What’s a blockchain? And how could it change marketing & advertising?
With promises of smart contracts, global and secure payment systems, token-based communities and transparent record keeping, blockchains are hot.
While the jury is still out on Bitcoin’s contribution to civilization, the digital currency has introduced us to at least one promising technology.
Called blockchain, it’s the infrastructure behind Bitcoins. Its advocates hail it as the most revolutionary technology since … well … the internet.
Don and Alex Tapscott, authors of a 2016 book called Blockchain Revolution, offer this definition:
The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.
Put another way: blockchain tech is frequently described as a shared spreadsheet or ledger than is maintained simultaneously across thousands or even millions of computers, with no central data storage.
Every part of the peer-to-peer network verifies every incoming transaction, which becomes a new block of data that gets added to the “blockchain,” so the recorded value is available to everyone on the network.
Fans of the technology cite its efficiency as a global network of value exchange, the fact that it has no single point of failure, its very high level of security and its ability to generate value for its community of keepers.
An interesting white paper from blockchain firm Consensys points to three inherent “fairness advantages” of blockchain tech:
- “Everywhere is the same, because a blockchain has no center.”
- “The record is permanent to protect transactions, [offering] extremely strong cybersecurity.”
- “Nobody is in charge of the global blockchain as a whole, [although] local blockchains can be run by a sovereign entity or a company.”
One mitigating factor
It may all sound a bit like the early pitches for the internet. In fact, on its website Consensys characterizes the open source, blockchain-based distributed computing platform Ethereum as “how the Internet was supposed to work.”
Of course, the internet blossomed into something far beyond the fever dreams of even the most ardent fans. But it also showed that, however great the promises of any technology, there’s always one mitigating factor:
That part of internet history may be less visible to blockchain’s most enthusiastic backers. Take this description by author and technology futurist Ian Khan:
As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved.
Or this, from a primer about blockchain tech:
Bitcoin was invented in 2008. Since that time, the Bitcoin blockchain has operated without significant disruption. (To date, any of problems associated with Bitcoin have been due to hacking or mismanagement. In other words, these problems come from bad intention and human error, not flaws in the underlying concepts.)
Let’s review some recent history. A scant three years ago, the largest Bitcoin exchange on the planet at that time, called Mt. Gox and built on blockchains, crashed and burned.
When it filed for bankruptcy, it reported that 750,000 Bitcoins had been stolen from customers’ accounts and 100,000 from the exchange because of what it said was a problem with the digital currency’s code. The estimated value of the missing currency: about half a billion dollars.
And Mt. Gox was far from the only Bitcoin enterprise that went down in flames.
Let’s just stipulate that blockchain technology is gearing up for an amazing future. But it is a future on a planet with error-prone, hacking, mismanaging and sometimes bad-intending humans.
For marketers and advertisers, that future could be dramatically different on many fronts if even only a few of the visions for blockchain tech take off.
Digiday recently summarized some of these possible applications.
They include verification of ad delivery; immutable contracts with consumers; handling consumer data in a way that is completely transparent; and verifications about products’ authenticity that track from the point of origin, like sustainable fishing. Shanghai-based Vechain is using blockchain tech to authenticate fashion products, as well as provide background info on the items.
Last year, MediaPost similarly pointed to blockchain opportunities for managing huge numbers of consumer relationships, settling of multiparty payments and user ID verification.
Other observers have suggested global payment systems and, especially, smart contracts that are secure and transparent, available throughout a network even as they get modified.
‘Like 1993 and the internet’
He envisions that consumers might buy blockchain-generated tokens representing products or values they agree with, employing the power of rising and falling token prices — in a decentralized, self-regulating blockchain environment — to express their will:
Instead of wearing a logo that says, “I’m rich enough to have this brand” or “I want to be like Mike,” we will offer a signal with the digital tokens we own and spend. Our online transactions (with privacy levels as we see fit) will communicate that “I support this cause, this community, in a way that empowers them economically.”
Epstein told me the growing blockchain movement “feels like 1993 and the internet.” This feeling of déjà vu, he said, is primarily because both offer decentralized systems that have tremendous potential, except the internet was about “the rapid transfer of information,” and blockchains are about a rapid transfer of value.
In the most idealized version of his vision, a community of developers can maintain each blockchain faithfully, because they each own platform-generated tokens that increase in value only if that blockchain itself increases in value.
“For the people who hold these protocols and issue tokens,” he said, it’s “always in their best interest” to make sure it operates well.
On the way to that utopian vision, Epstein acknowledges that blockchain technology may be managed by organizations, such as Consensys’ Ethereum platform, or banks that see the opportunity in its ability to record transactions globally and permanently with one entry.
Bitcoins have achieved celebrity status, but ultimately their chief value in the evolution of digital commerce and business may be that they introduced the world to blockchains. And blockchains are just now getting suited up for their role.