Introduction:

Yi Lu: Good afternoon everyone. I’m the co-founder and project lead of U Network. Basically U network is a decentralized protocol for publishing and valuing online content. Some people call U Network the new-age Steemit and at times the Steemit killer. Now David here, is also an advisor for U Network. So David would you mind introducing yourself a little bit?

David Bailey: Yeah, my name is David Bailey, I’m the CEO of BTC Inc. We’re a media company in the crypto space that really touches a lot of different parts of the media ecosystem, everything from the content creation distribution to the media technology itself. I have been around crypto for quite a while so I basically eat, sleep, and breath crypto since 2012 and I’m just completely obsessed with the potential.

Blockchain to readers:

Yi Lu: So let’s get started with some general topics. One topic that I am personally interested a lot in is what kind of changes will blockchain bring to readers.

David Bailey: Well I think I think blockchain and cryptocurrency can really change how and what people consume online because the economics change the way content is created so therefore there is a lot of variety out there. Perhaps much more niche content. I think it’s gonna change where people consume that content. So it’s going to blur the lines of who is and isn’t a publisher. Maybe one day you’ll start reading coca-cola.com/news in order to get all of your beverage news. In fact I think it’s gonna change how readers engage with content so that means maybe there’s reputational information around the publisher or maybe there’s provenance of changes for a piece of content so they can see how it’s changed over time. Or perhaps there’s embedded prediction markets so that they can see what the market thinks the likelihood of certain events are. And then I also think it’s going to change how people engage with content from a monetization standpoint. So a lot of the behavior that consumers bring to content, their attention, it’s gonna be monetized and so everything from sharing content to commenting on content to just creating value in general for a publisher I think they’re gonna end up getting rewarded for.

Fake News problem:

Yi Lu: Cool, I like the idea that everyone and every institution can be a content creator. For example, President Trump is actually a very good content creator. I think one thing he cared a lot about is whether the blockchain technology can solve the fake news problem.

David Bailey: Yeah so I think it depends on what we mean when we say fake news. If we mean someone taking a fact and saying an incorrect fact that’s binary. I think maybe there’s a potential there for some sort of a curation market for a piece of information and its accuracy. If we’re talking about the bigger issue of taking a limited set of facts and then creating a perspective that’s kind of radically different, I don’t think it can change that. It’s like the glass is half-empty or the glass is half-full. It’s the same fact but just with two radically different perspectives on it so I don’t think you can solve that issue.

Yi Lu: So yeah actually in U Network we are trying to build a protocol that is very similar to a prediction market where you can vote for content. For example you can vote on whether a piece of content is fake news or not. And if you are on the right side you can get the benefit given by the prediction market. So yeah it’s decentralized governance and hopefully it will be able to deal with fake news problems.

David Bailey: Yeah I do think that one attribute that’s beneficial is the reputation of publishers and content creators and being able to look at the history of content that they’ve created. So that’s one thing that’s gonna be a big improvement over what we currently have. And then embedded prediction markets is also pretty interesting, so if someone is talking about an idea like who’s gonna win the election and what they are saying in their article is radically different than what the the market thinks the likelihood of that event is, a reader can discern for themselves, like hey you know I’m reading this article that the market says there’s a 1% chance of that happening. So there’s maybe some element of curation there as well.

Yi Lu: Yeah, I think that could be a source of income for those content creators.

David Bailey: Absolutely.

Readers in the future:

Yi Lu: Cool, so right now, with blockchain technology we can do things like micro monetization or maybe micro metering. So do you think in the future, readers will need to pay more money to read more content or get stuff?

David Bailey: We definitely know that readers are willing to support content creators on a micro level with things like subscriptions. There’s a service in the United States called Patreon that’s gotten very popular within the YouTube communities. So I think there is some evidence to see, but fundamentally I think you’re fighting against the economics. You know users’ attention is valuable and so if users’ attention is valuable it doesn’t make sense to charge them money to consume content. It’s better to focus on other parts of the stack of where you can either gain efficiencies or monetize content to a greater degree outside of that reader. But it’s the eyeballs that you want.

Yi Lu: I see, so it’s basically when readers read some stuff their attention is actually valuable. We can monetize that and maybe return this to those content creators. And I also think readers’ choice or maybe certain behaviors can also be valuable. For example, readers can help us identify some good articles or maybe identify some good information. This kind of behavior is also actually valuable and we can capture them using blockchain technology.

