Decentralized Autonomous Organization (DAO) – The Organization Of The Future?

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October

2022

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written by Robin Fieseler, 14th of October 2022, 5min read

Table of content:

  1. The $50M ‘The DAO’ hack
  2. What is a DAO?
  3. Opportunities and Threats of a DAO
  4. Key Take aways
  5. References

1. The $50M ‘The DAO’ hack

Spring 2016, the world’s first decentralized autonomous organization (DAO) on Ethereum, ‘The DAO’, was created on a P2P network to be the first decentralized venture capital fund. The DAO raised $168M of individual investors. In June 2016, headlines all over the news stated that The DAO was hacked by $50M (Mehar et al. 2019).
Before the threats are unveiled, let’s start with a simple explanation and dive deeper into the crypto space. Afterwards you will learn what areas DAOs could affect and what opportunities a Dao can create. Finally, the threats of DAOs are discussed by unveiling what caused the hack.

2. What is a DAO?

A decentralized autonomous organization is internet-based globally operating collectives using resources together for a common and predefined goal (creating products or services). Everyone who invests in a DAO benefits from governance, i.e. reciprocal voting rights. This leads to a dehierarchisation. The DAO is a company with programmed rules, e.g. how to use the money or what happens with the money if the project fails. These rules are programmed as Smart Contracts resulting in an action as soon as the needed votes are reached. Everyone can raise new topics on which the DAO investors/members will reconcile (Welpe 2022).

What is DAO, Source: https://cryptooa.com/wp-content/uploads/2018/12/DAO.png

Furthermore, it is stated that it could be a legal organization to acquire goods or art, to focus on a social goal or crowdfunding, functioning as an investment vehicle like The DAO or being a whole decentralized business. The last point could mainly focus on new businesses like start-ups. This example would look like: if a start-up wants to create a decentralized app, the DAO would be the company making the decisions with smart contracts about for example raising the money needed to pay salaries and decisions about the allocation of salaries (Welpe 2022).

3. Opportunities and Threats of a DAO

After understanding what a DAO is and in which area a DAO could operate, the following focus is on opportunities and threats. On the one hand, DAOs are part of the decentralized movement leading to the abolition of the intermediary. This leads to reduction in costs for not needing lawyers, banks etc. Focusing on investments, individuals might not be able to participate in funding due to minimal amount of money to invest (Wang et al. 2019). For example, a DAO called ConstitutionDao was founded and raised $3.5M to buy a rare copy of the U.S. constitution. Not having or wanting to invest that much money would mean there is no possibility to participate in the auction (Rachel Lerman 2021).

The threats incorporate security and privacy issues, and an unclear legal status. For this post the focus lies on the security. How does it come that in a decentralized (more secure) world, security is such a big issue. It comes by the nature of the blockchain itself. The blockchain stores the data openly accessible for everyone. But, if everyone can read the code of the contracts and the organization, then also everyone is able to find bugs. In the case of The DAO, a bug was identified in 2016 and immediately tried to be solved. However, everyone has the same amount of knowledge due to open access to the data. So, in this specific case an anonymous hacker group stole $50M due to a bug in the code. Moreover, a company is succeeding due to it’s unique selling proposition. Now imagine if the data is openly accessible for anyone. Anyone can just copy and paste the data and create a similar company. In reality, it is not as easy as juts pressing ctrl + c, but the threat still exists. Lastly, there is no legal status on DAOs meaning there is a lot of risks of new laws regulating or banning (Liu et al. 2021; Mehar et al. 2019; Wang et al. 2019).

4. Key Takeaways

To conclude, a DAO is the best way to eliminate the intermediary and invest collaboratively with
anonymous others with the same goal into projects. While the opportunities show that it economical
to reduce the intermediaries and gives opportunities to compete with hedge funds, the risks explain
why DAOs are more used as investment vehicles than actual companies. If you invest and use a DAO
as the vehicle, make sure the programmers who created the company know what they do.
For those of you who want to learn more about the hack now, click on the link to learn what a hard fork is, how The DAO programmers made sure people didn’t lose all their money and why we have Ethereum Classic today.

5. References

Liu, L., Zhou, S., Huang, H. et al. (2021), ‘From Technology to Society: An Overview of Blockchain-Based DAO’, IEEE Open J. Comput. Soc., 2: 204–215.

