Written by Hunter Gebron

Hello again! In our last post, The Ad Tech Landscape Today: Existing Problems As We See Them we addressed many of the core issues in the current web advertising ecosystem, and we alluded to the release of our technical white paper that would soon follow.

After much deliberation and internal review, we are proud to announce that our technical white paper is finally finished. Please check it out here!

If, however, you prefer to skip past the technical wizardry in the white paper then we encourage you to keep reading. By the end of this document, you will have a high-level knowledge of the adChain protocol and the benefits it will bring to the digital advertising industry.

But first some background information: adChain is a collaboration between MetaX and ConsenSys.

MetaX is a blockchain technology company driving development and adoption of open platforms for digital advertising. adChain is used to power the MetaX ad-centric applications that allow the digital advertising supply chain to coordinate in a scalable, trustworthy and secure way. For more information visit metax.io

ConsenSys is a venture production studio building decentralized applications, systems, developer and end-user tools for the Ethereum blockchain. Founded in Brooklyn in 2014, ConsenSys is a global organization with 200 employees on six continents. ConsenSys’ enterprise consulting organization designs and builds Ethereum-based blockchain infrastructure for Fortune 10 companies. In the token space, ConsenSys was the incubator for both the Singular DTV and Gnosis companies.

As previously stated, there is a laundry list of critical issues currently plaguing the digital advertising ecosystem. But we can boil them all down to just three main concerns:

The Three Main Concerns in Digital Advertising

1)Advertisers and Publishers Cannot Accurately Verify One Another Throughout the Supply Chain

This simple fact has given rise to a complex web of spoofed domains, botnets and bad actors that maliciously inject themselves into the supply chain and extract value from the digital advertising ecosystem by masquerading as reputable entities. Digital Ad Fraud has reportedly been estimated at between 10–20 billion dollars annually and growing.

2) The CPM is an Industry Standard that Encourages Fraud

Probably the most glaring example of the misaligned incentives inherent to digital advertising is the CPM. The CPM is an industry standard used to count impressions, (Cost Per Mille). The CPM charges advertisers on a per 1000 impression basis. What this means is that publishers are incentivized to increase the number of impressions at all costs, while advertisers are incentivized to scrutinize and challenge every impression to the utmost degree. Furthermore, since it is nearly impossible to distinguish between a bot impression and a human impression, a publisher may be rationally incentivized to drive fake bot traffic to their website to increase the number of impressions.

3) Facebook and Google Have a Pejorative Duopoly

According to The New York Times, “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook, said Brian Nowak, a Morgan Stanley analyst.”

Facebook and Google capture the majority of all Internet advertising dollars because they have full control over a centralized and vertical data stack. In other words, they own every step of the supply chain within their walled gardens. Obviously, this is great if you are Facebook or Google, but what about every other website on the World Wide Web that needs to monetize itself by selling ads to stay in business? If just two companies capture 85 cents of every dollar spent on digital ads, there isn’t much left over for anyone else.

This duopoly has implications that go far beyond just harming advertisers and publishers. Much of the free Internet we have come to rely on for our news and entertainment is dependent on digital ad revenue to keep its web doors open. Without the steady income stream from digital ads, independent websites will be forced to shut down or find alternative ways to generate revenue, such as using content recommendation engines, sourcing traffic from 3rd party vendors, selling monthly subscriptions or charging one-time fees. Imagine if every website you browsed (besides Facebook and Google) charged a fee. This may seem far-fetched, but it is already happening.

We know this all sounds pretty bleak. We agree. But what if there was a way for publisher websites that exist independently to come together and form the same kind of vertically integrated data stack Facebook and Google have, and to do it in a decentralized and open way? If they were able to do that, then they could effectively coordinate to leverage their collective bargaining power and fight off Facebook and Google. It would require a central source of truth that all publishers and advertisers could rely on and an open system built around it specifically tailored for the digital advertising industry.

This is precisely what adChain was built to do. The Ethereum Blockchain is that central source of truth and the adChain protocol is the open system custom designed for digital advertising.

Blockchains provide entities with competing interests the ability to directly coordinate and trust one another without the need for 3rd party intermediaries.

Programmable blockchains, like Ethereum, permit the creation of tokenized protocols and decentralized applications (dApps). These protocols use economic incentives and game theory optimization to draw power from a large pool of individual participants to drive a particular outcome or, “the completion of a process.”

“Shared protocols promote standardization, decoupling and interoperability; characteristics that reinforce network effects and provide mutual benefits for both dApps and their end users.”

