Introduction

While Bitcoin's primary function was to serve as a financial tool, its connection to the media industry was evident from the very beginning. The initial block, or the genesis block, of the Bitcoin blockchain not only recorded transaction details but also included a piece of news from the Times newspaper. After more than a decade of evolution, blockchain technology and cryptocurrencies have gained popularity and sparked innovations across multiple sectors beyond finance, including the media industry.

With its decentralized and transparent nature, blockchain technology has the potential to transform the media landscape by enabling new business models, enhancing transparency and trust, and creating new revenue streams for content creators. Yet despite this significant potential, widespread adoption of blockchain technologies and cryptocurrencies in the media industry still faces several challenges. Recent surveys show that only a small percentage of Americans view cryptocurrencies positively, with many citing concerns around volatility, security, and regulation. In addition, prominent figures in the business and finance world, such as Charlie Munger, have called for cryptocurrencies to be banned [1], further adding to the perception of uncertainty and risk around this emerging technology.

That being said, the intersection of the fourth estate and Web3 continues to witness constant innovations. This paper aims to provide an exploration of the history of blockchain technology and cryptocurrencies adoption in the media industry, before examining both the challenges and opportunities for Web3 to disrupt the fourth estate and usher in a new era of decentralized media.

The Times Cover for the Bitcoin Genesis Block

Part I: A Brief History of Crypto Media

1. Crypto-Centric News Outlets (2009-2015)

The emergence of any innovation will always birth a demand for related knowledge and information. With mainstream media unable and unwilling to cover details about the development of cryptocurrencies and blockchain technologies, several dedicated crypto media outlets emerged soon after the inception of Bitcoin. The most notable ones, such as Bitcoin Magazine (cofounded by Vitalik Buterin in 2012), and Cointelegraph and Coindesk (both founded in 2013), are still vital pillars of crypto media today.

Though critics will argue crypto media sometimes help drive scams and bubbles around cryptocurrencies, crypto media outlets play a crucial role in 1) educating and driving the adoption of blockchain technologies in the very early days 2) training and cultivating reporters who have domain knowledge about blockchain and who will later fill positions in legacy media when expanding their crypto reporting team 3) sounding alarms for frauds and potential systematic fallouts. For example, one CoinDesk report disclosing Alameda’s reserve actually played an important role in the discovery of “the biggest” crypto fraud and the collapse of FTX in 2022.

The first report revealing the balance issues of FTX from CoinDesk

Besides news media, on-chain data analysis and market intelligence providers also began surfacing during this time period, most notably CoinMarketCap and Chainalysis, founded in 2013 and 2014 respectively. The existence of these information providers to some extent improves transparency in the market and helps journalists investigate stories.

During this stage, innovations and applications of blockchain in the media industry were very limited. This was primarily due to the fact that blockchain technology was initially popularized by the creation of Bitcoin, which was designed primarily as a decentralized digital currency system. The original whitepaper for Bitcoin, published in 2008 by the pseudonymous creator Satoshi Nakamoto, did describe a system in which the blockchain could be used to timestamp documents and data, but the Bitcoin network is invented primarily for payment, with the maximum size of a block setting at 1 megabyte (MB) by Nakamoto in 2010 in order to prevent the blockchain from becoming too large to be managed by individual nodes on the network. (That limit was effectively increased to be about 4 MB per block as of 2023.) As a result, though miners can attach some irrelevant data/messages along transaction details in a block, just like Nakamoto did in the first block of Bitcoin, applications beyond payment on the Bitcoin network are almost impractical.

On top of that, the Bitcoin network has only several APIs (Application Programming Interfaces) available that developers can use to interact with the network, which further limits applications that can be built on Bitcoin. It wasn’t until several years later when Ethereum was launched in 2015 that people began to explore the full potential of blockchain for data storage and management.

2. Smart Contracts and Decentralized Content Management (2015-2020)

Vitalik Buterin's creation of Ethereum in 2015 was a significant milestone in the development of blockchain technology. With Ethereum, Buterin introduced a new blockchain architecture that allowed for the creation of decentralized applications (dApps) beyond the scope of digital currencies. The Ethereum blockchain came equipped with a programming language called Solidity, which enabled developers to create smart contracts - self-executing digital agreements that automatically enforce the terms of the agreement.

