Digital currencies are the new portals

Once described as “The Internet of Money”, Bitcoin is much, much more: it’s software, it’s a store of value, and increasingly it’s being recognised as a legal form of payment. In its wake have come a multitude of other crypto-currencies, alt. coins, digital tokens and programmable assets. Each of them built on one or other blockchain protocol or using distributed ledger technology (DLT), and each of them seeking to serve a specific use case or to drive disruption in traditional markets and business models.

Based on my work with Brave New Coin (a market data vendor for these new asset classes)*, I was recently asked my opinion on all these “Initial Coin Offerings” (ICOs – although I prefer to call them Token Issuance Programs). My response was that digital currencies are becoming the new portals.

How?

First, they are building dedicated communities of interest. Many of them are designed for a specific audience or for a particular purpose. They are leveraging network effects to drive engagement and participation, such as MobileGo, for the online games community.

Second, they are becoming “destinations” in their own right, such as Steem for publishing, or CalcFlow, a market place for mathematical models. They are acting as repositories and resources for specialist content. They are also curating this content, and enabling users to contribute to the community, and get rewarded for doing so.

Third, they are building platforms that support e-commerce and other online transactions, such as SPHRE’s Air solution, and its XID token. In Air’s case, they are creating a paradigm shift in digital ID management: in contrast to most social media and old-school portals that monetize our personal data, our content and our search behaviour through the sale of advertising, Air is giving individuals more power over the use of their own data.

Finally, token issuance programs are creating new registries and alternative distribution networks for a range of tangible and intangible assets, such as MyBit for energy, and bitNatura, for natural capital.

So, as well as supporting P2P payments, facilitating cross-border remittances and enabling the purchase of electrical goods in Japan, Bitcoin and the like are becoming key tools in the new digital economy, just as AOL, CompuServe, Lycos, Yahoo!, Google and MSN were once the main public gateways to the internet.

*Note: the opinions expressed here are my own, and do not represent the views of Brave New Coin or their clients.

Next week: #Blockchain heralds a new railway age?

Law and Technology – when AI meets Smart Contracts…

Among the various ‘X’-Tech start-up themes (e.g., FinTech, EdTech, MedTech, InsurTech) one of the really interesting areas is LegTech (aka LawTech), and its close cousin, RegTech. While it’s probably some time before we see a fully automated justice system, where cases are decided by AI and judgments are delivered by robots, there are signs that legal technology is finally coming into its own. Here’s a very personal perspective on law and technology:

Photo by Lonpicman via Wikimedia Commons

1. Why are lawyers often seen as technophobes or laggards, yet in the 1980s and 1990s, they were at the vanguard of new technology adoption?

In the 1970s, law firms invested in Telex and document exchange (remember DX?) to communicate and to share information peer-to-peer. Then came the first online legal research databases (Lexis and Westlaw) which later gave rise to “public access” platforms such as AustLII and its international counterparts.

Lawyers were also among the first professional service firms to invest in Word Processing (for managing and drafting precedents) and e-mail (for productivity). Digitization meant that huge print libraries of reference materials (statutes and case-law) could be reduced to a single CD-ROM. Law firms were early adopters of case, practise, document and knowledge management tools – e.g., virtual document discovery rooms, precedent banks, drafting tools.

2. But, conversely, why did the legal profession seem to adopt less-optimal technology?

The trouble with being early adopters can mean you don’t make the right choices. For example, law firms in the 80s and 90s seemed to demonstrate a preference for Lotus Notes (not Outlook), Wang Computers and WordStar (not IBM machines or MS Office Word), and DOS-based interfaces (rather than GUIs).

Some of the first CD-ROM publications for lawyers were hampered by the need to render bound volumes as exact facsimiles of the printed texts (partly so lawyers and judges could refer to the same page/paragraph in open court). There was a missed opportunity to use the technology to its full potential.

