Understanding Blockchain through Bitcoin. Also is Blockchain set to disrupt the entertainment industry...?
The last blogs I published I looked at 'Could the blockchain have an impact on the entertainment industry' this blog is looking at understanding blockchain through Bitcoin and the disruption in the entertainment industry....
The Bitcoin (BTC) is the most developed system predicated on blockchain. It is a decentralised, permissionless public ledger peer-to-peer payment network whereby transactions are verified by nodes in the network and recorded in the public distributed ledger (the blockchain). Understanding the underpinnings of the bitcoin network explains why a significant proportion of investor interest has focussed on the payments industry when coming to terms with blockchain technology itself.
With the performance of bitcoin and newly emerging cryptocurrencies across the market place, within the past six months, has intensified debates on the stability and sustainability of the digital currencies. JP Morgan CEO Jamie Dimon's comment in September that bitcoin was "a fraud" led to bitcoin dropping almost 10% in the days that followed.3 Bitcoin advocates, including John McAfee, hit back and so the debates continue 4 (with Dimon more recently saying he regretted calling bitcoin a fraud ("The blockchain is real… The bitcoin to me was always what the governments are gonna feel about bitcoin as it gets really big, and I just have a different opinion than other people."). 5
We also note that a survey by blockchain research website coindesk.com revealed that 58% of its readers believe that digital asset valuations are in a bubble, while 72% believe bitcoin mining is too centralised, with over half expecting it to get worse.6
Shortcut to Bitcoin’s barriers to dominance – a recap from above
The scalability issues around bitcoin have given rise to several debates that are both political and technical in nature. When creating the digital currency, Satoshi Nakamoto – the developer/s behind bitcoin – introduced a block size limit of 1 megabyte (MB).
This was to prevent potential attacks from hackers that would otherwise be able to theoretically create blocks of an infinite size and flood the network, thereby paralysing and causing huge problems for the blockchain. The limit of 1MB means that one block can support roughly 3-7 bitcoin transactions per second. The spike in activity has therefore pushed the limits of bitcoin's network capacity. The average block size has been approaching the 1MB limit.
Furthermore, increased demand on the network has at times created a backlog in the system, meaning that users must pay for their transactions to be prioritised by miners of the network known as the "replace-by-fee" system. This has pushed transaction costs higher and made bitcoin increasingly expensive and inaccessible for many. Indeed, the average fee at the time of writing for a transaction to be included in the next six blocks is roughly $30, making bitcoin much more expensive than existing payment infrastructure for smaller-sized transactions.
The question of how to upgrade the network to handle even more transactions is pushing fees so high that, for certain transactions, bitcoin is nearly unusable. Both transaction times and fee sizes have been increasing, adding to bitcoin's existential quandary. Furthermore, bitcoin's value are self-referential and contain inherent contradictions, notably that bitcoin cannot be a speculative investment prone to quintupling while at the same time be a useful currency for making or receiving payments. I think there are still many issues with Bitcoin and the Cryptocurrency world, but I would say this is a very interesting and exciting times ahead for all content makers. The next section takes a brief look at the Film industry with the blockchain technology.
FILM INDUSTRY
Blockchain technology appears set to disrupt the partially monopolized entertainment industry. Through it, independent filmmakers are able to distribute their products to viewers without necessarily passing through major studios that have hitherto served as inevitable intermediaries for the past several decades with an iron fist of control.
EXISTING LIMITATIONS
A lot of filmmakers have been unable to make it into the mainstream not because of the absence of quality products, but due to their inability to meet the standards of the major studios who have taken over control of the industry, and subsequently created an 'exclusive club' for the elite through production, talent and distribution.
Some of these standards may be in the form of high fees by these studios, or due to sentimental preferences by the powers to be in charge of such intermediaries / companies. That's why, so many supposedly excellent productions may have existed only as prototypes, ideas - in the hands of; studio executives, producers and directors without seeing the light of day in the real world of entertainment, as we know only to well.
BLOCKCHAIN EMPOWERING THE REAL OWNERS
One of the major attributes of the blockchain with most of its advocates is the systematic elimination of intermediaries, which enables content creators to achieve closer interaction with their primary targets and objectives. This development fosters a more direct relationship that eliminates eventual overheads, thereby opening up opportunities for improved revenue and accessibility for the independent film makers.
The immutable nature of data processed on the blockchain is another fundamental feature that appears extremely useful for stakeholders within the entertainment industry. This is in large part due to the fact that piracy has been a serious setback especially for the emerging markets in the industry such as the Bollywood of India and Nollywood of Nigeria. The inalterability of data hosted on the blockchain will enable brand protection and retention by the original creators of the entertainment products over time.
A PLATFORM FOR CHANGE
To achieve the above mentioned benefits, blockchain solutions, I believe several companies are looking to maximise the blockchain with entertainment properties, looking to develop platform's where stakeholders within the entertainment industry can find expression while maximizing the potentials of the industry.
There are companies/business/individuals in the entertainment space developing technology to better the 'eco' system of entertainment space utilizing the blockchain. One area of interest, I was alerted to could be to pass large files such as digital films and storing them in a highly distributed network of servers, this is interesting. This potentiality leverages and offers the core advantages offered by the blockchain technologies; anti-piracy security that comes from an immutable ledger of asset transfers, the speed inherent in combining small blocks from a vast array of storage points, and the integrity that comes with duplication of content elements across many servers.
CAN BLOCKCHAIN BE THE “NETFLIX KILLER”?
This emerging creation could become a “Netflix killer” that potentily would meet the crowdfunding needs for many independent filmmakers, producers, directors, while satisfying the needs of the audience thirst for great content each week, month and year.
As blockchain technology continues to grow and develop, more and more industries are being disrupted. With the offerings of the new technology which includes, transparency, security, authentication and cost reduction among other benefits, the drive for its adoption is increasingly motivated. Emerging trends reveal that the entertainment industry is also set for decentralization through the power of the blockchain over the coming years, and in my opinion here to stay for a good while.
I look forward to sharing more thoughts with you all within the Blockchain and Cryptocurrency market over the coming weeks, and how the benefits and negatives work within the entertainment industry for new creators to established creators.
Links to paragraph 3 and 4:
3 https://www.theguardian.com/technology/2017/sep/13/bitcoin-fraud-jp-morgan-cryptocurrency-drug-dealers
4 https://www.cnbc.com/2017/09/13/john-mcafee-challenges-jamie-dimon-bitcoin-skepticism.html
5 https://www.foxbusiness.com/markets/2018/01/09/exclusive-jpmorgan-chase-chairman-ceo-jamie-dimon-regrets-saying-bitcoin-is-fraud-but-still-isnt-interested-in-it.html
6 https://media.coindesk.com/uploads/2017/09/state_of_blockchain_q2_2017.pdf