Bitcoin Has the Power to Transform Digital Media Forever
Bitcoin's frictionless payment system could profoundly change the way we monetize media, music and film.
Michael Jackson is a software engineer, entrepreneur and venture capital investor at Mangrove Capital Partners. He is also the former COO of Skype.
It is little wonder that many perceive bitcoin as a commodity rather than a method of exchange.
Extensive media coverage of the digital currency’s price fluctuations has driven enormous speculative interest. While it has enjoyed relative stability over recent weeks, it remains inherently unstable and vulnerable to speculation.
If this can be addressed, however, it may well turn out to be one of the most transformative technologies we’ve seen in recent years. The internet has been lacking a frictionless payment system since its very inception and digital currency could profoundly change the way industries operate. One that stands to benefit the most is the digital media industry.
We’ve seen a somewhat painful evolution for those industries with products that can be stored and transmitted over the web – with media, music, film and publishing being the most obvious examples.
Even now, the use of paywalls to monetise content is a high friction process. Setting up an account and providing credit card details is both tedious and a significant commitment. On the other hand, the simplicity and ease of paying for apps using a mobile account meant Apple customers spent $10bn on the App Store in 2013 alone.
Digital currency promises to go further for digital media – enabling content owners to incorporate payment intrinsically within their content. For example, publishers could very simply watermark a single article and wrap it in a layer of encryption so it can only be accessed using a bitcoin key.
When a bitcoin holder clicks on the article they want to read, their key automatically unwraps the layer of encryption and a payment is made. By attaching the relevant bitcoin to the article’s watermark, the publisher could also track its usage in order to identify and address any copyright infringement.
The same is true for everyone from bloggers to media conglomerates – and for all kinds of businesses, from social media to online gaming. It could also be used by the music, science and education industries, as well as pretty much every service delivered through the web for that matter.
As well as helping all of these industries and businesses create new value, a widespread virtual currency would also undoubtedly lead to a whole myriad of new applications and services being delivered over the web.
With strengths, come weaknesses
While bitcoin has so much to offer, it does of course have its weaknesses – until it has price stability it is unlikely to be trusted as a medium of exchange, as people want to know that the currency they hold will still be worth the same amount the following day.
Conversely, those with bitcoin will hoard their holdings if they expect its value to keep rising. Reversibility of transactions is also important. However, the existing implementation can be modified and we may well see a second generation of bitcoin-based or bitcoin-inspired digital currencies emerge – one if which may well be adopted more broadly.
Indeed, 'virtual currencies' are already proven. The international telephone industry itself has used special drawing rights (SDR) as a currency for inter-operator settlements for many years.
We are also seeing the rapid adoption of 'mobile minutes' as a currency in under-banked markets including a number of African nations. So too could a digital currency be used to transact by anyone or anything connected to the web.
If one of them does become widely adopted as a currency, rather than just a commodity, then it will be so pervasive that it will essentially become a global authentication system – the potential of which is almost too staggering to comprehend. As well as simplifying transactions, it would transform business processes and unleash fresh productivity gains for economies around the world.
This is what excites venture capital investors, and also what reinforces my belief that we are still very early on in the wave of technological innovation that we’ve been undergoing for the last two decades.
Rather than viewing bitcoin as a commodity and speculating on its value, we should be exploring how we can create value – through a digital currency that really can be widely adopted.
Those businesses that face transformational changes are most likely already working on their own concepts and designs but there remains immense opportunity for more nimble entrepreneurs. So far I’ve not found any but I hope they will emerge very soon.
This was written by bitcoin commentator, venture capital investor, engineer and entrepreneur Michael Jackson of Mangrove Capital Partners. Michael has discussed bitcoin with governments and at some of the technology industry’s most respected events – including last year’s TechCrunch Disrupt and Dublin Web Summit.
Media Image via Shutterstock
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