3. On the plus side, legal technology is having a significant a role to play…

…in law creation (e.g., parliamentary drafting and statute consolidation), the administration of law (delivery of justice, court room evidence platforms, live transcripts, etc.), legal practice (practice management tools) and legal education (research, teaching, assessment, accreditation). Plus, decision support systems combining rules-based logic, precedent and machine learning, especially in the application of alternative dispute resolution.

4. Where next?

In recent years, we have seen a growing number of “virtual” law firms, that use low-cost operating models to deliver custom legal advice through a mix of freelance, part-time and remote lawyers who mainly engage with their clients online.

Blockchain solutions are being designed to register and track assets for the purposes of wills and trusts, linked to crypto-currency tokens and ID management for streamlining the transfer of title. Governments and local authorities are exploring the use of distributed ledger technology to manage land title registration, vehicle and driver registration, fishing permits and the notion of “digital citizenship”.

We are seeing the use of smart contracts powered by oracles on the Ethereum blockchain to run a range of decision-making, transactional, financial, and micro-payment applications. (Although as one of my colleagues likes to quip, “smart contracts are neither smart nor legal”.)

Artificial Intelligence (AI) is being explored to “test” legal cases before they come to trial, and more knowledge management and collaboration tools will continue to lower the cost of legal advice (although I doubt we will see lawyers being totally disintermediated by robots, but their role will certainly change).

There is further opportunity to take some of the friction and costs out of the legal system to improve access to justice.

Finally, and this feels both exciting and scary, is the notion of “crowd-sourcing policy“; some governments are already experimenting with hackathons to develop policy-making models, and even the policies themselves. But this does sound like we would be moving closer and closer to government by mini-plebiscites, rather than by parliamentary democracy.

Next week: Digital currencies are the new portals

 

Music Streaming Comes Of Age

Last Saturday was the 10th International Record Store Day, an annual event to celebrate independent music shops. A key feature is the list of exclusive and limited edition vinyl releases, most of which can only be bought in selected participating stores – in person and on the day. But there are also loads of other promotions and live events, designed to get people browsing the racks in their local retail outlet. In an age when streaming services now account for the bulk of US music industry revenues, what is the future of the neighbourhood record shop (those that are still left, that is)? Will streaming services kill off digital downloads, as well as sales of physical product like CDs and records?

Despite the sense of doom that has permeated the record industry in recent years (if not decades!), there is also a feeling that, just as the internet has not yet managed to kill off the publishing industry, digital has not yet killed the radio star. The independent music industry in particular has found a way to survive, and retail stores are still an important part of the business.

So, what are the recent trends in music industry sales and business models?

First, the continued rebound in vinyl sales (at least in the UK) show that there is renewed interest in this 70-year-old format, with industry data showing a 25-year high (but not yet a return to the 1980s’ peak). Record Store Day is generally credited with boosting vinyl sales. And to be fair, even music streaming services have contributed to this growth, through curated content, recommendation engines and user preferences: meaning that listeners get exposed to a wider range of music and artists than they would from traditional Top 40 radio, and they get to explore and discover new music.

Second, digital downloads, once seen as the industry growth engine, are facing a pincer attack, from streaming services as well as vinyl sales. No wonder that Apple is expected to slowly and quietly retire the iTunes download store, and shift more focus onto its own Apple Music subscription service. The music industry (especially the dwindling number of major labels) didn’t really “get” the internet. Having just competed in the CD-format wars, the major labels then competed on digital file formats, and tried to lock their digital content to proprietary players and software protocols. Some of this reticence was justified – thanks to digital piracy and illegal file sharing – but they didn’t (and still don’t) help themselves by poor CX on their retail websites (if they have an e-commerce presence at all), and adherence to arcane geo-blocking.