- Will Warren

Which leads us to…

The adChain Registry

The adChain Registry is a smart contract on the Ethereum blockchain, which keeps a cryptographically secure record of publisher domain names. The domains listed in the adChain Registry are, “accredited as non-fraudulent by adToken holders.”

The benefits of the adChain Registry for advertisers and publishers are threefold.

1. It serves as an identity mechanism, which allows publishers, and advertisers to establish a cryptographically secure handshake before running a real-time bid requested advertisement or campaign.

2. It serves as a rich source of premium publisher domains for advertisers that want to run campaigns with verified sites.

3. The key value proposition of the adChain Registry is that it decouples the CPM incentive structure from adToken holders. adToken holders have one goal and one goal only, to vote in reputable publishers and vote out fraudulent ones.

adToken: Challenging, Depositing, and Voting

adToken is the native token of the adChain protocol and an essential component to the utility of the adChain Registry. Publisher domains that wish to be included in the adChain Registry are required to make a deposit in adToken and to wait out a Challenge Period. If an adToken holder believes that a publisher is fraudulent they can raise a Challenge anytime during the Challenge Period by matching the Deposit amount of the publisher wanting to be added to the Registry.

If a Challenge gets raised during the Challenge Period, a vote is automatically initiated. adToken holders will vote using the commit-reveal scheme derived from Colony’s partial-lock token weighted voting system on whether they believe a publisher’s domain is fraudulent (the site is a shill for bot traffic) or non-fraudulent (the site has legitimate human traffic).

If a Challenge gets issued against a publisher, and the publisher wins the vote, then the publisher gets added to the Registry, and a portion of the Challengers Deposit gets awarded to the publisher as a special dispensation. If the Challenger wins the vote, the publisher will not get listed in the Registry, and a portion of the Publishers deposit gets awarded to the Challenger. Publishers that are rejected, are free to try and gain entry to the Registry by staking adToken as many times as they wish.

If there is no Challenge raised during the Challenge Period, then the publisher domain will be added to the Registry, and their initial Deposit will get refunded.

Token Weighted Voting Diagram

A User Interface will be provided by MetaX for adToken holders to vote, challenge, deposit and reparameterize certain elements in the Registry, “such as the period over which listing applications are challengeable.”

After the vote has concluded, adToken voters in the winning bloc will receive the remaining portion of either the publisher’s or the Challenger’s Deposit, depending on who wins the vote. The amount they are awarded is proportional to their token weight. adToken holders in the losing bloc will not receive anything. adTokens that are used for voting purposes will be returned to their rightful owner once the voting period has ended regardless of which bloc they voted in.

An Argument for Rational Voting

adToken holders are incentivized to vote rationally because as the number of non-fraudulent publisher domains in the Registry’s ‘whitelist’ increases, the more valuable it becomes to advertisers who wish to serve ads to a rich pool of reputable publishers. The more advertisers want to serve ads to publishers listed in the adChain Registry the more desirable it becomes for publishers to be listed in the Registry. If the adChain Registry is valuable for both advertisers and publishers, it will increase the network effect of adChain AND the overall value of adToken. This virtuous cycle creates and maintains the economic driving force comprising the adChain protocol.

adChain: Not Just a White List

An Open Ecosystem for dApps and ingenuity

adChain begins its journey as a Registry of reputable publishers, but its future promises to deliver much more. It’s an open protocol built on the Ethereum blockchain and thus enables developers from around the globe the ability to create dApps that serve to function within adChain and increase the overall value of the protocol. This will lead to a rich ecosystem-enabling environment for advertisers and publishers to openly coordinate advertising campaigns with one another via a suite of customizable dApps. Some examples of dApps to be built on adChain are: bot detection dApps, reputation score dApps, automated payment delivery, DMP (data management platforms) and even virtuous Ad Blockers. But the most exciting dApps are likely to be those we have yet to even think of!

The Road Ahead

Token Launch and BETA Test

You can find Ken Brook, CEO of MetaX and Cofounder of adChain speaking at the OPS digital media conference in New York City on June 5–6 and The Advertising Research Fund’s Audience Measurement Conference in Jersey City on June 12–13. He will be hitting the road to evangelize adChain and educate the digital advertising community about our public Ethereum solution. Our upcoming Token Launch is also a top priority. We are issuing 1,000,000,000 adTokens. The Token Launch will take place on JUNE 26TH, 2017 AT 8AM PDT / 3PM GMT / 11PM CT-CHINA; we know many of you are eager to participate. For a full breakdown, please visit www.adtoken.com and stay on the lookout for the results from our BETA test with key industry players.

Thank you all for your continued enthusiasm around the project!

Sincerely,

MetaX & ConsenSys

Written by Hunter Gebron