Mehar, M. I., Shier, C. L., Giambattista, A. et al. (2019), ‘Understanding a Revolutionary and Flawed Grand Experiment in Blockchain’, Journal of Cases on Information Technology, 21/1: 19–32, accessed 13 Oct 2022.

Rachel Lerman (2021), ‘A group of crypto enthusiasts lost out on the auction to buy a rare copy of the U.S. Constitution’, The Washington Post, 19 Nov <https://​www.washingtonpost.com​/​technology/​2021/​11/​18/​crypto-​dao-​constitution-​auction/​>, accessed 14 Oct 2022.

Wang, S., Ding, W., Li, J. et al. (2019), ‘Decentralized Autonomous Organizations: Concept, Model, and Applications’, IEEE Trans. Comput. Soc. Syst., 6/5: 870–878.

Welpe, I. (2022), ‘#323: DAO – Modell der Zukunft?’, Podcast, Trends: NFT, Krypto, Web3 & Social Media, 14 Oct.

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Investments in web3 and the Metaverse. Risk, opportunities and managerial implications

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2022

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Let’s begin with what really drives choices in the business world: numbers. The annual  “Follow the Money” report, published by Bocconi’s Digital Enterprise Value and Organization Lab, showcases that the two concepts underlying the new evolution of the internet, the Metaverse and the web3, are able to attract not only media attention, but also substantial financial investments. 

Globally, companies and start-ups operating on Metaverse technologies attracted over $430 million in investments in the last quarter of 2021 alone, compared to a total of 11 million in 2020. 83 percent of investments in 2021 concentrate starting from the month of October, in conjunction with the rebranding of Facebook in Meta. At the same time, since the two issues are often linked in the managerial discussion, an investment trend has started in companies specialised in web3 technologies which has seen a growth of 142 percent between the whole of 2021 and the first quarter of 2022, reaching over 380 million of dollars from January to March 2022, against the total 157 million of the previous year.

But where are these investments headed? Capturing the attention of investors in the Early Stage, Seed and ICO (Initial Coin Offering) phases are Metaverse companies such as NAVER Z, a platform for designing 3D worlds, filling them with virtual objects and launching live streams to interact between users; or Inworld AI, a platform for the creation of avatars and characters driven by artificial intelligence; or Space, a platform that combines digital commerce and socialisation according to the immersive experiential paradigms of the Metaverse. On the web3 front, interest shifts to a more infrastructural layer of technologies, with companies such as Mina, The Graph and QuickNode committed to building scalable protocols to lay the foundations for the new web.

Dwelling on the current managerial debate, an obvious problem is that the concepts of Metaverse and web3 now tend to be superimposed and used interchangeably to characterise the current evolutionary phase of the internet. Seeing the web3 as a new phase of the web – after the birth and growth of the internet (eighties and nineties) and the affirmation of web 2.0 paradigms (from 2004 to today) and placing the immersive virtual worlds of the Metaverse in the new meaning – represents however, an oversimplification, which can lead companies to overestimate some opportunities, as well as underestimate some risks. Opening an immersive virtual space on Roblox, the reference platform for the Alpha generation, does not necessarily mean entering the web3, just as buying an NFT does not make us citizens of the Metaverse. To better understand how the two technological concepts are linked and can be exploited, individually or in association, as well as what risks can derive from them, it is good to focus on their respective definitions and, above all, on the value that each can bring.

The term Metaverse was coined by Neal Stephenson in the novel Snow Crash in 1992 to indicate a three-dimensional space within which individuals can move, share experiences and interact through personalised avatars. To date, the term Metaverse is used to indicate, in a broader sense, an interactive, advanced and immersive experience, in which users can socialise, receive professional training, play, take lessons, participate in meetings, have cultural experiences and much more. other. There are many technologies that enable this type of experience – for example, advanced virtual graphics, computer vision, and data analytics. Of all, without a doubt, a fundamental role is played by virtual reality (or VR) which enables immersive accessibility to these new virtual worlds.

The term web3 was coined in 2014 by Gavin Wood, co-founder of Ethereum and developer of Polkadot. The web3 aims to become a new decentralised internet network thanks to the use of the blockchain, the technological infrastructure on which Bitcoin and other cryptocurrencies are based. In the web3 the data would no longer reside on a network of centralised servers, but would be spread evenly throughout the network. This need arises from very pragmatic evidence.

