There are a number of ways that crypto-currencies and the protocols that they’ll enable will change the way that we interact online. This post is meant to be a living collection, so as I come across more ideas and concepts, I’ll update the post. I’m coming at this more from a conceptual perspective than a technical perspective, so if there are any errors on the technical parts, please feel free to point them out to me.
Below are some of the ways that crypto-currencies can change the way that we interact online:
1. File Storage/Sharing
2. Ticketing
3. Get paid for your attention
4. Micropayments
5. Rewarding peer producers
6. Digital rights transfer
7. Identity verification
8. Prediction markets
File Storage/Sharing
The advent of cloud computing has allowed people to store their data online generally through one of the larger cloud repository providers (Google, Apple, Microsoft, Dropbox etc). File transfer was typically done through the HTTP protocol, which works well for smaller files and websites but doesn’t scale well as we enter the big data age.
The InterPlanetary File System (IPFS) is a protocol and network that creates a peer-to-peer method of storing and sharing hypermedia in a distributed file system. IPFS has no single point of failure because It utilises distributed content delivery, it avoids DDoS attacks and can be accessed by a variety of methods. IPFS is being used to create a mirror of Wikipedia to enable people that wouldn’t typically have access to it.
The protocol builds on the existing infrastructure to create a more sustainable platform for storing and sharing files (you can read more about it here). It’s not limited by geography as some cloud storage solutions could be. Also, he who controls the server that stores your data controls your data. Your data could be accessed, manipulated or deleted without your approval on centralised servers. Not so when stored in the IPFS.
Filecoin is a cryptocurrency that has evolved to enable network users to offer and pay for distributed storage with the IPFS protocol. Anyone can join the network and get paid in Filecoins for offering data storage and retrieval services.
Ticketing
When buying a ticket off Stubhub, it’s difficult to know whether the ticket is legit in the first instance.
There are a couple of companies that are creating blockchain applications for ticketing, allowing consumers to verify the authenticity of a ticket without having to rely on claims from the seller, from which there may be no or limited recourse, especially if you have put all your eggs in one basket and are relying on the ticket to access a one-time only event.
Further, the technology will also put more power into the hands of artists and promoters, who are typically gouged by the ticketing monopolies/oligopolies that currently exist in various geographies. This has the potential to reduce the costs for consumers, increase profit margins for concert promoters and reduce the potential for fraud.
Get paid for your attention
This is a major one for me, it should be a significant application for a lot of people. Currently, people are indiscriminately spending hours of their lives on centralised platforms such as Facebook (including Instagram), Twitter, Google (including Youtube) etc. They’re giving away their time and mental energy to the platforms, which are turning around and selling their attention to marketers. They are creating the content and consuming it intermingled with advertisements. The people using these platforms currently don’t get anything for the time that they spend on them or the advertisements that they see.
The Basic Attention Token (BAT) was developed with this in mind. The BAT was created by Brendan Eich, a tech pioneer who had invested in Javascript, co-founded the Mozilla project, the Mozilla Foundation, and the Mozilla Corporation. Advertisers purchase advertising space (and effectively attention) with BATs, publishers receive user contributions and advertising revenue in BATs, and users will be paid in BATs for viewing BAT ads.
Currently, the profits from marketing and advertising accrue to the centralised platforms. The applications that have been built on top of the existing internet protocols are the ones that gain. This could explain the rise of the stock prices of Facebook and Google, which are largely monetising attention (you give Google a portion of your attention every time you want to search for something).
This application flips the tables and puts the power back into the hands of the consumer. They can reward content producers and receive payment for being bombarded with advertisements.
Micropayments
Another killer application that crypto currencies can solve is micro-payments. It’s probably happened to you before… you click on a link to read an article that’s taken your fancy only to find that it’s sitting behind a paywall. The only way to remove the paywall is to sign up for a monthly or annual subscription to that publication. What if you don’t want to sign up and pay for all of the articles that you don’t want to read, only the very few articles that come up from time to time that you do want to read?
As Nick Szabo has covered in his paper on micropayments, the main friction that’s preventing the implementation of micropayments is the mental cost or “hassle factor” that’s involved in making numerous small payments.
Currently, the technology is in place that could effectively reduce the technological cost to zero. The marginal cost of processing a transaction on one of the current payment processing networks is effectively zero. However, due to legacy pricing structures and also the psychological costs to consumers of adopting micropayments, they haven’t been widely adopted.
It’s now possible that we could have a base or reserve crypto-currency that we hold. When we want to view or pay for something with a micropayment via a browser, a wallet could automatically deduct the appropriate amount of tokens (which could be fractionalised) to make the payment and allow us to view the content. Further, if required, the wallet could automatically convert the reserve token into the payment token (if we assume that there will be multiple different tokens for different tasks in the future), before making the payment and opening the content.