David Bailey: Absolutely. I think content consumers are going to become effectively ad-hoc employees of publishers in the future. As a user you’re going to be able to perform actions that are valuable to the publisher that you’re going to be able to share in the monetization. So I think it’s the opposite effect of consumerism where they are gonna have to pay more for content. I actually think the trend is in the opposite direction. Consumers are going to be paid to consume content or to create content or to engage with content in certain ways.

Content creators:

Yi Lu: Yeah I think that’s a good direction. So let’s now talk about something related to content creators, what kind of change will blockchain technology bring to content creators?

David Bailey: So I’ll put in a bit of a plug here for a project that we’ve built called Po.et which is a network for publishers and content creators to be able to catalog all of their digital creative assets and demonstrate ownership over those assets, and then trade or license or put logic into certain elements around those assets. This is something that I think is gonna be really valuable for content creators because it’s a mechanism by which they can gain sovereignty over the content that they create rather than being beholden to the publisher. It also means that content creators are going to be able to sell their content to a much wider audience of buyers, publishers, international publishers or corporations that are looking to buy content that’s relevant to them. I also think it’s going to allow those content creators to keep a reputational history that they can take with them and prove all other content that they’ve created and where that content has been published. It is going to allow them to extract more value from what they’ve created so I think it’s ultimately to enable the content creators to monetize the content they’re already making to a higher degree.

Yi Lu: Yeah Po.et is actually a great project and U Network is in a partnership with Po.et.

David Bailey: Yes. We have Jared Dicker who we just brought on about four months ago, who was the head of technology and innovation for the Washington Post. He is running the project and it’s something that a lot of media companies are excited about because the margins are razor thin in media. In fact I would say they’re negatively thin and so any way that they can monetize or re-monetize old content and capture additional value is really interesting. So we’ve gotten great feedback from Reddit, Gannett & Vice, and other media companies which are interested.

Blockchain to media and content industry

Yi Lu: So you mention about how people are very excited about blockchain technology. So what kind of value can it add to media or maybe content industry.

David Bailey: There are a bunch of ways to answer this question but I’ll go to the one that I think is most interesting. I think fundamentally when we talk about token systems we’re really talking about how benefit is accrued within a system. In the analog world we can think about equity in a company, we have a bunch of different people all performing different functions. Maybe some of those functions are not directly revenue-generating functions themselves, yet people can provide this service and collaborate as a team because they know that there’s some mechanism in order to reconcile the value that they’ve created, and that they’re going to be able to ultimately benefit from what was accrued over time. So I think we can apply this same concept to token economic systems and I think that we’re going to be able to dramatically reduce the expense or cost of operating that we now see with a publisher and take those savings and pass them back to the content creators because that’s ultimately where the real value is. For our media company, I would say less than 15% or 20% of our total cost of operating is actually paying for the content. We have to have editors and curators of content, we have to have sales to monetize that content, we have to have product people in order to build a place for you to come consume that content, we have to have an HR person to deal with all the problems that come and we have to have an accounting person yada yada. So what if instead we could leverage a token system where we could eliminate some of those costs and instead content creators could join with other content creators and effectively almost as if it’s a co-op underneath a specific property and they don’t have all the administrative overhead that comes with running a traditional company.

So a perfect example of this is Reddit. It is a fantastic platform and where a large amount of content that’s published on the web is generated from. But there’s some perverse incentives within Reddit where the more popular subreddit become more valuable by cheating the system or trying to socially engineer the system so that you can get value that wasn’t really there by extracting value from the system. That’s like a tragedy of the comments problem. When you add a token economic structure on top of it you now change the economic incentives for people and how they participate. So think Steemit, so I have to have skin in the game in order to put content up and for me to upvote or downvote. There’s also some skin in the game in terms of activity I have to perform. So now the the economics of the system is what governs the rules, we don’t have to have central administrators doing that. That’s a really interesting and compelling concept and I think something that we’re going to see a lot more of going in the future.

Yi Lu: You mentioned a bit about Steemit and this kind of decentralized platform. They are basically open collaborative networks compared with traditional media company where the company structure is like a tree: you have a boss, your boss will have a boss, so you belong to an organization. But for the open collaborative network like Steemit community or U Network community or maybe bitcoin communities, they are networks, where you can belong to one network or another network. You are free to move and you will be incentivized by tokens. This is actually more flexible than wages with lower administration cost. So I think in the future there will be more open collaborative network or maybe it will be the way for some of the companies in the future.