Currently, the information exchanged via the internet is tracked by some well known tech-giants (especially by the famous GAFA-Google, Apple, Facebook and Amazon) and the levels of privacy guaranteed to users are very limited. Having a more open and democratic web available is the driving force that pushes many techno-utopians to focus on the web3. A cyberspace that should restore to the internet that nature of an open, uncontrollable and accessible to all environment, dusting off the initial promises of the nineties, then broken in an oligarchic structure controlled by well-known actors.

The implications of these initial reflections for companies and managers facing these issues are many. Above all, it is necessary that the initial evaluations of new use cases linked to these paradigms take place precisely on the guidelines of the decentralisation level of the infrastructure (web3) and the level of immersion of the experience (Metaverso), weighing these characteristics on the basis of company objectives and the needs of target users. There is currently no prevailing approach, it will be quite interesting to see which logics will assert themselves in the coming years.

However, it must be said that the benefits of an immersive experience or a decentralised infrastructure correspond to risks. In the case of decentralisation, the risks arise mainly from limited scalability and the absence of governance and control. For immersion, it should not be forgotten that the level of maturity of the enabling technologies, VR above all, is still evolving and not completely adequate to support the long-term vision of many use cases.

These considerations must help us to avoid a repetition of what happened in the 2000s with the Second Life experiment, which, after an initial moment of euphoria, was greatly reduced due to the lack of a strong purpose of the project capable of intercept real needs of users.

References

Minevich, M. (2022) The metaverse and WEB3 creating value in the future Digital Economy, Forbes. Forbes Magazine. Available at: https://www.forbes.com/sites/markminevich/2022/06/17/the-metaverse-and-web3-creating-value-in-the-future-digital-economy/?sh=4a5bf51f7785 (Accessed: October 9, 2022). 

Blockchain and the Metaverse Boost Startup Investments (2022) SDAB. Available at: https://www.sdabocconi.it/en/news/blockchain-and-the-metaverse-boost-startup-investments (Accessed: October 9, 2022).

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Web 3.0 Looks Good On You

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2022

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Can the Metaverse change fashion as we know it?

The emergence of immersive interaction spaces is transforming digital environments into outstandingly collaborative and sensorial virtual worlds. Such potential levels of engagement presented by the future Metaverse are opening the door to a new era of fashion. Brands and designers are accordingly making out the opportunity to take their engagement with consumers to the next level and to unlock completely new revenue streams.
This new digital world brings the concept of virtual fashion to life in multiple shapes and disciplines where the industry can reach new cohorts.
In this regard, gaming is currently a major target for fashion brands, as it gradually turns into a near substitute of the real world where clothes are becoming a sign of in-game status (McKinsey & Company, 2022). Several brands are already partnering with immersive games such as Fortnite or Roblox by offering exclusive digital garments or ‘skins’ in the shape of in-game merchandise. In June 2021, a player acquired a Gucci bag on the game Roblox for more than $4,000, an amount that overly exceeded the price of the equivalent real-world physical bag (Gonzalez, 2020). And this is just an example of the new fashion wave in videogames, which is creating a new revenue stream for brands.
A considerable part of the enthusiasm about the Metaverse points in the direction of NFTs, as they can bring value in several ways that the fashion industry can utilize to their benefit. For instance, and more importantly, by utilizing blockchain, NFTs have undeniable proof attached to them of both the creator and the owner of the item (Joy, et al., 2022). This can solve the everlasting problem of authentication in the fashion industry, but now in the digital paradigm. Blockchain provides uniqueness and traceability, so brands’ identity is protected, together with their revenue streams (Gonzalez, 2020).
The rise of digital fashion in immersive platforms is also setting the scene for an emerging business model in the industry that plays a crucial role in the inevitable disruption process. Direct to Avatar (D2A) consists of the sale of items to game avatars or characters through the digital environment, and thus omitting all types of supply chain management steps needed to deliver physical products to a consumer (McKinsey & Company, 2022). Multinational brand American Eagle was one of the first to step into this disruptive initiative in July 2021, when it released a fully digital collection for Bitmoji, an avatar creation platform (Adams, 2021).
These and more advantages offered by the coming Metaverse is turning the fashion industry towards fully digital offerings and creating infinite opportunities for new revenue streams. This is especially shocking in an industry which has traditionally been sustained on physical interactions with consumers.

