In an earlier post I advocated esports to utilize up and coming technologies to facilitate growth. These follow up posts will examine technology sectors esports business owners should familiarize themselves with.

The Ethereum blockchain is an incredibly complex idea that has gained increasing momentum in the past few months. While I am an avid fan of the tech, I will be the first to admit that my understanding of it is basic at best, so I encourage you to explore the below ideas on your own. For fans of HBO's Silicon Valley, Ethereum is apparently the focus of this season's story arc.

What is the Blockchain

The blockchain is a concept first pioneered by BitCoin. The Bitcoin Blockchain is a ledger of all existing BitCoin transactions. Think of it as a giant database for every use of BitCoin ever. It uses decentralized technology to verify every transaction to prevent fraud and a failure of the system by compromising any single node. In the same way that Torrents utilize multiple computers to distribute content, BitCoin uses the blockchain to verify all data in the network. Users on the system have digital wallets in which they can store digital currency.

If you compare BitCoin to something like the US Dollar a clear difference emerges. Every year more and more dollars are printed resulting in inflation. Every year the dollar buys less than it did the year before. BitCoin differs from most traditional currency by installing a cap on the total number of BitCoins that can be in circulation. This has generally caused the value of BitCoin to increase. At the time of this article a single BitCoin trades for approximately $1500, up from 2014 when a BitCoin traded for $400. An ounce of gold currently trades for $1250.

Warning: BitCoin prices have fluctuated wildly over the past several years. Do not invest without doing due diligence into the size of these shifts and their causes.

BitCoin was the first mover in the space but it's current limitations spawned several competitors that seek to fill the holes BitCoin does not. Enter Ethereum.

Ethereum took the Blockchain idea and expanded it to a true platform. It provides multiple services already and many more are being built out by developers.

Smart Contracts

Let's look at the traditional functionality of an esports contract. Two parties agree to an exchange of services which will result in an exchange of currency. Here are some esports related examples:

I will stream for 20 hours in exchange for currency.

I will compete at a tournament for which I will be compensated a certain amount of money for my performance.

I will engage in sponsor content for which I will be paid a certain amount.

Once the service is rendered one of the parties is then obligated to pay the agreed upon amount. However as we know there have been many cases where this party renegotiates for an alternative rate or absconds with the payment altogether. The recourse for the wronged party is to seek legal action which is time consuming, difficult, expensive, and frequently ineffective. It gets even more complicated if the two parties are in different international jurisdictions.

You would not have this problem on the Ethereum Blockchain. Via it's smart contract system, once both parties agree to the contract, the contract will automatically execute. Parties agree to terms, designate mutually agreed upon "watchers" for the contract (or utilize API hooks to monitor the desired metrics) to execute the contract. In essence it acts as a computerized escrow account over which neither party has full control over.

Organizational Functionality

The Ethereum blockchain allows the creation of custom tokens. These tokens can be used to weigh votes, signify membership, and interface with contracts. In esports this can be utilized to create a Pro Players Union that can provide benefits. Tokens can be awarded based on smart contracts. Union rewards and fees can be collected programmatically from each member's connected wallets.

Fundraising

Many an esports Kickstarter has collected funds from the community without ever providing the advertised result. With Ethereum you can design smart contracts that connect to custom created tokens. These tokens can be sold to raise funds. If the agreed upon product never materializes, the currency pledged by the community can be returned back to the community. Additionally third party services such as Kickstarter or GoFundMe will be cut out of the equation resulting in more funding going directly to the project.

Many of the DApps being built on the Ethereum blockchain are funded through this method. Some have been able to raise incredible amounts of money in a short period.

Closing Thoughts

There is a lot of functionality in Ethereum already and I encourage you to explore the topic at greater length. The above ideas barely scratch the surface of what is possible with this decentralized technology. Institutions such as Bank of America and Microsoft have already made inroads in building their own products on the Ethereum blockchain and many other traditional players are entering the space. Utilized properly the Ethereum blockchain can eliminate many of the Wild-Wild-West antics of esports while maximizing organizational efficiency.

About the author: Anton Ferraro has been working in esports since 2006. You can view his past projects at www.AntonFerraro.com