Challenges Beget Change: Issues with Arbitration, Attribution, and Trust Spur Blockchain Innovation
By Melrose PR Contributing Writer, Nikki Brown
The companies leading innovation within their respective industries are increasingly employing blockchain technologies as part of their solutions. Such groundbreaking companies illustrate the motorizing force challenges can have on engendering lasting change.
Commerce is a concept as old as the human species — perhaps even more ancient. Ever since the first men and women exchanged one thing for another, we have been conducting commerce. The first coins were minted in ancient Lydia around 640 B.C. This was a huge step in making trade more efficient. A farmer, for instance, no longer needed to bring a cart full of chickens to market if he wanted to buy a cow; he only needed a handful of coins. Metal coins held value because of the precious metals they were produced from, but the rise of paper money represented yet another shift. Paper money only holds value, in the most simple sense, because we universally agree upon it as a global society. This accepted belief led to the possibility of credit cards and the booming eCommerce businesses we have today. Gone are the days when two farmers met in the market and exchanged chickens for a cow.
The challenge with eCommerce is that exchanges are moderated by a few powerful players that have monetized value transfers, such as Paypal. The cost for entering the marketplace is higher for individuals crafting clothes by hand or growing their own produce than for industry giants who can more easily absorb high transaction fees and exchange rates.
The rise of digital currencies could disrupt the stranglehold massive companies have on eCommerce by eliminating the need for third-party verification of value exchanges. Particl, for example, is developing an eBay-esque platform on the blockchain. The decentralized marketplace will be a space for merchants to exchange directly with consumers and accept cryptocurrencies for their goods. Platforms like Particl are especially empowering to individuals operating in unbanked nations. On a decentralized marketplace, a textile maker in Cambodia can sell her product directly to a fashion designer in New York City without the cost-prohibitive factors of currency exchange rates and transfer fees.
The music industry has cycled through a roller coaster of golden and dark ages spurred, in large part, by technological innovation. In 1877 Thomas Edison recorded “Mary Had a Little Lamb” on the first working phonograph. The invention of the phonograph led to a flurry of innovations, including jukeboxes, radio and records. The cheap and easy production of records and mass distribution enabled the rise of such greats as Bing Crosby, Benny Goodman, Frank Sinatra and Elvis Presley. The record industry made record companies and many musicians rich; however, the music industry was also highly centralized and a powerful few determined the voices and sounds reaching consumers.
The latest disruption of the music industry came with the rise of the internet and streaming services. Record companies were already a dying breed, but one could say that Spotify nailed that coffin shut for good. Spotify taught consumers that they shouldn’t expect to pay to listen to music, effectively neutralizing the incomes of all but the biggest stars who can make their living by putting on concerts. This presented a challenge: how can musicians continue to flourish in an industry that did not adequately reward them for their work?
Blockchain has the potential to reverse the Spotify effect and allow indie artists and musicians to break free of the proverbial streaming coffin and rise to cultural prominence again. Imogen Heap’s company, Mycelia, is doing just that by introducing digital rights management using the Ethereum network. By building its network on the blockchain, Mycelia aims to empower artists to make a living without having to adhere to the demands of streaming services. The Ethereum-enabled smart contract network allows artists to conduct business directly with listeners without the third party arbitrator taking its cut. Additionally, the digital rights management enabled by smart contracts ensures that artists receive the credit they deserve for their work.
When you think of gambling you might think of James Bond in Casino Royale sipping a martini or George Clooney romancing Julia Roberts in Ocean’s Eleven, but the reality is a little less glamorous. Though the majority of gambling continues to take place in casinos, it’s estimated that by 2020, the volume of online gambling in US dollars will reach a resounding $37.91B.
Unfortunately for game developers, players, and casino operators, the online gambling industry is plagued with suspicion of behind the curtain deals and rigged games. In reality, most online casino games are not rigged, but there is no way for these sites to prove their integrity and fairness to players. The challenge for the gambling industry is how to overcome this negative perception, the crux of which lies in the issue of trust. Players must trust that casino operators are being honest and maintain faith that the system prevents cheating.
The beauty of blockchain is that it renders trust a consequence of the technology, and thereby eliminates the need for users to participate in good faith. Dao.Casino is the first company to build an Ethereum-powered protocol for the online gambling industry. By employing a system of smart contracts, participants can exchange value peer-to-peer without the need for third party verification. The decentralized system ensures that there is no single point of failure or risk of a human operator being corrupted. Smart contracts incentivize good behavior with token rewards and punish bad actors by revoking tokens.
Dare to Disrupt
The greatest harbingers of change are often those who dare to face the greatest challenges. Issues with third party arbitration are spurring eCommerce companies like Particl to look for more peer-to-peer mechanisms of exchange. The struggles of artists to receive proper compensation for their work sparked companies like Mycelia to seek out better and more accurate systems for rewarding value and attributing credit. The lack of transparency in online gambling prompted a company like Dao.Casino to seek new ways of eliminating the need for trust. These companies and others are increasingly looking to blockchain for solutions. If companies like Particl, Mycelia, and Dao.Casino tell us anything about the future, it’s likely going to be one that is more transparent, secure, and rewarding.
Disclosure: Dao.Casino and Particl were previously clients of Melrose PR.