References

Adams, P., 2021. American Eagle debuts digital clothing on Bitmoji in creator-focused push. Marketing Dive, 5 August, pp. Retrieved from: www.marketingdive.com/news/american-eagle-debuts-digital-clothing-on-bitmoji-in-creator-focused-push/604402/.

Gonzalez, P., 2020. Digital Fashion In The Metaverse, Milano: Politecnico di Milano, School of Design. Retrieved from: https://www.politesi.polimi.it/handle/10589/188809

Joy, A., Zhu, Y., Peña, C. & Brouard, M., 2022. Digital Future of Luxury Brands: Metaverse, Digital Fashion and Non-Fungible Tokens. Strategic Change, 31(3), pp. 337-343. Retrieved from: https://onlinelibrary.wiley.com/doi/epdf/10.1002/jsc.2502

McKinsey & Company, 2022. The State Of Fashion 2022, Retrieved from: https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/state%20of%20fashion/2022/the-state-of-fashion-2022.pdf?shouldIndex=false: McKinsey & Company

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The “Merge” killed Ethereum mining, what does this mean for other blockchains?

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September

2022

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Ethereum is a popular cryptocurrency and is the second largest blockchain network after bitcoin. It distinguishes itself from bitcoin by being open source. In other words, anyone can use it to program a blockchain-based digital technology, several examples of the use of Ethereum are NFTs, decentralised finance and smart contracts.

Before the “Merge” Ethereum used a proof-of-work (PoW) concept, i.e. a group of participants would run software to prove that the encrypted number was valid – this process is called mining. For their contribution, these miners were rewarded in a cryptocurrency called Ether. The mining process required a large quantity of processing power from GPU, which intern, required large amounts of electricity. This process was, however, very profitable at the cost of the environment. One main criticism of blockchain was the huge amount of electricity required to keep up the network. In Ethereum’s case, it was 78 Terawatt hours each year, for comparison that is equivalent to the power consumption of Chile. Not always is this electricity sourced from green energy, often it comes from fossil fuel power plants (Howson, 2022).

To address the sustainability concern Ethereum moved to a proof-of-sake (PoS) model. This differs from mining in that the block creators previously known as miners now become validators. In short, the validators record the transactions, verify activity, and get paid with transaction fees. The cost of equipment and electricity is not a barrier to entry anymore and anyone with sufficient funds can become a validator. Energy-hungry GPU mining rigs have become obsolete as the new model does not require as complex decryption calculations as previously needed, this will cut emissions by 99% according to the conversation.

The move toward sustainability has pleased environmentalists and has sparked a movement to switch all blockchains from PoW to PoS to reduce their energy consumption. The Merge, however, left many crypto-miners disgruntled, with useless hardware. Second-hand GPU prices have dropped drastically since the “Merge” and Nvidia has announced to its investors, that they will hold back production of their newest GPU to avoid further GPU price crashes.

Reference:

Howson, P., 2022. Ethereum: second biggest cryptocurrency to cut energy use by over 99%, but the industry still has a long way to go. [online] The Conversation. Available at: <https://theconversation.com/ethereum-second-biggest-cryptocurrency-to-cut-energy-use-by-over-99-but-the-industry-still-has-a-long-way-to-go-189907#:~:text=Ethereum%2C%20the%20world’s%20second%2Dlargest,the%20power%20consumption%20of%20Chile.> [Accessed 17 September 2022].

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From Game-Fi to Social-Fi: new business opportunities in Web 3.0

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September

2022

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GameFi, also known as Play-to-Earn games essentially combine Gaming and Finance using Blockchain technology. Similarly, SocialFi, also known as Move-to-Earn apps combine social activities and Finance. Web 3.0 players are no strangers to these concepts as they have existed since the popularity of cryptocurrencies. However, 2022 was a big year for Game-Fi and Soci-fi with more and more traditional industries pouring investments into these emerging activities. In this article, I will discuss how the two business models contribute to the growth of blockchain and NFTs, with a focus on StepN, a Web 3.0 lifestyle app.

