Blockchain is the underlying enabling technology developed for Bitcoin, a cryptocurrency. Klaus Schwab, founder and executive chairman of the World Economic Forum, provides this summary in his book on the Fourth Industrial Revolution: “… the blockchain is a shared, programmable, cryptographically secure… trusted ledger… no single user controls… can be inspected by anyone…”
According to a report from McKinsey&Company, by Ryo Takahashi, Blockchain has the potential to become a powerful disruptive force. A survey of 800 executives, suggests 58% believe that up to 10% of global GDP will be stored using blockchain technology.
Blockchain technology may provide several important features that could be leveraged for use in the creative economy, says the report:
The implications of such features reach far beyond blockchain’s original use in financial transactions. Any transaction, product life cycle, workflow, or supply chain could, in theory, use blockchains.
Enabling ‘smart contracts’
Blockchains can host “smart contracts” to help artists manage digital rights and allocate revenue shares to contributors to the creative process. Such smart contracts have the potential to replace conventional contracts, which can be esoteric and leave some artists with little power over the terms for the content they generate
Establishing transparent peer-to-peer transactions
All of the transactions for a creative work could be seen and validated, including who accessed the work and how much revenue the work is generating at any point in time. This will allow stakeholders to have a better sense of the overall value of the creative work that is being produced Ownership can be traced and creative content securely shared.
Promoting efficient, dynamic pricing
By tracking the demand for creative content, pricing could be more dynamic. Prices for creative content could fluctuate according to supply and demand. Moreover, artists could control prices and have the ability to set prices themselves without having to go through a complex web of intermediaries
Allowing ‘micrometering’ or ‘micromonetizing’
Digital music stores such as iTunes allow consumers to purchase individual song tracks. Using blockchain, snippets of creative works could be made available for a price, for example, a few seconds of a song for use in a movie trailer. This kind of “micrometering” works by having the blockchain record the precise components of the creative work that were used, defining the smallest consumable unit of creative content. “It allows users to support content creators of their choice and reduce unwanted ads,” says Mike Belshe, cofounder and CEO of BitGo.
Establishing a reputation system
Blockchain can help link reputations to specific “addresses” on the blockchain, thus allowing both producers and consumers of creative content to verify one another. Participants who repeatedly don’t fulfill terms in a contract or try to game the system would have their actions recorded, acting as a deterrent against bad behavior
Risks, challenges, and the future
Despite the benefits offered by blockchain, several challenges remain for the technology, concludes the report. More ubiquitous use of blockchain technology will require solutions to “off-chain” issues, especially around business, technology, and legal challenges
For more background, and additional security benefits, please visit McKinsey here.