The innovation of smart contracts on the Ethereum blockchain has inspired many innovations in the media industry. One of the most significant use cases of blockchain technology in the media industry is in content management and distribution. With the help of smart contracts, content creators can protect their intellectual property rights by assigning licenses and setting terms and conditions for the use of their content. Smart contracts also make it easier for content creators to receive payment for their work directly from their consumers, without the need for intermediaries such as publishers or distributors. This creates new opportunities for content creators to monetize their work and earn a fair share of the revenue.

For example, Steemit, established in 2016, is a blogging and social media platform that leverages blockchain technology. The platform is built upon the Steem blockchain and enables users to earn cryptocurrency in the form of STEEM tokens for creating and curating content. Users are rewarded based on the popularity and quality of their content, as well as the votes and comments it receives from the Steemit community. When Steemit was attempting to develop a blockchain-powered, token-based version of Twitter, a number of other projects emerged to create similar decentralized platforms for video sharing with an aim at disrupting traditional video sharing giants such as YouTube. Some notable examples include StreamSpace (founded in 2017), Flixxo (founded in 2016), Viuly (founded in 2017), and Viewly (founded in 2017 but is no longer active).

Furthermore, the use of blockchain technology in the media industry has extended beyond content creation and distribution. It has also enabled the development of new business models, such as decentralized advertising networks, that reward users for their attention and data. For example, Basic Attention Token (BAT), introduced in 2016, is a blockchain-based advertising platform that aims to disrupt the traditional digital advertising industry by providing a more privacy-focused and user-centric model. The platform enables advertisers to target users directly and rewards users for their attention through the use of BAT tokens.

Moreover, blockchain technology has also been used to tackle issues related to fake news and misinformation. One such platform, called Civil, was launched in 2018 and leverages blockchain technology to create a decentralized newsroom that allows journalists to publish and monetize their work directly, while also providing transparency and accountability through its community-driven verification process.

Source: NBC News

During this stage, many projects in the blockchain and crypto space emerged as a result of initial coin offerings (ICOs) instead of traditional venture capital funding. While this allowed for a quick and easy way to raise funds and gain traction during the market hype, it also made these projects financially vulnerable when the crypto market experienced a crash in 2018. It's also important to note that while many of these projects were marketed as "decentralized," some of them still relied on centralized servers, taking advantage of tokenomics and using tokens purely as incentives. This lack of true decentralization was a point of criticism for many in the industry.

The period of crypto hype from 2017 to 2018 also saw the emergence of several other innovative ideas that were poised to bring greater adoption of blockchain technologies to various industries, including the media and entertainment sector. One of the most prominent examples of this innovation is Non-Fungible Tokens (NFTs). NFTs have unique properties, such as verifiable authenticity, unique ownership, and the potential for new revenue streams, that make them an attractive tool for creators and collectors alike. Although NFTs were first introduced in 2017 with early projects like CryptoKitties and CryptoPunks, it wasn't until 2021 that they gained widespread attention and spurred a wave of innovation in the media industry and beyond.

3. NFTs, DAOs, and Decentralized Social Media (post 2021)

Since its inception, blockchain had been a niche topic for legacy media to cover until something dramatic happened in 2021. Established media companies around the world were involved in a so-called NFT boom, selling a wide range of content - from writings to videos - as NFTs on the blockchain. This adoption of NFTs by established media companies represents a significant shift in the industry and demonstrates the growing interest and potential of blockchain technology.

Legacy media's involvement in NFTs has been met with some controversy, with some critics, including Bill Gates, claiming that crypto and NFTs are solely based on the "greater fool theory." [2] However, the adoption of NFTs has brought in new revenue for legacy media companies, with Time Magazine generating over $10 million in profit from NFT sales in just 14 months through its flagship TimePieces NFT collection.[3] [4] The profits are still growing on the secondary market.

TIMEPieces NFTs

NFTs have not only provided content creators with a new way to monetize their work, but also a unique opportunity to engage with their fans. As a result, an increasing number of decentralized platforms have emerged to better leverage this new technology, with Mirror.xyz being one of the most notable examples. Founded in 2020, Mirror.xyz, often referred to as a crypto-version of Medium, is a decentralized publishing platform that enables anyone to create, share, and sell their unique digital content as NFTs. It allows creators to have more control over their content and the ability to monetize it in new and innovative ways.

With the increasing popularity of NFTs, we are also seeing a rise in media-related DAOs (Decentralized Autonomous Organizations). These DAOs utilize the power of blockchain technology to create decentralized ecosystems for media companies and their communities, with a focus on transparency, community participation, and shared ownership. By embracing DAOs, media companies can offer a new way for their audiences to engage with them, while building more sustainable business models that benefit all stakeholders.

