For the last several months the BitClave team has heard of many new blockchain projects using blockchain in all possible and impossible ways, but adding blockchain into a random project will not grant it superpowers. We have discussed this internally and are happy to present you our current vision of smart blockchain usage. This article will help you to decide if a blockchain project is worth your time, money and skills. We have also included one simplified example of blockchain injection into the internet advertising market.

💔 The problem of potential dishonesty

The domain where you are going to add a blockchain should contain the problem of potential dishonesty. You should analyze the needs and scenarios of participants and think through every member’s economic incentive for each scenario. This will allow you to understand where each participant may try to cheat.

Let’s look at the example domain: internet advertisement market. There are the following participants: Advertisers, Agencies, Ad Networks, Publishers, Users.

Internet advertisement market participants

On the presented scheme you can see how exactly each of the participants acts. Advertisers pay Agencies for managing their ad campaigns and targeted ads creation. Agencies pay Ad Networks for actions (it may be clicks or installs). Ad Networks pay Publishers for ad impressions and collect Users information for better targeting. Usually Agencies and Ad Networks create a really long chain, each link of which eats Advertisers money.

Ad Networks can trick Agencies and Advertisers on CPA (cost per action) forming and the whole middlemen chain will eat a significant part of Advertiser’s budget. In addition, illicit collecting of User info will enable not just incomplete, but also unreliable information which finally leads to higher CPA. These are the problems of potential dishonesty we are going to solve with a blockchain.

🔗 Blockchain is an actor, not a storage

Please stop thinking about blockchain as a decentralized synchronizable trusted storage — these properties are secondary. First of all blockchain is an actor. It acts honestly, thus everyone can confidently trust it. For example, proof-of-work consensus blockchains confidence is guaranteed by miners who desire to earn money.

Lets look at the first blockchain application, Bitcoin. You can ask the Bitcoin blockchain (Bitcoin network formally) to transfer money from your account to another one. Bitcoin blockchain (Bitcoin network miners formally) will check two fixed conditions: transaction signature to confirm that you are a real account owner and that your balance is enough for this transaction. If one of these checks fails, blockchain will refuse to carry out the transaction. Ethereum blockchain is able to perform any checks that smart contract developers can imagine — so it is more advanced trusted actor with Turing complete abilities.

Internet advertisement market participants (pumped version)

So adding a new actor to any domain leads to a revision of scenarios for every participant. Users will complete their profiles in Blockchain and also get verification with regional services with digital signatures. Some Advertisers will begin to create ads and pay for campaigns directly to Blockchain. Ad Networks will be able to show ads from Blockchain to Users via Publishers and ask Blockchain to pay them for User actions. Blockchain will pay to Ad Networks and to Users.

☯ Achieving consensus

After adding blockchain as a new participant to the system you need to develop all members scenarios from scratch, and every participant screnario should be led by real economic incentives. Also participants should not be able to break your system by following any non-profitable scenario.

What about fraud in the system? Every User action will be also handled by Advertiser with following kinds of events: user_visited, user_registered, user_purchased. The system is going to rate different Ad Networks compeling them to compete with each other. So any fraud will spoil the Ad Network rating and no Advertisers will give it a budget anymore. Yes, ad campaigns will allow Advertisers/Agencies to tune Ad Networks budgets directly. One more time: the system will make Ad Networks to continuously fight fraud, and to improve at reducing fraud.

Why Ad Networks will use your Blockchain at all? Ad Networks will be able to rank ads in Blockchain and compare with their local ads. In the case of profit for showing blockchain ad will be higher than profit for showing local ad — Ad Network will try to earn more money by showing ads from blockchain. Non-blockchain ad with time will become more expensive and will die.

What will make users to register? This may be any kind of referal program for web-sites, search engines, web browsers. This new system will also allow users to see engaging, personalized ads and will lower product prices because of the lower costs of promotion.

Finally:

In this article we tried to summarize our current vision about smart blockchain usage to help you to distinguish blockchain projects that are worth your time, money and skills.

The subject area should contain the problem of potential dishonesty for any participant to add the blockchain as an actor to fix the problem. You should develop economic incentives for the participants and be aware of system breaking actions.