Third, many musicians are benefiting from increased exposure via streaming services – although with Apple Music and Spotify seemingly leaving the other platforms far behind, the downside risks from a dominant duopoly don’t need spelling out. Especially as the royalty payments from streaming are generally much smaller than they would have been from physical sales, “traditional” downloads and radio airplay. This source of friction between labels, their artists, music publishers and online content platforms surfaced again earlier this month, in a spat with YouTube over fees for video streaming.

Fourth, in a new move in the streaming wars and the battle to win mobile screen real-estate, Australian startup Unlockd has just secured a deal with MTV UK to stream free music videos in return for viewing ads. It’s also a move designed to counter ad-blockers and locked screens, while finding another way to distribute sponsored content. Elsewhere, some mobile carriers are now including music streaming services as part of customers’ un-metered data consumption, although what this may mean for artist royalties and the revenue share from ad-supported content on Spotify etc. is unclear.

Fifth, as another example of how the music industry is having to adapt, UK startup Secret Sessions is using a combination of social media, independent/unsigned artists and major brand licensing deals to find new ways to generate revenue streams for artists that can no longer count on income from traditional sales-based royalty deals, especially with the diminished licensing revenues from streaming services.

Sixth, as further evidence that all is not well in the world of music streaming, SoundCloud continues to lose its way. Once the music service of choice for user-contributed content created by independent and unsigned musicians, it got greedy and has been subject to recent speculation about its financial health and future.

Initially, SoundCloud was all about the makers and producers – helping artists connect with their audience, via a simple but effective website and mobile app. It also meant that at first, SoundCloud charged musicians and labels under a “pay to publish” model, while listeners could simply stream (and sometimes download) all this content for free. Then, it alienated many of its earliest supporters and champions, by introducing “ad-supported” streaming (with priority access going to labels and artists with big marketing budgets, who could also attract/demand the lion’s share of the advertising revenue).

SoundCloud also seriously messed with the app, making it far less useful to artists, and then introduced its own subscription-based streaming service, SoundCloud Go. Only, it wasn’t satisfied with just one subscription model, and recently announced an “upgrade” – whereby the “old” service became “SoundCloud Go+“, and a “new” SoundCloud Go was launched. Confused? You will be….

Meanwhile, Bandcamp continues to outperform the industry, in terms of annual sales growth, and has become a unique platform that offers music streaming, digital downloads and even physical product. (Frustratingly, Bandcamp is still blocked from selling digital content directly via iOS devices – even though much of this content is unavailable on either iTunes or Apple Music. Surely that’s anti-competitive?) And now there’s an amusing string of “SoundCloud vs Bandcamp” memes doing the rounds which may say a lot about the respective fortunes of these rival services.

Finally, the last word on the current state of music streaming and digital downloads should go to the artist known as L.Pierre. He has just announced the release of his latest and final (vinyl-only) album under that particular moniker, with an accompanying artist statement which could be seen as both an indictment upon and a requiem for the music industry.

NOTE: Apologies to my readers for any confusion regarding the timing and accessibility of this post. Thanks to WordPress, this article “missed” its scheduled time, and the outgoing e-mail notification had a faulty link. Normal service will hopefully be resumed next week…

Next week: Startup Vic’s E-commerce Pitch Night

Personal data and digital identity – whose ID is it anyway?

In an earlier blog on privacy in the era of Big Data and Social Media, I explored how our “analog identities” are increasingly embedded in our digital profiles. In particular, the boundaries between personal/private information and public/open data are becoming so blurred that we risk losing sight of what individual, legal and commercial rights we have to protect or exploit our own identity. No wonder that there is so much interest in what blockchain solutions, cyber-security tools and distributed ledger technology can do to establish, manage and protect our digital ID – and to re-balance the near-Faustian pact that the illusion of “free” social media has created.