The attractiveness of Social-Fi comes from the “earning” perspective. By playing games and being active on the app, users are able to receive income either from in-app token rewards, staking, or minting NFTs from the platform marketplaces. When users receive tokens, they will be able to trade these tokens or derivatives on supported crypto exchanges. The games are normally simple and easy to play, with a twist of NFT integration. For example, in StepN, users first need the NFT sneakers to start earning STEPN, the native token of the platform. After getting a pair of the sneakers, users will be able to earn STEPN by exercising, such as walking, HITT, etc. You now may ask: How do you buy the NFT sneakers? The answer is it all happens on Solana’s NFT marketplace. Solana Blockchain also powers the Social-Fi app StepN so it ensures all users can figure out all activities in one ecosystem.

According to Cointelegraph, by September 2022, over half of the blockchain industry are being used for Gaming (Fortis, 2022). The crypto industry has definitely shifted from simple token and derivatives exchanges to a more beginner-friendly society. However, hackers are targeting these platform with the increasing amount of less crypto-educated users joining the projects. Axie Infinity is one of the biggest GameFi project, but AXIE holders have become easy phishing tagets on telegram because they are relatively new to the industry. Additionally, it has suffer multiple security breaches where users lose millions worth of tokens (NBCUniversal News Group, 2022). Therefore, more educations are definitely necessary for GameFi to penetrated in a broader audience. Meanwhile, projects need to enhance security operations to prevent such events from happening.

References:

Fortis, S. (2022, September 2). Gaming makes up over half of blockchain industry usage, DappRadar. Cointelegraph. Retrieved September 14, 2022, from https://cointelegraph.com/news/gaming-makes-up-over-half-of-blockchain-industry-usage-dappradar

NBCUniversal News Group. (2022, April 10). Axie Infinity Hack leaves players shaken – but still loyal. NBCNews.com. Retrieved September 14, 2022, from https://www.nbcnews.com/tech/crypto/axie-infinity-hack-leaves-players-shaken-still-loyal-rcna23379

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‘Blockchain Impact On Real Estate Brokerage’

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October

2021

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The real estate brokerage process


According to Nitin Gaur, the former Director of IBM Blockchain Labs, “we live in the age of

disintermediation,” or the removal of middlemen. On a worldwide basis, individuals appear to be wary

of intermediaries and prefer to engage directly with one another. Currently, most purchasers and

sellers of real estate use escrow and title firms for third-party verification, which serves as a safety net

to ensure that both parties maintain their end of the bargain and reduces the danger of fraud.

However, the real estate brokerage model has many inefficiencies.

Among these are a requirement for a great deal of paperwork, a need for face-to-face interaction among the parties

to most transactions, and a lack of technological capability to legally bind property purchase with complete

documentation and security (Cheng-Shorland & Alishahi, 2019). Furthermore, the present real estate brokerage

process is not transparent or verifiable. These problems are also closely related to

the non-transparency of its data (Deloitte Centre for Financial Services, 2017). The information

asymmetry relating to real estate assets contributes to the real estate market’s transaction costs. In

addition, a complicated structure of interrelationships between participants also accounts for a large

portion of the transaction costs in the price of real estate (Kalyuzhnova, 2018).

Blockchain technology could potentially improve some of the current shortcomings in the real

estate brokerage process. The blockchain is a peer-to-peer network that does not require any

centralized authority or trusted third party. It only adds information to the database after it has

collectively verified the accuracy of the data (Tapscott, 2016). If the assets are digital, they can

contain any sort of value.

Blockchain

The innovative power of this technology makes it possible for companies to use a computer network to do business

with other companies they do not trust. A ‘smart contract’ powers the blockchain. The smart contract’s

programmability allows registered peers to validate transactions automatically and anonymously and

decide whether a new block can be added to the chain in chronological sequence (Baliga, 2017).

Moreover, any valuta, any contract, any tangible or intangible good can be traded using a system like

blockchain. Transactions are not the only thing that can be used for blockchain. Blockchain can also play

a role in the system of record and inventory to record, track, monitor, and trade assets. Hence,

blockchain could be applied for any form of recording, inventorying, and exchanging assets, including

all areas of finance, economics and currency, tangible assets, and intangible assets. According to

Spielman (2016), blockchain technology provides greater security and makes fraud impossible

because blockchain is immutable. Aside from security, another significant feature of blockchain

technology is transparency, as all parties involved have access to the data. So, the four primary

characteristics of blockchain are transparency, immutability, programmability, and decentralization.