While there are still a number of issues with adopting cryptocurrencies for micropayments (which will open an equivalent number of opportunities for entrepreneurs). These issues can be addressed over time as the mental costs of micropayments are able to be reduced to a nominal level.
Rewarding peer producers
In an extension of the above two concepts, crypto-currencies could allow the creation of protocols that will allow people to reward peer producers. This means people that are creating content that’s available in the commons can be rewarded for their effort. Imagine that each time you posted something meaningful to Reddit (Steemit) or Wikipedia (Lunyr) that you could be rewarded with a token, which has some monetary value.
Currently, there are over 270,000 active contributors to Wikipedia, that contribute with an edit at least once a month. It’s arguable that people don’t need any reward for contributing their knowledge to open source communities. While the content on Wikipedia as a whole is generally reliable, there are still a number of articles that have false or misleading content. Tokens, will encourage people to create a verifiable database of knowledge that will grow in value over time.
Similar economics could be applied to Reddit with Steemit, where contributors are given tokens based on their contributions. The users that hold more tokens in their accounts get to determine where a larger portion of the rewards pool is distributed (contributors vs voters). There is also a mechanism that restricts the amount that people are able to upvote or downvote certain topics. Essentially, this should mean that better value content flows to the top as people are economically incentivised to curate the content and they will be rewarded for doing so.
As these platforms are further developed, the value of the platforms should increase, which in turn should cause the value of the tokens to increase (although Lunyr is going to be reliant on advertising, which Wikipedia has avoided). The holders of the tokens, who are by default the users of the platforms will also share in the upside of the value appreciation in platforms, whereas that value is captured by the shareholders of the incumbents currently.
Digital rights transfer
Presently, it’s difficult for rights creators to receive their proper compensation because their content needs to flow through various middle men before reaching the end user. Blockchain enables the digital registry of artwork, which could be linked to a smart contract. The smart contract could determine how the cash flows will operate if someone wants to purchase the rights to the digital artwork, avoiding going through the middle men and giving the producer a bigger cut.
As the Blockchain Revolution puts it, “Musicians, photographers, designers, illustrators, or other artists whose work could be digitized and watermarked as a definitive copy could use this technology to transform their intellectual property into a tradeable asset.” Verisart is using blockchain technology to create a public database of art and collectibles. This means people will be able to determine the work’s authenticity, condition, and chain of title from their mobile device before participating in an auction.
Applying the technology to art is going to reduce the amount of middle men, increase the cash that artists receive and reduce the potential for counterfeits to work their way into the system. Generally, it has the ability to improve the trust and transparency for the art world as a whole.
Identity Verification
Blockchain makes it possible for individuals and institutions to store, share and validate personal data without compromising the privacy or security of the data. Currently, the attributes that belong to an individual might be kept in various different silos. For example, you might be able to log in with your Facebook, Google or Twitter identity through the use of various APIs but the information that belongs to you will be stored on that website or in that database.
Now it’s possible to log into one centralised database that will hold all of the attributes that are related to the individual. Those attributes can be checked and attested through checks via a blockchain protocol. This means that identity attributes (such as your address) only need to be stored and updated in one centralised location, as opposed to having to tell each of the services that you use when something changes (like needing to tell the bank, utilities, magazine and newspaper subscriptions etc that you have moved to a new address).
This should dramatically reduce the KYC and AML compliance costs for large institutions that are doing thousands of regulatory checks on a daily basis. This will make it easier for individuals to update information. The way that information is uploaded can be controlled to trusted parties as well, making the falsification of data more difficult.
Prediction Markets
A really interesting application of crypto-currency protocols that has recently launched is the betting and prediction market protocol Augur. Results of prediction markets are typically more accurate when people have skin in the game. People are able to make bets on political events, financial prices, or company results.
While there are other better markets that allow people to place predictions on things that aren’t typically traded commodities, they are generally centrally organised. With Augur, the people that use it either by making bets or reporting the outcomes, need to stake Reputation tokens. If they report the accurate outcome then they receive a portion of the settlement fees for doing so.
This protocol will be better for markets that have outcomes which could be disputed, because people need to put something at stake to be able to report the outcome of an event. If there’s a dispute on the outcome, then there’s a dispute resolution process, which could result in the reporter that has staked tokens on the incorrect outcome losing those tokens.
The key difference between this market and the existing betting markets is that participants are able to construct contracts on anything that they want. They aren’t reliant on a bookmaker creating the initial odds for an event because there’s no one sitting in the middle trying to make a spread. Further, there is far more flexibility in the types of events that can be created and effectively bet on.
Read more at endeavour ventures
