Centralized Power & The Crypto Asset Backlash
Executive Summary:
- Bitcoin was created, and embraced as a result to the 2008 financial crisis
- Google, FB face the risk government regulation from non-neutral stance they’re taking against what they deem as ‘inappropriate content’
- Decentralized platforms stand to benefit if Google, FB are regulated, similar to how Bitcoin did from financial market government regulation
What it Means for Media Companies:
- This is all too speculative to be actionable now but it’s a dynamic worth keeping an eye on
- FB, Google appear unstoppable but as history has shown, all tech incumbents are eventually disrupted
- Decentralized platforms currently seem better positioned to disrupt tech incumbents in the future than any other organizations
- What every the outcome, the implications for the media industry will be significant
In case it’s not already clear, all of this is hugely speculative and not necessarily a likely scenario. However, I think there is enough possibility for at least some components coming to fruition that it’s worth being aware of. At the very least, it’s a fun rabbit hole for entertaining intellectual thought.
I am going to focus on how crypto assets are most relevant to the media and am avoiding discussing them as an investment vehicle. If investing in crypto assets interests you, I recommend these podcasts:
- Tim Ferris podcast featuring blockchain philosopher (and founder of AngelList) Naval Ravikant and the rumored inventor of blockchain (aka Satoshi), Nick Szabo
- Hashpower- A podcast Documentary on Blockchains & Cryptocurrencies
Bitcoin — A Backlash Against Centralized Financial Power
It’s no coincidence that Bitcoin, the longest sustaining crypto asset, was created in the heat of the 2009 financial crises. The US federal reserve pumped over a $T of liquidity into the economy, the banks that caused the crises were bailed out and some tech-savvy people were pissed off at the lack of democracy controlling the money supply. Bitcoin, a digital asset that controls its supply through a set algorithm and tracks transactions on a decentralized ledger, was created and embraced by this pissed off community.
Through 8 years of crazy drama and volatility Bitcoin is still standing stronger than ever and has convinced many of its utility as a digital store of value, or even as its potential to become the world reserve currency (Forbes).
Exposing Platform Cracks
As today’s tech platforms have gained tremendous power in the form of attracting people’s attention, bad actors have taken advantage of their neutral, frictionless aggregation systems to spread malicious agendas (no link required). In response to people being pissed off at the platforms for enabling the spread of these agendas, platforms are attempting to secure their platforms from these bad actors:
- Facebook Trust Indicators (The Verge)
- Google censoring YouTube Kids content (USA Today)
- Twitter Revoking Verification for Some Accounts (TechCrunch)
The Growing Backlash Against Platform Censorship
However, in the platforms’ attempts to remove bad actors, they have sacrificed their neutrality and have become inherently biased. While it’s easy to agree with their current motivations, it’s scary to think of the possible repercussions from them exercising this type of editorial control in instances in which their motivations are not necessarily aligned with those of society. Some argue that the platforms are not properly incentivized to regulate themselves effectively and that government regulation is the solution (NYT)
The potential for this cycle of platform censorship and backlash to result in government regulation is summarized here by Stratechery’s Ben Thompson:
“it is hard to escape the sense of a perfect storm forming: the left, already more politically inclined to favor regulation, is increasingly pushing tech companies to exercise their power; the tech companies will be especially vulnerable to this push because it will come internally, not just externally. That internal reality, though, means that policies that “make us proud”, to use Twitter’s words, are going to be perceived as biased by the right — the same right that would be more politically inclined to defend the prerogative of private corporations, unless, of course, they feel discriminated against.”
Trust in Government
You don’t have to be a glass half empty kinda person to shit your pants at the prospect of the US government regulating our most powerful media distribution platforms.
Stated in <140 characters from the aforementioned crypto philosopher, Naval Ravikant:
If government regulation of social media isn’t enough to give you Orwellian nightmares, look no further than today’s hot takes on net neutrality to consider the possible outcomes of the FCC repealing net neutrality:
The Response of the Crypto Community: Get to Work!
That’s an extended detour to make the case that the media could be facing a serious threat of centralized power abuse that even Ben Bernanke’s 2009 make it rain party could not touch. Just as in 2009, the crypto asset community is preparing to create alternative means of media distribution.
If you’re like me, you have no clue what most of this tweet means but I think the point is, with decentralized systems data storage, decision making, and/or ownership are in the hands of many entities rather than one. They are therefore much less susceptible to government regulation that today’s platforms.
I’ve recently come across a few crypto asset companies that are very early stage but have made real progress in developing decentralized media platforms.
Steemit
Steemit is a social network that looks a lot like Reddit except Steemit compensates content creators and those who curate content through upvoting, with its own cryptocurrency.
I do not have the answers to all of your warranted questions on how this is sustainable but if you’re curious here’s the white paper and the simplified, Steemit for Dummies.
Steemit launched just over a year ago since which they’ve reportedly acquired 335K users, paid out over $22M in rewards and are currently sporting healthy traffic trends:
Blockstack
Blockstack is taking on the even more ambitious goal of creating an entirely “new internet for decentralized apps where users own their data.” By using the Blockstack browser, users can access cloned versions of Facebook, Amazon, Google, Airbnb, Twitter apps, that operate similarly to their platform predecessors except user data is encrypted and decentralized rather than stored on centralized application databases — white paper link.
Along with the $5M (Update — 12/4/17: $55M) in equity Blockstack has raised from high profile investors including Union Square Ventures they’ve also launched a $25M venture fund to be invested in developers that create decentralized apps for their browser. They currently have over 13K community developers.
If developers are the chicken and users are the egg, the question remaining in my mind — is decentralized encryption enough of a value prop to entice a critical mass of users join? We’ll see.
SingularDTV
SingularDTV brands itself as:
“a blockchain entertainment studio laying the foundation for a decentralized entertainment industry. Building the future of rights management, project funding, and peer-to-peer distribution, SingularDTV’s platform empowers artists and creators with powerful tools to manage projects from development to distribution.” — whitepaper link
From my understanding, SingularDTV uses blockchain technology to allow content creators to completely control, and be compensated for the distribution of their work while removing the need for middlemen in the value chain.
In today’s world in which creators can already be compensated for distributing their work directly through Spotify, YouTube, and even Netflix, SingularDTV’s value-add is not completely clear to me. However, it’s been enough to sign, kind of a big deal, electronic music producer Gramatik.
What’s This Mean for Media Companies
While it’s entirely possible, and probably probable, that these platforms will become the Myspace of the future, if you rub your eyes and squint hard enough, you may be able to picture them as playing a significant role in the future of media.
The point is, while we’re laser-focused on the media ecosystem as it exists today in the hands of Facebook, Amazon, Netflix, and Google (FANG). History has so far shown us that, on a long enough timeline, all technology incumbents are eventually disrupted. In today’s especially crazy world, the stars of government regulation could be aligning to drain the rising FANG tide. If we are approaching that high water mark, decentralized, difficult to regulate, systems are positioning to fill the void.
What would the impact on our business be if effectively owner-less, decentralized platforms became the defacto for media distribution?
Next Level
If that didn’t take you far enough to the fringes, here are some ultra-meta, decentralized system thought pieces:
