By Tom Cox, IPR License
With Porter Anderson, Editor-in-Chief | @Porter_Anderson

Authors and Publishers Are Looking at Blockchain

While many in publishing still are working to catch up with blockchain technology—which underlies cryptocurrencies such as Bitcoin—the international Alliance of Independent Authors (ALLi) already has stepped forward with a campaign, Blockchain for Books.

“So far,” ALLi’s introductory material reads, “blockchain has attracted the most interest as the system that underwrites digital currencies like Bitcoin, but it is also likely to underwrite the next disruption in publishing, and likely in a way that will be even more disruptive than the digital revolution.”

ALLi proposes that blockchain will impact:

• Copyright, which ALLi suggests can be superceded by blockchain, making “ownership indisputable”
• Smart publishing contracts, that will use automation to “simultaneously represent ownership of an intellectual property and the conditions that come with that ownership”
• Smart author wallets, into which “booksellers and wholesalers” as well as “Amazon and other digital platforms and trade publishers” will make author payments, as will readers who will “make micropayments for a single article, small video, or podcast episode”
• Privacy controls, in which ALLi’s interest is in its members’ ability to “forward a book, directly from author to reader, without any middle man, freely or for Bitcoin exchange”

“If we imagine that the industry remains as it is today, one path would be to establish a blockchain network of publishing industry rights trades.”Tom Cox

ALLi’s administration is developing a white paper for the independent author sector on the subject, and its founding director, Orna Ross, has produced an article that includes the topic.

Today, IPR License development director Tom Cox shares in his recent article on blockchain and its implications for publishing and rights.

‘The Potential to Revolutionize How IP Is Traded’

Blockchain is being touted as the next Internet, a technology with the power to radically transform every aspect of our lives. But as yet its real world applications have been limited to a few areas.

Bitcoin and cryptocurrencies are currently the best-known applications of blockchain. The technology is now starting to get serious investment into both startups and within large organizations. Blockchain offers the promise of decentralized self-regulating data that can be applied to many aspects of business.

At IPR License, we believe that blockchain has the potential to revolutionize the way IP is traded, and we’ve been thinking about some of the potential applications of blockchain technology within the rights community.

So What is Blockchain?

Let’s start with the hard stuff. What is this new disruptive technology called blockchain?

All transactions are based on trust; this could be in a central bank or a large company such as a publishing house. In a traditional transaction, trust is generally provided by an established institution and that trust is based largely on reputation.

Blockchain changes this dynamic and introduces trust rooted in the consensus of a network of peers who all agree to the same set of rules. This decentralized model relies on the agreement of the peer network in order to process the next set of transactions so no individual or organization can subvert the rules that have been established.

Bitcoin is, without doubt, the most widely known blockchain implementation and, without going into detail, it makes sense to provide a very high-level overview of its architecture to describe the concept of a blockchain.

The Peer Network

“Each user of Bitcoin has a wallet. This allows him or her to store and spend Bitcoins.”Tom Cox

Bitcoin is a cryptocurrency which is not owned by any individual, government, or organization. It allows for transactions to occur outside the traditional financial frameworks and fiat currencies.

Each user of Bitcoin has a wallet. This allows him or her to store and spend Bitcoins. Each wallet is identified by a pair of keys, one private and one public. These keys are used to send and receive transactions across the network. The public and private keys are linked, and the private key is only known by the wallet and its user so this guarantees that a transaction originates from the verified source.

When a user wants to transfer Bitcoins, her or his wallet publishes a message to the peer network.

The peer network is a collection of “nodes.” A node is generally a computer running the core Bitcoin client. Each node within the network has the complete ledger of all the previous transactions that have been agreed to within the network. This shared ledger is the blockchain. New transactions are recorded on each node, and periodically a new block of transactions is written to the chain.

In the Bitcoin network, the job of writing new blocks is given to special nodes called miners. These miners are trying to solve a complex hashing algorithm based on the current state of the blockchain. Periodically one of these special nodes solves the problem and a new version of the current transactions known to that node is written permanently to the ledger in a block.

“Across the planet, there are people and organizations competing to write the next block to the ledger.”Tom Cox

The first part of this new block will link it back to the previous one. And, as such, a continuous ledger —blockchain—is built.

After the new block is created, the other nodes within the system are designed to update their local blockchain with the longest variant and the process repeats. The time between new blocks being added varies, but on average it happens every 10 minutes.

And how does this process replace the trust you’d associate with traditional financial systems?

The Bitcoin blockchain is a proof-of-work system. This means that in order to write the next block to the ledger, the node in the network that is doing so must first solve a complex hashing algorithm. The network of nodes has a distributed set of miners trying to solve this. Each new block written rewards the miner that has written it with Bitcoin.

So across the planet, there are people and organizations competing to write the next block to the ledger. No single individual or organization can guarantee that they will write the next block to the chain. If you were trying to subvert this process, the expenditure in processing power you’d need to guarantee writing the next block would massively outweigh any gains you could make by doing so.

How is This Used Outside a Financial Transaction?

“Any data that would traditionally need to come from, or be checked by, a trusted authority can be published and agreed on by a blockchain network in almost real time.”Tom Cox

While it’s true that at present most blockchain implementations are in the financial tech area, the information that can be stored on blockchains isn’t limited to financial transactions. The information posted to the chain could represent almost anything: a vote in an election, a bill payment, contract details, property deeds, consumption of perishable goods.

This concept has the potential to impact many aspects of our lives. Any data that would traditionally need to come from, or be checked by, a trusted authority can be published and agreed on by a blockchain network in almost real time. This data must comply with the rules of the network, and the built-in security of the network design means that the authenticity and accuracy of the data can be trusted.

There are now platforms such as Hyperledger and Ethereum that allow developers to build on top of a distributed blockchain infrastructure, which should greatly reduce the time-to-market needed to develop blockchain-based systems. The amount of investment being made in this area makes the move beyond financial tech a certainty, although at this point it’s hard to predict which implementation will take off.

Rights Transactions

“Rights management is, in many ways, similar to financial processing, in that trust is the core component.”Tom Cox

Rights management is, in many ways, similar to financial processing, in that trust is the core component. At present, that trust is provided by large institutions and the complex contracts that describe the ownership, use, re-use, translation, permissions and royalties associated with a product. These rights often cross company and country boundaries.

While there are efforts such as the ARDITO Project and the Copyright Hub to harmonize and share data, the technology and process landscape around rights remains fragmented.

Organizations have their own siloed data, contracts, and proprietary systems. Data interchange between systems is almost nonexistent and changes to the state of the system are handled by offline contract negotiation which are still normally paper-based.

We’ll look at some examples of blockchain implementation that could be used to improve these issues.

Using Blockchain as the Definitive Ledger of Publishing Rights

If we imagine that the industry remains much as it is today, one possible path would be to establish a blockchain network of publishing industry rights trades.

Over time, this ledger of rights could become the definitive source for searching and establishing the authoritative rights holder. This shared ledger means that there’s no one single company that’s holding the data and that the ledger itself is always an accurate reference.

Publishers would have an incentive to take part in the initiative, as it would reduce the discovery and coordination time associated with searching for and establishing new contracts.

The network would be able to provide real-time details about rights holdings across the industry without the need for a central authority to police this. The blockchain ledger wouldn’t be a replacement for existing enterprise resource planning (ERP) systems. Instead the current systems could publish key life-cycle events to the blockchain.

New software clients that can analyze, search, and report on the blockchain would need to be established.  It’s not too difficult to see how such a system could be developed and it could possibly leverage much of the work that already has been created by initiatives such as the Copyright Hub.

Smart Contracts Could Enable Self-Enforcing Terms

If we were to take this a step farther and look at a more disruptive implementation of blockchain, it would be possible not only to store the record of products and rights, but also to implement “smart contracts” enforced by the design of the network.

Smart contracts don’t just contain the terms of a contract but also can act in programmed ways, delivering aspects of an agreement once specific terms are fulfilled. If connected to additional resources, such as distribution networks as well as online and physical stores, the contract could automatically deal with recouping costs and paying royalties.

When a new contract or a change to a contract was published to the network, the time needed for this information to be available to all nodes would likely to be minutes. If the contracts were sophisticated enough, the complex area of royalties could be handled in almost real time by the system.

Once established, these smart contracts could drastically reduce the time and effort currently spent creating and enforcing the terms of contracts. However, given the complexity and variation found in many current publishing contracts, the initial implementations of smart contracts may focus on specific subsets of content that lend themselves to this approach.

Decentralized Autonomous Organizations

Some advocates of blockchain suggest that eventually the technology may be sophisticated enough that instead of our current corporate model, we’ll operate with “decentralized autonomous organizations” (DOA)—a distributed corporate model enforced by the setup of the smart contracts that capture the organization’s goals and processes.

This is a model that could replace the siloed functions of publishing companies with distributed services and could allow content creators much greater oversight and flexibility in how their work is published and disseminated.

However, such a model is yet to be proven in any industry, and until the necessary building blocks and technologies are in place, this is only a pipe dream and one which may never come to pass.

What is the Impact of Blockchain and When?

“We believe that the publishing industry should be investing in and understanding this new and disruptive technology in the same way that financial institutions have been.”Tom Cox

It’s easy to see the upside that blockchain technology could have on the publishing industry, and we believe it’s likely that some of this change is going to happen in the medium to long term.

However, there are a number of obstacles that stand in its way.

It’s hard to see how such a network could be built without the support of publishers and while the benefits can be clearly laid out, we’re likely to see resistance to this level of change.

The scenarios described here are just some of many possible implementations that blockchain that could affect the publishing industry. While much of the current hype around blockchain is certainly unfounded, there’s definitely great potential in this model.

We believe that the publishing industry should be investing in and understanding this new and disruptive technology in the same way that financial institutions have been. It’s certainly an area that IPR License is going to continue to research and develop.

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Tom Cox is development director of IPR License, which is described as the world’s first fully transactional rights and licensing platform. More articles are at the IPR License blog. At Frankfurter Buchmesse, the Arts+ program will include issues around blockchain in its “Arts+ Brainfood” presentation on October 11, 11:45 a.m.