For example, Mad Realities is a DAO-style start-up that is backed by Paradigm and several celebrities, including Paris Hilton. The company is a decentralized studio that produces reality shows, with funding from the sale of NFTs. And the owners of these NFTs have various governance powers over the production, allowing them to participate in decision-making processes that were traditionally reserved for industry insiders. This innovative use of blockchain technology and NFTs represents a significant shift in the media industry, as more companies look to embrace decentralized ecosystems and offer more direct participation opportunities to their audiences.

In addition to Mad Realities, several other media-related DAOs have emerged, with Friends with Benefits (FWB, founded in 2020), Bankless DAO (founded in 2021), Pub DAO (founded in 2021), and Headline DAO (founded in 2023) as some examples. FWB is a token-based membership system where members can directly support and benefit from the success of their favorite creators. Bankless DAO is a community-driven decentralized media organization with members contributing skills and expertise to create educational content about blockchain and cryptocurrencies, and involving in decision-making processes and the governance of the organization. Pub DAO, on the other hand, is a decentralized media platform that is focused on supporting independent journalists and content creators. The platform uses blockchain technology to enable micropayments for articles and content, allowing creators to be directly compensated for their work without relying on advertising revenue or intermediaries. Whereas Headline DAO is a decentralized journalism “experiment” that uses NFT sales to fund independent journalism and NFT holders will have the right to vote for which journalist they’d like to fund.

Besides the rise of NFTs and DAOs, the year of 2021 also witnessed the growth of demand for decentralized social media/platforms when Donald Trump was banned on major social media platforms that sparked heated debates around freedom of speech and content moderation. Furthermore, people became increasingly aware of the issues around data privacy and ownership, and the growing control of content by giant tech companies. This led to a surge of interest in decentralized alternatives, where users have more control over their data and content. That demand continued to grow when Twitter was bought by Elon Musk in 2022.

Decentralized social media offers an alternative to traditional social media platforms by leveraging blockchain technology to create decentralized networks that are not controlled by any single entity. Unlike many of the projects claiming to be "decentralized social media" during the 2017/2018 crypto mania, newer projects focus on building true decentralized networks using federated networks. Federated networks use a protocol called ActivityPub, which allows users to communicate and share content with other users on the same network, regardless of the specific platform they are using.

In a federated network, users can communicate and share content with other users on the same network, even if they are using different servers or nodes. This is made possible through a protocol called ActivityPub, which is used by many federated social networks to allow users to connect with each other regardless of the specific platform they are using. Protocols like Lens protocol, Nostr and Farcaster are all aiming at providing such tools to help build decentralized social media apps. And Mastodon and Damus are two notable application examples facing directly to general users.

Part II: Challenges for Decentralized Media

The rise of NFTs, DAOs, and decentralized social media platforms demonstrates the potential for blockchain technologies to reshape the media landscape, empowering creators and communities with new ways to monetize and distribute their content, and fostering more democratic and transparent media ecosystems. However, these innovations still face significant challenges:

1. User adoption and scalability

The media industry operates on an attention economy, where success depends on capturing the attention of a large audience. However, while internet access has reached 64.4% of the world population, the global adoption of cryptocurrencies stands at only about 4.2% as of 2023, equivalent to the adoption rate of the internet in the late 1990s, according to World Bank data.[5]

Digital media adoption first overtook traditional media in the United States not until 2020, thanks to Covid-19; Therefore, there is still a long way to go for a killer web3 application to emerge in the media industry, especially given that only 8% of Americans view cryptocurrencies positively. [6][7]

Public education through mass media is a powerful way to promote the adoption of new technologies, but legacy media brands face a dilemma when embracing blockchain and the general idea of web3. While they welcome innovations, they also seek to distance themselves from any potential scams or bubbles around crypto, which is closely tied with blockchain, to maintain public trust. This largely explains why most established media brands chose to donate their "experimental" NFT sales to various foundations in 2021.

Decentralized social media platforms are still in their early stages, and it remains to be seen whether they can gain widespread adoption and compete with dominant centralized platforms. One major factor that could impact their growth is the overall infrastructure development of blockchain networks, as decentralized social media platforms are dependent on the speed and scalability of blockchain technology. Until these challenges are addressed, it may be difficult for decentralized social media to gain the attention and adoption needed to compete with traditional social media platforms.

