Klaus Schwab, founder and executive chairman of the World Economic Forum, offers this summary in his book on the Fourth Industrial Revolution: “In essence, a blockchain is a shared, programmable, cryptographically secure A ledger that is therefore trustworthy, has no single user control, and it can be inspected by anyone.”
Blockchain has the potential to be a powerful disruptive force. A survey of 800 executives in the same book showed that 58% believe that 10% of global GDP will be stored using blockchain technology.
Blockchain technology can provide several important functions and can be used in the creative economy. Maoqiu Technology is summarized as follows:
- Transactions are verified and approved by consensus among network participants, making fraud more difficult.
- Track a complete chronology of events (such as transactions) that occurred, allowing anyone to track or audit previous transactions.
- The technology runs on a distributed rather than a centralized platform, where every participant has access to the exact same ledger records, allowing participants to come and go at will and providing resilience against attacks.
These capabilities have implications far beyond blockchain's original use in financial transactions. In theory, any transaction, product lifecycle, workflow or supply chain could use blockchain.
Artist-centric blockchain model
In the creative economy, blockchain could redefine the way artists are paid, acting as a platform for creators of intellectual property to derive value for their work.
A common complaint articulated by artists is that, as performing rights organizations such as Spotify and YouTube and new intermediaries become more integrated into the value chain between artists and their audiences, artists are paid less and have less control over how they create. The right to speak has also been reduced.
Pricing, sharing or advertising. On Spotify, for example, it takes between 120 and 170 streams for rights holders to receive their first penny.
"Today, when someone wants to pay for the right to play a song in a concert or the right to have a song in a movie, that causes quite a bit of transactional friction and takes time," said Xapo CEO Wences Casares.
"People end up not paying or doing it at all, and it's likely [creative work] is actually worth more, but the problem is that creative work is undervalued because of all the transactional friction we're seeing today."
Several properties of the blockchain can be used as a platform to solve these problems, and Maoqiu Technology defines them as "five forces".
1. Enable "smart contracts"
The blockchain can host "smart contracts" to help artists manage digital rights and distribute revenue shares to contributors to the creative process. Such smart contracts have the potential to replace traditional contracts, which can be esoteric and give some artists little power over the terms of the content they generate.
Royalty could be designed to be more inclusive, offering fairer terms to composers, lyricists and musicians — all stakeholders involved in the creative process.
PeerTracks is an example of a service for artists seeking immediate royalties payments and ownership of their content. The service works by attaching a smart contract to each song an artist uploads and distributes revenue according to the terms stipulated in the contract.
2. Establish transparent peer-to-peer transactions
One of the biggest attractions of blockchain is its public nature. All transactions of a creative work can be viewed and verified, including who has accessed the work and how much revenue the work is generating at any point in time. This will allow stakeholders to better understand the overall value of the creative work being produced, all in the form of a digital ledger available on the blockchain.
Additionally, blockchain will make it transparent who owns the creative material. Services such as Ascribe.io provide secure attribution of ownership of creative works. The service works by giving each creative work a unique cryptographic ID, verified through the blockchain. This means ownership can be tracked and creative content shared securely.
3. Facilitate efficient and dynamic pricing
Creative content can be mispriced. By tracking demand for creative content, pricing could be more dynamic. The price of Creative Content may fluctuate based on supply and demand. Additionally, artists control prices and have the ability to set their own prices without going through a complex network of intermediaries.
Since blockchain can provide a record of who has been granted access to a creative work, it can be leveraged to dynamically price creative works. Perhaps more importantly, because artists will be closer to their creations than before, they may have a stronger say in pricing schemes and thus be able to offer discounts on their work at certain times.
4. Allow "micro-metering" or "micro-monetization"
Digital music stores such as iTunes allow consumers to purchase individual tracks of songs. Using the blockchain, snippets of creative work can be offered for a price, for example, a few seconds of a song used in a movie trailer. This “micrometer” works by allowing the blockchain to record the precise components of creative work used, defining the smallest unit of consumption of creative content.
This can have huge implications: why buy parts of your creative material that you don't need? Services such as Streamium are already disrupting the traditional way artists are paid through intermediaries by offering micropayments.
5. Build a reputation system
Blockchain can help link reputations to specific "addresses" on the blockchain, allowing producers and consumers of creative content to mutually verify each other.
This can encourage stronger collaboration and better behavior by facilitating the terms of cooperation between content creators and consumers. Participants who repeatedly default on contract terms or attempt to game the system will have their actions recorded as a deterrent to bad behaviour.
Risks, Challenges and the Future
Despite the many benefits that blockchain offers, the technology still presents some challenges. More general use of blockchain technology will require addressing “off-chain” issues, especially around commercial, technical and legal challenges.
- Licensing issues and challenging the status quo. While some artists, such as Imogen Heap and Zoe Keating, are using blockchain as a way to release tracks to gain more control over the terms of their creative work, blockchain-ready artists are still in the minority. It's not clear that the bar for artists will be large enough to disrupt the status quo, with distributors, labels and other intermediaries already setting the terms, including those for payment and usage.
- Artist promotion. While blockchain could provide creators with a greater say and a stake in the revenue generated by their creative content, the problem remains that they can do so without the help of traditional agents, whether publishers or labels. The extent to which their creative content can be marketed and promoted. There are concerns that self-publishing or self-promoting material may actually result in less income for some artists who would otherwise benefit from agency support.
- "On-chain" and "off-chain" storage. Questions remain about where creative media is stored — on the blockchain itself, as metadata, or in the form of access keys? Current technology may limit putting creative content directly on the blockchain, and storing only metadata for creative content raises the question of where creative data is actually stored and how it is disseminated.
- Intellectual property (IP) framework. Governments and intellectual property alliances will need to define legal frameworks that recognize transactions made using blockchain. While blockchain technology provides the means to record property owners, we may still need to rely on traditional mechanisms to enforce owner rights, especially if contracts are not being maintained.
- Governance/permission. There are also questions about whether blockchain in the creative economy should be public or private. If a public blockchain thread is adopted, then by definition, data stored in the blockchain will be accessible to all participants in the network. This could raise intellectual property issues if creative content is stored directly on the blockchain.
On the other hand, if a private blockchain is chosen, issues around governance — especially permission — will still remain. In a private blockchain scenario, an important question is who will fund the new system? If traditional agencies such as record labels develop the infrastructure, there may be little change in how artists are paid.
Defining the value of creative work
While blockchain may allow for more transparent and dynamic pricing, Maoqiu believes that such a pricing mechanism based purely on market demand may ignore the subtleties of how creative works are valued according to their cultural, social or political value. .
This could lead to further commoditization of creative works. How blockchain can digitally attribute these subtleties to creative works remains to be seen.
Blockchain has great potential to break down barriers that could lead to greater efficiency, greater accountability, lower costs, and higher artist compensation. However, to reap these benefits, the technology needs to be developed responsibly within the right regulatory framework.