The change

Blockchain represents a total shift away from the traditional ways of doing things, even

for industries that have already seen the significant transformation from digital technologies. It places

trust and authority in a decentralized network rather than in a powerful central institution. And for

most, this loss of control can be deeply unsettling (Deloitte, 2018). According to the theory, the blockchain digital

ledger’s transparency and traceability will dramatically lower the cost of verifying trading partners (Catalini and

Gans, 2016). Blockchain technology and a smart contract can overcome the problems associated with the real

estate sector. A decentralized system can allow buying as well as selling properties without a third party. The

document is also verified and validated digitally. All the documents are stored in a digital ledger

distributed database where everyone can see them (Mohanta, Panda & Jena, 2018). As a result, the

amount of time and money it takes to collect the information needed for a transaction will be lowered.

Real estate agents currently gather the information manually in multiple databases and verify the

stakeholders through slow protocols. Many of these documents must be bought. In addition, a real

estate agent charges fees for services such as enhancing reliability and reducing the risk of trading

with unknown partners. The transaction costs would be reduced if this procedure was carried out using

smart contracts. Furthermore, if the majority of this transaction were handled via smart contracts, most

of the labor of real estate agents would be eliminated, resulting in the brokerage fee being eliminated

or significantly reduced. The primary reason blockchain is not being utilized in this procedure is

because it is not yet legal. Public authorities have rules and standards regarding privacy when people

conduct a real estate transaction, that prohibit blockchain real estate transactions and registrations.

As long as human factors play a prominent role in the process of buying or selling real estate

objects, information asymmetry, goal incongruence, and high transaction costs will not disappear. In

the future, there should be blockchain alternatives to support or completely provide this process for the

involved parties in a real estate transaction.


References

Baliga, A. (2017). Understanding Blockchain Consensus Models.

Catalini, C., & Gans, J. (2016). Some Simple Economics of the Blockchain.

CHENG-SHORLAND, C., & ALISHAHI, A. (2019). BLOCKCHAIN-POWERED REAL ESTATE

SALES AND RENTAL SYSTEM.

Deloitte Centre for Financial Services. (2017). Blockchain in commercial real estate – The future is

here!

Kalyuzhnova, N. (2018). Transformation of the real estate market on the basis of use of the blockchain

technologies: opportunities and problems.

Mohanta, B.K., Panda, S.S., and Jena, D., (2018), “An Overview of Smart Contract and Use Cases in

Blockchain Technology.”

Spielman, A. (2016). Digitally rebuilding the real estate industry.

Tapscott, D., & Tapscott, A. (2016). Blockchain revolution : how the technology behind bitcoin is

changing money, business, and the world .




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How can Blockchain change the legal industry?

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2021

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Blockchain is an example of a Distributed Ledger Technology (DLT), in short this means a distribution of independent computers which are also referred to as nodes. These nodes are responsible for recording, sharing, and synchronizing transactions in the ledger. A great advantage of this is that the transactions are decentralized instead of being centralized in one local ledger. These ledgers can be used to distribute digital assets without the need of copying or transferring, to facilitate access to the ledger from anywhere due to the decentralized form, and it generates trust in the asset due to the prevention of changes created by the transparency of the ledger.

Learn How To Integrate Blockchain In Legal Industry | by Robert Smith | Medium

The legal industry will be affected by the Blockchain ledger in multiple ways. Firstly, cost reduction and automation due the introduction of smart contracts. Smart contracts provide a way to change the way of working in the legal industry, traditional static documentation will be otiose in the future since smart contracts can automate the process of terms and conditions application. Smart contracts can automatically detect if terms and conditions are met or not, after this it can automatically execute the effects of this contract. This results in a less labor intensive more effective process for both parties which means a cost reduction.

Another interesting area where blockchain can affect the legal industry is in transactions of ownership of digital and physical assets. Legal firms often need to supervise big transactions to secure a secure and fair transaction for both the buying and selling parties. Human errors can be minimized if legal firms would use blockchain technology to settle transactions. Agreements and restrictions can be automatically followed since they are integrated in the protocol code of the blockchain.

Lastly, Blockchain will bring an extra layer of integrity and transparency in the legal industry. Legal documents which are transferred or stored in an insecure way are a big target for hackers with bad intentions, information shared and created by lawyers can be valuable and publicizing this information can have many negative effects for the owner of the information. Legal offices can decide to store sensitive legal documents in private append-only ledgers where information is immutable this results in more integrity. Hash values will not match if data is changed or tampered which warns the legal firm for any violations.