2. Infrastructure limitations

Infrastructure takes time to build. Building a blockchain is no longer a major hurdle for innovators, but new blockchains may struggle to gain traction and survive without active applications built on them. Therefore, most innovators choose to build on existing and active blockchains like Ethereum, despite its scalability issues. Ethereum congestion can significantly degrade the user experience for network transactions and DApp interactions. During times of high congestion, transaction fees can skyrocket, making it expensive or impractical for some users to participate in the network. In extreme cases, network congestion can even lead to temporary shutdowns or other disruptions.

Due to these infrastructure limitations, most decentralized applications struggle to match their centralized competitors in terms of user experience, making it difficult for them to compete. As an example, let's take Damus, a decentralized social network that has been backed by Jack Dorsey, the co-founder of Twitter. Currently, users have to upload their images to a third-party server before posting them on the app, and video uploads are not yet possible on the platform.

3. Volatilities and inconsistency

The highly volatile nature of the crypto market poses a significant challenge to innovation in the media industry, with frequent cycles of boom and bust making it difficult for companies to manage staff and maintain financial stability. The challenges faced by crypto media are exacerbated during market downturns, when it becomes even harder to sustain the business.

Moreover, decentralized social media startups often struggle to maintain traction during market downturns, as those who joined the hype during the boom but don't truly believe in the decentralized future, quickly abandon the market. This market volatility also presents a major hurdle to the financial health and sustainability of startup ventures, and has unfortunately led to the shutdown or sale of several promising projects. For instance, Civil was shut down in 2020,[8] Po.et, a blockchain-based platform started 2016 for managing digital content rights and ownership, also shut down in the same year, Steemit was sold in 2020, and TrusStory, a blockchain-based platform for fact-checking and verifying online content, also shut down in 2020 due to funding difficulties, despite receiving initial investment from prominent figures in the blockchain community.

4. Patchwork Solutions and the Creation of New Problems

Decentralized applications (dApps) are a promising solution to many problems, but they also pose new challenges and risks that must be carefully considered.

Decentralized social media platforms, for instance, offer a way to address the shortcomings of centralized platforms in terms of data privacy, censorship, and content moderation. By using blockchain technology, these platforms can empower users by giving them control over their data and content. However, they also introduce new challenges, such as the difficulty of removing illegal content and the potential for spreading misinformation and hate speech. For instance, though Damus prides itself as a platform for “free speech,” most of the existing content on the platform is low-quality advertisements and pornography.

Furthermore, in their efforts to create an anti-censorship network, decentralized social media platforms may inadvertently contribute to a divided user base, as different groups migrate to different platforms that align with their views. This can lead to the creation of "echo chambers" where individuals are only exposed to views that reinforce their existing beliefs, rather than engaging in productive dialogue and exchange of ideas. That's not good to heal this already divided society.

DAOs, for another instance, provide alternative ways to produce and distribute media content, yet when it comes to serious journalism, some shortcomings may emerge as this specific area often requires expertise that is lacking from the general public. And decentralized decision-making may easily lead to the production of lower quality content and a lack of accountability. Another concern with voting in DAOs is the potential for vote buying, where individuals or groups with large amounts of funds can use their resources to influence the outcome of a vote. This can be particularly problematic in DAOs where voting power is tied to the amount of funds held by members.

Part III: Opportunities for Decentralized Media

Despite the challenges facing the adoption of blockchain technologies in the media industry, there are still numerous opportunities for innovation and growth. These opportunities can be grouped into three main areas:

1. Further adoption of NFTs and Web3 in media industry

Several news providers, including Reuters, Bloomberg, and CNBC, have expanded their crypto reporting teams and are offering more educational content about blockchain and cryptocurrencies. Despite facing criticism, more legacy media brands are adopting NFTs as a monetization and user engagement tool, even during times of market downturns in the cryptocurrency space.

The adoption of Web3 is also becoming increasingly common in the media industry. The Times is reportedly doubling down on its Web3 strategy, while Forbes and NBCUniversal were searching for VPs in charge of Web3 by the end of 2022 according to public information on LinkedIn.

And the year of 2023 already witnessed more media companies adopting NFTs. In February, GQ launched its first ever NFT collection, and Fox Entertainment’s The Masked Singer launched a token-gated fan experience. Fox is also planning to launch its NFT-driven TV series "Krapopolis" involving “Rick and Morty” creator Dan Harmon this year, according to CoinDesk.[9]

Gaming is another great channel for tech adoptions beside mass media, and with development of blockchain infrastructure, native on-chain games that with built in NFTs and economics has attracted an increasing amount of attention from the public. The development of GameFi has the potential to significantly impact the mass adoption of blockchain in the media industry. With the growing interest in blockchain and DeFi applications, GameFi offers a new way to engage audiences and drive adoption, particularly among younger generations who are more likely to be gamers and tech-savvy.

