockchain Internet.
The blockchain sector is something regulators and lawmakers are beginning to look at more closely as well. Earlier this year, the U.S. Securities and Exchange Commission, in uncharacteristically snarky fashion, even created its own cryptocurrency called HowieCoin to show how easily ICOs can hide as frauds. In June, the SEC appointed Valerie Szczepanik as its first “crypto czar,” while members of Congress in July held multiple committee hearings to learn more about how the blockchain can be used in industries such as agriculture.
Who are the major players right now?
It depends on which part of the ecosystem you’re looking at.
Lots of industries—and plenty of large brands—are testing it out. Walmart is testing blockchain in China to track food safety throughout its supply chain. Johnson & Johnson is testing it in its incubator. Comcast is building out a unit to see how it could affect video, and IBM is investing heavily in blockchain, potentially making the technology more mainstream, much as it did for artificial intelligence.
But then there are all the ad-tech companies—Kochava, MadHive and NYIAX, for example—that are pivoting to blockchain, seeking to integrate the technology into their advertising platforms. But unlike ad tech, where Facebook and Google remain at the top, there are no runaway winners yet for blockchain, especially in the advertising world.
A lot of venture capitalists are also starting to invest in the space. In June, the powerhouse VC firm Andreesen Horowitz announced a new $300 million fund dedicated to cryptocurrency and blockchain. Other big names like Sequoia Capital and Union Square Ventures have also helped validate the space with investments of their own. Last year, USV backed Kik’s ICO for its Kin cryptocurrency, while Sequoi has invested millions in companies like Polychain, the first $1 billion cryptofund. This Forbes list shows the 50 biggest companies exploring blockchain in some way.
What are the use cases, or at least potential use cases?
While blockchain technology has only recently become a widely discussed topic, there are already a lot of uses cases, or at least a lot of potential ideas and applications. Some, such as those for tracking transactions or following shipments around the globe, seem reasonable. And then there are more consumer-friendly things like CryptoKitties, which helps teach people the basics of blockchain while raising and trading—you guessed it—digital cats. Here’s a look at some of the ways people are touting the use of blockchain:
What does blockchain mean for the ad-tech and mar-tech worlds?
Ad-tech companies have the potential to either benefit from the blockchain or be severely threatened by it. While the layers of data collection and use, along with the multiple monetary transactions, often make ad tech fairly opaque, some say blockchain technology could make the whole industry more transparent. Writing all the info to the blockchain allows for an advertiser to more accurately and more efficiently track how money is being spent and where the ads are showing up, rather than trusting a third party or media buyer or publisher based on where they say ads show up. It could also be used to help improve the quality of ad networks by requiring publishers to become whitelisted based on cryptocurrencies that in a way act as a downpayment for making sure a media company is what it says it is.
However, while programmatic advertising has largely been helped along by its ability to rapidly scale digital ads, blockchain technology still has issues with speed. As of now, a blockchain-enabled advertising exchange can process far fewer ads per second than a traditional digital advertising network. (Even earlier this year, a network could only verify as many as a dozen or so transactions per second, far fewer than the millions performed on other programmatic channels. However some, such as Kiip, have been trying to get around that obstacle by batching transactions that don’t need to be accounted for right away.
What will it look like for publishers?
A number of startups are looking to use the blockchain to help publishers get paid. By using the technology, publishers might be able to more directly receive revenue rather than always having to go through third parties such as Facebook. One of the companies looking to do this is Po.et, a startup founded by Jarrod Dicker, who previously ran innovation at The Washington Post. His vision is to create a place online where publications and the writers, photographers and others who fill the pages can monetize content directly from a blockchain-based marketplace.