Public Relations Tactics

A Currency Affair: Understanding Blockchain Technology

August 4, 2017

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[shutterstock]

Since its launch in 2009 by an anonymous internet user, bitcoin has become one of the world’s most recognized digital currencies. Although it isn’t backed by any government, this peer-to-peer cryptocurrency once valued at a few pennies is now worth more than $2,500 as of July 25 as people worldwide use it to anonymously purchase goods and services over the internet, without any middlemen. (As of the same date, the price of one ounce of pure gold was $1,255.)

However, the technology that powers bitcoin and other digitally coded currencies is perhaps more significant. Called blockchain, the innovation has business leaders in a number of industries — financial services, in particular — excited about its potential to transform our economy.

To understand blockchain, consider that a dollar bill is essentially just a piece of paper. But because the dollar is the official currency of the United States and legal tender issued by U.S. Federal Reserve banks, it represents a unit of trust that we can exchange for things we need. Thus, we are paid in dollars for the work we provide for others.

Bitcoin, on the other hand, is encrypted computer code that when successfully “mined” by solving complex math problems is placed in a ledger, where everyone in the network can see the total number of existing bitcoins at any given time (out of a limit of 21 million total bitcoins that will ever exist, a reported 16,400,000 were in circulation as of late June). Like dollars or gold, the value of bitcoin is based on the trust that people place in this currency, and their desire to acquire it.

A blockchain is a digital ledger in which transactions made in coded currencies are recorded in linear, chronological order. Each block is like an individual bank statement added to the chain, which serves as a record and proof of all transactions in the network. Names of buyers and sellers using bitcoin are only identified by their “digital wallet” IDs, which is why the cryptocurrency is often used for illicit transactions online.

Potential to transform industries

As The Wall Street Journal reported, companies across industries are experimenting with similar ledger technology as a trusted way to track ownership of assets without the need for a central authority — which could speed up transactions and cut costs while lowering the chance of fraud.

Blockchain technology presents a huge opportunity for many fields, says Paul Armstrong, an adviser and strategist with the technology consultancy HERE/FORTH.

“It’s a foundational technology,” says Armstrong, “meaning other things are being built on and around it. The potential to reshape industries and the way things are done is pretty staggering.”

“Blockchain is going to transform entire industries,” says Sanjiv Singh, director of management consulting at KPMG. “It will be an important tool that organizations use to commoditize and verify information.”

“Blockchain has the potential to impact every industry from health care to government, finance to retail, real estate to agriculture and more,” adds Liana Douillet Guzmán, senior vice president at Blockchain, a Luxembourg-based software company. “We are already seeing applications, like ours, that are enabling millions across the globe — including those who are excluded or underserved by the incumbent financial model — to transact, save and hedge their way to a better financial future, immediately and without costly intermediaries.”

In an era of identity theft and online fraud, many within financial services, cybersecurity and related industries hope blockchain can rebuild trust among individuals and organizations, particularly in countries where people don’t trust their government or other institutions.

“By enabling businesses to transact immediately in a secure, private and transparent fashion, blockchain technology will revolutionize the back end of business systems across the globe,” says Douillet Guzmán.

Blockchain could facilitate the exchange of contracts, titles and other documents in the purchase or sale of assets or pieces of property.
“The true value of blockchain lies not in the technology,” says Singh, “but in the network of people who belong to the blockchain and unite to determine the value of certain digital assets.”

Ethereum, another blockchain network that allows users to send and receive tokens that represent value, could be used to exchange medical records, stocks, bonds or other types of property, says Jack Zwick, chairman of the Exagon Fund, which focuses on the bitcoin market.

“Today, the majority of consumers prefer to purchase online or digitally, driving rapid growth e-commerce and online shopping,” Douillet Guzmán says. “Digital wallets will allow transactions to happen instantaneously, and give customers the convenience they desire.”

Blockchain technology is also being considered as a possible mechanism for secure online voting.

Implications for marketing and comms

Marketers in the health care sector are looking at blockchain technology to increase security and trust. Luxury-goods companies might use it to curb illegal copies and protect brand identity. In communications, the technology could significantly reduce ad fraud and fake news through super-secure verification.

In the future, your verified identity will be one of your most valued assets. As marketers wonder how many people view a digital ad, for example, advertisers will need to provide ledgers of encrypted identities that represent real people to prove viewership of banner ads and video pre-roll. These ledgers can also help content creators like writers, photographers, videographers, illustrators and musicians collect more royalties. Companies such as adChain and Monegraph are already developing this space.

Similarly, direct-marketing firms may command higher prices for mailing lists (email, U.S. mail and text numbers) when certified human identities are linked to specific email addresses.

Encrypted identities could also be used to facilitate online polling or online contests and provide more certainty to advertisers that names and email addresses entered are connected to real people.

Marketers who reward customers with loyalty points could transform those credits into digital currencies that allow participants to buy, sell or exchange currency with the company and other customers or partnering companies. A credit card offering reward cryptocurrency, for example, could partner with Amazon.com or other companies that accept the same digital currency, providing consumers more choices in accessing and redeeming loyalty rewards.

“I could see digital currencies being used to reward consumers for reading an article or viewing an ad,” suggests Zwick. “For example, 21.co is a company that is using this approach to monetize your time in reading promotional emails.”

Blockchain might also be helpful for communicating sensitive information. For example, those in charge of investor relations for publicly traded companies can use the technology to encrypt financial information in a ledger that is available to a company’s investors, to allay fears that earnings reports, major operations or personnel announcements could be hacked before reaching the market. Investors would know the information is genuine.

To build and protect corporate reputations, blockchain could track the movement of products from their source of manufacture to the consumer. If a company experiences a crisis situation such as E. coli contamination or food tampering, for instance, the data trail would document the safeguards in place at every step.

“The intent of blockchain is to bring trust back into the equation,” says Singh. “It can take a great deal of legwork to check the validity of a news report. Having confidence that a piece of news is real can help in building or maintaining trust.”

As practical applications of blockchain continue to emerge, it could take several years before the technology becomes a mainstay in corporate marketing and communications. Based on the momentum that blockchain is building, it appears to be a matter of when, not if, marketers and communicators design new blockchain applications that contribute value to the customer experience. But marketers that adopt the new technology will realize significant competitive advantages in the years to come.

Stephen Dupont, APR

Stephen Dupont, APR, is vice president of public relations and branded content for Pocket Hercules (www.pockethercules.com), a brand-marketing firm based in Minneapolis. Contact him via stephendupont.com.
 

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