I recently spoke at a Blockchain and CryptoCurrency event in Vietnam. I was there to speak about blockchain but I knew that most people were there to hear about cryptocurrency.
The audience was interested in learning about cryptocurrency because of the large gains Bitcoin has had in recent years. In 2017 Bitcoin grew 2,000%. It’s no wonder they were interested!
I told them, however, that the value increases they are seeing in cryptocurrencies are minuscule compared to the value increases they will see with blockchain-based applications.
Cryptocurrency is just one application of blockchain. There are thousands more coming and eventually there might be millions. Blockchain-based apps will look much like the apps we use now. The main difference will be in the ownership and control of personal information, which up until now we have not had.
A large reason why we have not had control of our information is because many times we are forced to give it away to companies in order to use their services. For example, when we want to use a service such as Facebook or Twitter, we have to agree to their terms of service. Often times, agreeing to their terms means we are agreeing to let them use our data and content for their own profit (this may change now that GDPR [General Data Protection Regulation] has been implemented). Many of us don’t like agreeing to these terms but if we don’t we will be left out of the central gathering places where our friends and family are located. Essentially we are forced to give away our self generated value.
By giving away use of our data and allowing companies to profit from it, this has caused us to not realize the value of our information. For example, did you know you could potentially get $100 a month for selling your smartphone activity, or $480 for selling your browsing data? One person sold his keystroke and mouse movement data for $2,733 on Kickstarter! When we are able to reclaim control of our data, we will slowly begin to realize how much our content is worth. Once this happens, people will begin to create and participate in markets and new industries that have not existed before.
It’s much like what we saw with Youtube. When Youtube first came out in 2004, people were not making money from their video uploads. There was no market for short videos yet. As time went on, content creators started to generate millions of views on their channels. Youtube recognized this as a way to grow their reach and offered to share ad revenue with the channels that brought in the most views. This was when people began to realize that their self generated content had value. That was the beginning of a market that did not exist before…a market for user generated videos.
What’s interesting is that not only did a new market emerge from Youtube’s platform but people started to make decent incomes from it. Thousands of content creators make between $100K-$500K a year from ads and sponsorships. And The top Youtubers make 10 times that amount! In 2017, the top 10 Youtubers made between $10M — $16M each.
These numbers are impressive but the flip side is that the vast majority of the 12 million channels on Youtube, make no money at all. A majority of those who do make money only make between $15-$20K dollars a year at best.
All together, content creators probably share a total of $200 million annually. That may sound like a lot but it’s not very much when compared to what Youtube is bringing in. Youtube earns approximately $3.5B in ad revenue every year. That means the content creators are receiving only a 5% share of the revenues.
The Youtube model is a good start in that it gives people the opportunity to make money doing something that they have creative control over but the fact remains that the central organization still has ultimate control. If Youtube decided that they wanted to cancel a channel, there is nothing the channel owner could do. Youtube could pull the plug on a channel at any time. In fact, just recently in 2017, Youtube decided to cancel monetization on channels that have less than 10,000 views in a calendar year. This came as a shock to the Youtube community. That one decision affected the income of tens of thousands of people and there was nothing they could do about it. Their hands were tied.
A better model for the users would be a model that allows them to have control and ownership of their content and a say in how the network operates. In other words, a better model would be a peer to peer (P2P) organization. The only true P2P network that exists in mainstream today is cryptocurrency, with the most notable one being Bitcoin. Bitcoin’s network is made possible by blockchain technology.
The reason blockchain is able to help create true P2P networks is because blockchain has solved a problem that has never been solved before. Through blockchain technology, there is now a way for every person who is part of a network to have an immutable record of their contributions and rewards while remaining decentralized. Before blockchain, P2P networks had to implement a centralized component in order to monetize. This created a central point of failure which makes a network susceptible to outside forces. This is what happened to Napster. The creator of Napster started putting advertising on the platform in order to fund the project. Because he had to use a central server to do so, the authorities were able to find him and shut him down.
With decentralized P2P networks there is no central point of failure. This creates an element of security and safety for those who are in the network. And because the network is completely open source and transparent, there is a trust in the information that is recorded. The information that is on the Bitcoin blockchain for example is a record of every transaction that is made. This allows for trust in the financial distribution among the participants.
The way Bitcoin is able to sustain the financial viability of the network is by allowing each person or node to contribute their work or their funds in return for shares. Their contribution is recorded on the blockchain as an immutable record and they then become one of the stakeholders of the network. Because of the encryption process that is used within blockchain there is no way to destroy or manipulate the record of that stakeholders share. Therefore the record can be trusted as accurate which enables transactions to happen at any distance and at the blink of an eye. This makes Bitcoin a highly sustainable and stable system.
If Youtube were a truly decentralized P2P organization like Bitcoin, it would be a much more sustainable system as well because then the content creators would be the ones to receive the $3.5B revenue. That would mean each one of the active content creators (which is about 40,000 channels of the 12 million total) would earn about $87.5K a year. Most of them could then live comfortably off the revenues they receive and more people could become successful content creators along with them.
Because of the freedom the blockchain enables, and the way it allows people to own their own content and data we are going to see a movement towards decentralized P2P organizations in the near future. This will eventually lead to the creation of a P2P economy where individuals will have the opportunity to work autonomously and make a decent living.
I believe this movement to a P2P economy will create a shift in thinking. When people begin to feel the difference between having control and being controlled they will not want to go back to being controlled. There will be a move away from systems that require them to give up their rights in order to use a service. People will move to a system where they are free to do what they choose with their information and talents. This, in turn, will enable many new markets to emerge.
Once people see that they can create an income from a multitude of choices, such as selling their data, selling their content, selling their advice, selling their music, whatever it may be, they will flock to the new systems. There will be more money available to them in these new networks because there will not be an organization in the middle taking a 95% cut of the money. The promise of more money will fuel the fire and the P2P economy will explode. Right now the P2P economy is a skinny tech geek who is playing crypto games with his friends. But soon that geek will start to experiment with other decentralized applications and he will grow and grow with knowledge and strength until he looks nothing like he looks now. Blockchain is the new performance enhancer.