2. Zero-Knowledge Proofs and Media

The development of Zero-Knowledge Proofs (ZKPs, or simply ZKs) is one the most promising areas heavily bet by the biggest VCs, with several ZK start-ups raising tens of millions each in the past few months.

ZPKs are a cryptographic technique that enables one party to prove to another party that a statement is true without revealing any additional information beyond the truth of the statement itself. ZKPs have a wide range of potential applications, particularly in the areas of blockchain and cybersecurity. For example, in blockchain, ZKPs can be used to prove the validity of transactions or the authenticity of digital assets without revealing any sensitive information about the parties involved. This can help improve the speed and efficiency of blockchain networks while maintaining the privacy and security of users, largely addressing the challenges posed by the congestion of Ethereum and other blockchain networks. That in turn will benefit all dApps as a whole including Web3 innovations in the media industry.

In addition to providing scalability and privacy protection, ZKPs have the potential to be directly applied in the media industry, particularly in the fight against misinformation. A research team at Stanford has demonstrated the viability of ZKPs in the media industry, particularly in verifying the authenticity of digital images and videos using blockchain-powered ZK technologies. Trisha Datta and Dan Boneh, members of the research team, published a blog on Medium explaining how ZK proofs can be used to fight disinformation. [10] By leveraging the power of blockchain and ZK technologies, digital images and videos can be authenticated without revealing the underlying data, which can help prevent the spread of deepfakes and other forms of manipulated media that can be used to spread false information.

ZKPs provide a way to verify data without disclosing the data itself, making it a powerful tool for combating fake information. By using ZKPs to verify the authenticity of digital media, media companies can create more secure and trusted platforms for users to consume and interact with content. Moreover, ZKPs can also be used to protect user privacy and prevent the tracking and collection of personal data. By keeping user data private, media companies can create more secure and trusted platforms for users, which can increase user confidence and engagement.

Overall, ZKPs have significant potential in the media industry, particularly in the fight against fake information and the protection of user privacy. As the technology and applications of ZKPs continue to evolve, it will be interesting to see how media companies adopt and leverage it to create more secure and trusted platforms for users.

3. Decentralized Content Curation Systems

With the rise of Web3 and the decentralization of the media landscape, the importance of building decentralized content curation systems has become increasingly apparent. While major Web2 social media platforms have empowered individuals to create content, the centralized curating system they use, powered by dark-box algorithms, has limitations in terms of transparency and democratic access.

To build a decentralized content curation system, it is necessary to address various technical and governance challenges. One of the main technical challenges is ensuring scalability to accommodate a large number of users and content, while maintaining high security and transparency standards. Governance challenges related to decision-making and accountability must also be addressed.

Despite these challenges, decentralized content curation systems hold significant potential to impact the media industry, particularly in content discovery and distribution. By enabling more democratic and transparent systems for content curation, these systems can help to promote a more diverse and equitable media landscape, where all voices have an opportunity to be heard.

Most of the existing media-related DAOs naturally serve as decentralized sub-curating systems and some newer DAOs were created specifically to solve these problems, with KurateDAO founded in 2023 as an example. KurateDAO specifically seeks to use “cryptoeconomic games to curate the world's information”, demonstrating the potential for decentralized content curation systems to make an impact in the media industry. [11] And we’ll expect more innovative ideas emerging in this area in the coming few years.

Source: KurateDAO

Conclusion

In conclusion, blockchain technology presents immense opportunities for the media industry in Web3. Decentralization, immutability, and security are some of the key benefits of blockchain technology, which can address long-standing issues in the media industry, such as misinformation, lack of transparency, and censorship. However, the road to full adoption is long, and the media industry will face various challenges along the way, including regulatory hurdles and technical difficulties.

To fully realize the potential of blockchain in the media industry, it's crucial to focus on practical solutions that address real problems and are financially sustainable. Only by doing so can the media industry move towards a more decentralized and sustainable future, where trust and transparency are at the forefront of the industry.

About the Author

Wendy Ye is a Co-Founder of NewsBlock, a project aiming to preserve daily crypto headlines as NFTs. A journalist turned builder in web3, Wendy has a decade of experience reporting business and financial news from Wall Street, Silicon Valley and Singapore. She holds a master’s degree in Communication and New Media Studies.