Summarizing from the above, blockchain can change the legal industry in a positive way. Automation and smart contracts will result in cost reductions for all parties, and Blockchain data storage will result in integrity and transparency of legal information.

Sources:

Evans, J. (2018). Curb your Enthusiasm: the real implications of blockchain in the legal industry. J. Bus. Entrepreneurship & L., 11, 273.

Goldenfein, J., & Leiter, A. (2018). Legal engineering on the blockchain:‘Smart contracts’ as legal conduct. Law and Critique, 29(2), 141-149.

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NFT + ART = ?

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2021

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The first digital collection “Everydays. The first 5000 days” auctioned by the British auction platform Christie’s was closed in March of this year. The winning bidder obtained the “Non-Fungible Token” (NFT) for the work at a price of nearly 70 million U.S. dollars (69,346,250 U.S. dollars). The occurrence of this incident to a certain extent subverts the concept of the traditional collection market and has brought unprecedented impact to the entire art world and the alternative asset investment market.

“Everydays. The first 5000 days”

What is NFT?

NFT means non-Fungible tokens, which are indivisible, irreplaceable, and unique. Different from ERC-20 tokens, because it is inseparable, it guarantees the uniqueness of each one from the code level. Therefore, NFT can represent physical assets and their ownership in a unique way on the blockchain. You can also understand it this way: there are no two identical snowflakes in the world, so you can use a snowflake to represent something unique in the real world, but the significant difference is that snowflakes cannot be circulated on the chain, so no one will use snowflakes to hype, although it is scarce enough in characteristics.

Use Cases

The current use cases of NFT are mainly concentrated in categories such as collectibles, artworks, games, and virtual worlds. But other categories such as sports, fashion, and real-world assets are also developing steadily. 

In terms of sales volume, collectibles are currently one of the most popular applications of NFT. For instance, there is a market where NFT technology is used to create tokenized versions of celebrity athletes and celebrities. The fantasy football game Sorare allows players to collect “limited edition digital collectibles” of their favorite athletes from 100 football clubs, which has successfully attracted the attention of football fans. And now, this market is booming.

Fantasy football game_Sorare

The application of NFT in the gaming industry is also very extraordinary. Gamers are the perfect target market for NFT because they are already familiar with the concept of the virtual world and currency. But unlike traditional games, NFT allows players to have real ownership of their digital assets, and thus creates a way for players to make money by creating and developing in-game assets, which gradually forms a new economic model. Players can learn encryption knowledge by playing games without taking any financial risks, and more importantly, they can earn ETH and NFT. A player in developing countries can earn as much as their monthly incomes by just playing games like Axie Infinity and Cryptopick.

Axie Infinity marketplace

For digital artists, one of the biggest challenges is to protect their works from copyright infringement. The emergence of NFT technology provides an excellent solution to this problem because they provide proof of ownership and authenticity. Starting in 2020, as more and more museums and galleries are forced to close due to the pandemic, many artists have now turned to NFT and online exhibition halls.

Home page of Rariable

Challenge

Currently, there is a problem with the NFT issued on the two larger public chains in the NFT ecosystem, Ethereum and Flow. Although the cost of the NFT issued based on the public blockchain networks is almost zero and NFT itself cannot be modified, it also makes the cost of deceit negligible at the same time. Even though some NFT issuance platforms have pre-review, follow-up reporting, and other preventive measures, counterfeiters are still hard to completely eliminated. 

Prospect

At present, the application spectrum of NFT is still relatively narrow, concentrated in the niche circles of games, encrypted artworks, and card collections. But I think the possibilities and potential of NFT are limitless. One of the obstacles to its large-scale application might be the lack of extensive education on blockchain technology and the world of encryption. This can be partially ascribed to the geek, rigid and technology-oriented natures of NFT and blockchain technology. Hence, to increase the acceptance rate of the general public, it is fundamentally necessary to further simplify it and make it easy to use. Besides, if the increasing interests from the capital market can greatly enforce the market supervision on NFT trading in the future, the liquidity of NFT in the global market will be substantially increased.  At that time, I believe almost everything can be turned into NFTs, creating more interesting and exciting use cases.