Exchanging Keys in “Ghostbusters” (“I am Vinz Clortho the Keymaster of Gozer”)

It’s over 20 years since “The Net” was released, and more than 30 since the original “Ghostbusters” film came out. Why do I mention these movies? First, they both pre-date the ubiquity of the internet, so it’s interesting to look back on earlier, pre-social media times. Second, they both reference a “Gatekeeper” – the former in relation to some cyber-security software being hijacked by the mysterious Praetorian organisation; the latter in relation to the “Keymaster”, the physical embodiment or host of the key to unleash the wrath of Gozer upon the Earth. Finally, they both provide a glimpse of what a totally connected world might look like – welcome to the Internet of Things!

Cultural references aside, the use of private and public keys, digital wallets and payment gateways to transact with digital currencies underpins the use of Bitcoin and other alt coins. In addition, blockchain solutions and cyber-security technologies are being deployed to streamline and to secure the transfer of data across both peer-to-peer/decentralised networks, and public/private, permissioned/permissionless blockchain and distributed ledger platforms. Sectors such as banking and finance, government services, the health industry, insurance and supply chain management are all developing proofs of concept to remove friction but increase security throughout their operations.

One of the (false) expectations that social media has created is that by giving away our own personal data and by sharing our own content, we will get something in return – namely, a “free” Facebook account or “free” access to Google’s search engine etc. What happens, of course, is that these tech companies sell advertising and other services by leveraging our use of and engagement with their platforms. As mere users we have few if any rights to decide how our data is being used, or what third-party content we will be subjected to. That might seem OK, in return for “free” social media, but none of the huge advertising revenues are directly shared with us as ordinary end consumers.

But just as Google and Facebook are facing demands to pay for news content, some tech companies are now trying to democratise our relationships with social media, mobile content and financial services, by giving end users financial and other benefits in return for sharing their data and/or being willing to give selected advertisers and content owners access to their personal screens.

Before looking at some interesting examples of these new businesses, here’s an anecdote based on my recent experience:

I had to contact Facebook to ask them to take down my late father’s account. Despite sending Facebook a scanned copy of the order of service from my father’s funeral, and references to two newspaper articles, Facebook insisted on seeing a copy of my father’s death certificate.

Facebook assumes that only close relatives or authorised representatives would have access to the certificate, but in theory anyone can order a copy of a death certificate from the UK’s General Register Office. Further, the copy of the certificate clearly states that “WARNING: A CERTIFICATE IS NOT EVIDENCE OF IDENTITY”. Yet, it appears that Facebook was asking to see the certificate as a way of establishing my own identity.

(Side note: A few years ago, I was doing some work for the publishers of Who’s Who Australia, which is a leading source of biographical data on people prominent in public life – politics, business, the arts, academia, etc. In talking to prospective clients, especially those who have to maintain their own directories of members and alumni, it was clear that “deceased persons” data can be very valuable to keep their records up to date. It can also be helpful in preventing fraud and other deception. Perhaps Facebook needs to think about its role as a “document of record”?)

So, what are some of the new tech businesses that are helping consumers to take control of their own personal data, and to derive some direct benefit from sharing their personal profile and/or their screen time:

  1. Unlockd: this Australian software company enables customers to earn rewards by allowing advertisers and content owners “access” to their mobile device (such as streaming videos from MTV).
  2. SPHRE: this international blockchain company is building digital platforms (such as Air) that will empower consumers to create and manage their own digital ID, then be rewarded for using this ID for online and mobile transactions.
  3. Secco: this UK-based challenger bank is part of a trend for reputation-based solutions (e.g., personal credit scores based on your social media standing), that uses Aura tokens as a form of peer-to-peer or barter currency, within a “social-economic community”.

Linked to these initiatives are increased concerns about identity theft, cyber-security and safety, online trust, digital certification and verification, and user confidence. Anything that places more power and control in the hands of end users as to how, when and by whom their personal data can be used has to be welcome.

Declaration of interest: through my work at Brave New Coin, a FinTech startup active in blockchain and digital assets, I am part of the team working with SPHRE and the Air project. However, all comments here are my own.

Next week: Investor pitch night at the London Startup Leadership Program