An icebreaker is a specialized ship that uses its momentum to move through the frozen surface of a body of water. But counterintuitively, its bow isn’t shaped like a pointed wedge to split the ice. Instead, the ship’s bow is curved, allowing it to float above the ice and crush it.
Such is the approach of enterprising companies that are demonstrating the buoyancy of token economics for blockchain networks and cracking their own course through the crypto-winter for commercial viability.
What business distinction sets these networks apart from the first generation of blockchain projects? For starters, they aren’t simply trading crypto for crypto’s sake. They’re enabling trade in intellectual property.
Intellectual Property as the natural digital asset
It makes sense that IP would be a first best asset for commercial representation on blockchains. By nature, these assets can be completely encapsulated as data: the text of a story, the pixels of a patented design sketch or a short film, the code of a software component, the audio waveform of a song.
IP assets are digital-first products. Weightless, easy-to-copy files are quite ideal to store and distribute over a network, if file size and bandwidth permits. That ‘easy to copy and distribute’ part of IP is what makes blockchain such an effective companion on the commercial journey.
Blockchain platforms offer the ability to cryptographically secure data, and immutably record transactions in a distributed ledger. This makes it ideal for securing and recording the trade of IP assets, and ensuring that creators of those assets are fairly remunerated.
Take gaming – the near US$135B industry in 2018 that has surpassed the movie biz. Digital assets have long been a part of games. Gamers are eager to part with real money to pay for add-on modules and episodes, gaming services, or in-game assets such as special outfits or ‘skins’ and power-ups.
Hard to believe it’s been 20 years since people started buying swords and in-game cash from ‘gold farmers’ working in fantasy games like Everquest and World of Warcraft.
Floating tokens in the gaming world
The concept of buying in-game credits and items in games is nothing new, but the market mechanics are. One enterprising blockchain project called ALAX is bringing token economics to the gaming market. Starting by building a blockchain development toolset atop the DECENT DCore platform, they manage a gaming app store, SDK and token protocols that allow game designers to embed in-game item purchases.
The primary goal of ALAX is letting designers realize fast token-based remuneration when gamers consume their IP. While it is not the only gaming blockchain project, it is finding initial traction in Asia, to the point of offering in-store ‘recharge cards’ and payment kiosks for fans to buy the digital coin of the gaming world (with real coin of the real world).
Blockchains are inherently great at cryptographically securing access to digital assets. With the advent of smart contracts in Ethereum and other blockchains, the permission to download and use an IP asset is gated based on a token payment condition being met.
This feature comes standard on the network, without the need for a third party or intermediating payment system taking a huge cut of the proceeds.
Smashing the records
Another IP-based blockchain project called Fenix seeks to narrow the massive economic divide between music artists, and the fans who listen to their songs and attend concerts.
Now that music has moved online, artist compensation has dropped drastically, especially for streaming services, which pay fractions of pennies per play. Furthermore, the MP3 files of these digital assets proved quite unprotected from rampant piracy and sharing.
Even live shows are not safe economic zones for bands anymore, with a lack of transparency to ticket sales and a different set of intermediaries at the trough.
Fenix (launching first in China) will allow artists to manage a web presence atop a blockchain-based online store for digital music files, tickets and merchandise, where tokenized payment between fans and artists is immediate and transparent. Fans can become patrons, funding the next album.
The big economic icebreaker here? IP is secured on the blockchain, and managed by smart contracts, while the artist transparently sees immutable transactions, instantly getting 99 cents or more from each dollar sold. This works out way better than an opaquely reported online intermediary pooling funds for a month or more.
In most of these scenarios, the blockchain network maintains itself by making small payments to the nodes (people who host instances of the blockchain) to store data and validate transactions, from a small ‘network fee’ of a few basis points (usually less than one percent).
Avoiding performance and payload icebergs
What if the warming trend of IP sales starts to thaw the market for blockchain-based networks, and they become too popular? One of the main recurring knocks on blockchains is performance under high transaction rates and heavy data payloads.
Since all the blocks are stacked, hashed and stored immutably after each approved consensus, this makes blockchain a sub-optimal place to store too much in any block, compared to the performance of any standard database, where each cell can be written to or overwritten individually.
After all, if selling digital collectibles of Cryptokitties slowed Ethereum to a crawl with billions of requests a day, what chance of survival would any blockchain have against the massive payloads of full resolution art images, sound files and video?
The DECENT blockchain says they have solved this, by building a platform they claim can support up to 2,000 TPS (transactions per second). As for the payloads, the smart contracts would simply provide a ‘pointer’ to decrypt a stored media file on a CDN like Cloudflare or IPFS.
The Intellyx Take
We are seeing signs of life for decentralized blockchain economic networks and digital currency in particular industries and markets, especially those with intellectual property and digital ready assets.
Perhaps the ice is finally starting to crack.
© 2019 Intellyx LLC. Sharing or reprint of this work, edited for length with attribution is authorized, under a CC 4.0 License. At the time of writing, DECENT is an Intellyx customer. No other organizations or people mentioned in this article are Intellyx customers. Image source: LCDR Steve Wheeler, Wikimedia Commons, edited by bluefug.