Resources:

Beeple’s masterwork the first purely digital artwork offered at Christie’s. (2021, March11). CHRISTIE’S. https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-NFT-to-come-to-auction-11510-7.aspx

Clark, M. (2021, August 19). NFTs, explained: what they are, and why they’re suddenly worth millions. The Verge. https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq

https://sorare.com

https://marketplace.axieinfinity.com

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The future of content on demand: blockchain

28

September

2021

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Blockchain, a phenomenon that caused several hypes including decentralized finance and the ownership with NFTs. However, a new hype is rising around content on demand. Through augmented reality and artificial intelligence, the experience of online content is taken to another level. It is used to create content that best suits the audience of the creator. The question that rises is what system is challenging the creator to create what the watchers like?

The problem of today’s social media platforms

You might relate to it, scrolling through your Instagram and seeing photos and videos that are quite similar to content of other creators. Often times creators think that specific content is a good fit for the viewer’s wishes as other creators are also making that content, while the viewer wants to see other things that are unique. For a lot of creators on platforms as Instagram, Facebook, YouTube and TikTok it is difficult to set up a good revenue model. This because of the fact that creators are constantly dealing with trust issues. For instance, a YouTuber gets a request to create content but the question is who takes the first step? Is it the YouTuber that first makes the shots and receives money afterwards or does the YouTuber get the money beforehand. These questions were there for a long time, though the social media platforms waited too long with doing innovations on this subject, which will put them one step behind on the rising hype of blockchain.

The new hype of content creation

But what does blockchain have in common with creating content? Well, the technology behind this phenomenon is that you do not need permission from a third party and it is transparent. As it is programmable, you can set your own conditions regarding the payments, which are verifiable as well. This results in the fact that the creator and client are on the same level and no third party is arranging the transaction. What does that mean for the industry of content creation? With the use of blockchain, it is possible as a client to make specific requests related to content by their favorite creators. For example, you see that your favorite creator is traveling to Bali. You as a client can ask the creator to take a picture of something specific and you pay for it, in tokens. This results in greater interaction between the client and content creator.

In short, blockchain is not only the future of banking and ownership with NFTs, but also the future of content on demand. With blockchain, we will only see content that fits perfectly with our demand. But for now, it is still an expecting hype. We have to see what the future holds for us.

References

Hancock, J. (2020). Blockchain application for content creators. Medium. https://ethex-smm.medium.com/blockchain-application-for-content-creators-8fba70163269

Investopedia. (2020). How Blockchain is Revolutionizing Content Distribution. https://www.investopedia.com/news/how-blockchain-revolutionizing-content-distribution/

Urrutia, K. (2021). How Blockchain is Affecting Content Creators on Social Media. Voy. https://voymedia.com/how-blockchain-is-affecting-content-creators-on-social-media/

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Blockchain technology in the art industry

26

September

2021

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Started as a tool for provenance and authenticity evolved to a new approaches to collect, and even create, new art forms. The impact of blockchain technology within the art industry can’t be denied anymore. It is clear that this trend, which is still al little vague at the moment, will gain popularity the coming years. How is blockchain applied within the art industry? And what does this technology bring to the art industry?

Non fungible tokens (NFT’s)

The evolution of non-fungible tokens (NFT’s) allows artists to register their artworks through blockchain technology and translate these artworks into securable sellable assets. The digital art piece receives an unique serial number which entitles the original piece a form of provenance. As the popularity of an art piece increases, the more people are willing to pay for some rights to the original digital art piece. In contrast to physical art pieces, NFT art can be shared and used everywhere.
To demonstrate the growing popularity of NFT art; traditional and well-known auctioned Christie’s has opened has opened its first auction only focused on digital artworks by one single artist. This new-born platform is called Beeple.

Blockchain as fraud preventer

One of the biggest challenges of art markets is to verify the authenticity of the art works where the artist is not alive anymore. A report, published by the Fine Arts Expert Institute (FAEI) in 2014, stated that more than 50% of the artworks they investigated were falsified or not addressed to the right owner. The use of blockchain could change this. Blockchain is believed to be one of the most secure manners to transfer digital data at the moment. This reason lies in the fact that there is no centralized version of the information accessible and hackable for someone with bad intentions. Blockchain is able to track and verify authenticity via timestamps on transactions.

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