David Bailey: Yeah. If you think about how a business is governed, hiring is one of the hardest parts in a purely open collaborative network, to take your terminology. Now we don’t have to gateway who the employees are, because there really is no such thing as an employee. If you generate or create something of value you can capture back the value that you made. We had an interesting conversation backstage about when you think about these in benefit of accrual systems, you can think of the first generation business as the family-owned business. The reason it was a family-owned business is because the benefit was accrued and passed via inheritance so you didn’t have to trust the system. You got everything when your pops died. When we moved on to the second generation business which is the corporation and people. Now we’re able to participate as a unit and share the benefit in equity. We were able to start bringing in strangers because those strangers could now trust that ultimately there was some reconciliation methodology to make sure that they were getting a fair deal. Now that we’re in this third generation of business we can go even further. Rather than just hiring strangers it can be anyone and we don’t even know who you are and you don’t even need to work full-time or part-time. It’s work when you want to work as long as you’re bringing value to our property. You can see the upside in that.

Content monetization VS Social capital:

Yi Lu: Yes token economy is very important and providing incentive is also really important. Recently Vitalik, the founder of Ethereum, twittered some of his ideas. He believes that some of the directions taken on the content monetization is actually misguided, perhaps some of the content should not use money but other stuff like social capital to provide incentive. So what was your opinion about this?

David Bailey: So when we say a term like social capital what we really mean is reputation. And you know when you think about that from the context of who a publisher is, a publisher is purely a brand. That brand accrues reputation over time, that’s what causes people to return to it to consume the content and to trust the content. So you know I would agree with him that anyone can create content and everyone has the tools to create content. I don’t think the cost of creating content is going to go up. I think you know when the Industrial Revolution happened it caused the cost of artisans, the cost of what they were doing to go down dramatically. What I think is really important though is that social capital, that reputation has a real world value and so all of these content creators that are producing the value they should be able to participate in the upside of the value of their content. I mean that’s where the reputation is stemming from. So to put this in context let’s take Facebook for example. Lots and lots of people are creating content on Facebook, lots and lots of people operate pages on Facebook that bring in users who then go off through the Facebook platform. Facebook is able to monetize the lifetime of that user for however long they end up using Facebook. I don’t know what the market cap of Facebook is right now but it’s over a hundred billion dollars. What if the the content creators were able to participate in a pro-rata way of the value that they brought to Facebook with the ownership that they had in what was created? So you know I agree with his observation that social capital is really valuable and I think a token economic system is perhaps the best way that we can capture it.

Aggregators and AI

Yi Lu: I see, so let’s go with our last topic. I think blockchain technology can enable us to maybe bypass aggregators like Facebook. So do you think we need aggregators in the future or what kind of role will aggregators play in the future? Also a lot of aggregators are using AI technology to help improve content discovery, so do you think blockchain technology will be the enemy of AI or friend of AI?

David Bailey: So I think there’s two different questions in there. One is on the aggregators, we call them aggregators if they’re open, call them curators if they’re closed and it’s around the the distribution of content on those systems. You know I don’t think that’s going away, the value that they bring is they have eyeballs and readers. I just think the ownership and governance of those systems is going to be democratized and commoditized. In terms of AI I think it cuts to the root of of the question of who owns what data online when it’s created. Does the reader own it? Does a publisher own it? Or does the platform own it? That data is unbelievably valuable because what effectively the Googles of the world and the Facebooks of the world do is they let you create all this content that gives them insight and data around who your readers are and what they’re interested in. And then they turn around to the next highest bidder and they take your data and they say hey I got a list of all of these people that love this this concept or this idea and you can advertise to these people wherever they go on the web or wherever they go on our platform outside of that publisher. So there’s a massive diluted value to the publisher so this is programmatic advertising. If you’re in a niche topic, maybe you can get $70 CPMs, costs per million impressions, as a niche publisher. But if you’re doing programmatic advertising you can buy the same readers at two or three or four dollars CPM so you can imagine how much of a diluted impact that has. When people don’t need to go to the publisher anymore they can just go around the publisher and go to Google and they can buy the same viewer. I think that’s a huge problem and I think that if we can put the ownership of that data back into the hands of the consumer or keep it in the hands of the publisher, then it’s either going to allow the publishers to monetize to a much higher degree or it’s going to give the users of those websites an asset that’s really valuable that they can turn into some sort of financial resource.

Yi Lu: I think that’s all the time we have. Thank you so much. It was great talking to you.

David Bailey: Thank you and you can check out bitcoinmagazine.com. We got crypto all day every day. Thank you.