Are We Ready for Radical Transparency in the Web3 World?
This morning, at breakfast, I read a headline on my newsfeed, ‘Money That Won Melania Trump NFT Came From Melania Trump Wallet’. Interestingly, it recalled another article I also read about the authenticity of the new trove of Basquiat works that were recently uncovered and are now in exposition. The controversy around both pieces of ‘art’ are polar opposite from each other – in one case, the NFT owner seems to have purchased back their own NFT, in the other, the art world isn’t convinced the paintings are authentic. How can some transactions be laid bare for the world to see while others remain shrouded in mystery?
The answer is in the two articles. In the case of the Basquiat paintings, the article reports the transaction was an auction (probably a conventional, cash-based auction) of a storage unit whose owner had failed to pay his monthly fees. For the Trump NFTs, however, the article notes, "A series of blockchain transactions show that the cryptocurrency used to purchase Trump’s nonfungible token came from a wallet that belongs to the entity that originally listed the project for sale." The answer is the Web3 World.
Web3 and blockchain technology (also known as public distributed ledgers) are creating a radical, automatic, transparency to transactions. Because the blockchain is an open platform and a fully auditable and immutable ledger of transactions, anyone who joins the blockchain can view all the information on that ledger. And because nothing can be altered on it without recording the changes, we can hold others or ourselves accountable for the information on the blockchain. This not only makes payments more transparent - thus enabling the rise of cryptocurrencies today - it can also allow for smart contracts - which we are seeing through art-driven purchasing of NFTs today - and more.
In the future, blockchain transactions would allow consumers to see the entire supply-chain of a brand’s product and determine whether or not it was sustainable, free of child labour, or whether the company was really ‘giving back to the community’. Consumers could make ethical purchasing choices, relying on the blockchain to provide proof for their decisions. Brands would be tested on their authenticity in terms of how they present themselves to consumers vis-à-vis their actual actions in the creation of their services or products. And because the information is immutable (that is, not erasable, only editable), companies will have to consider their choices carefully.
Advertising can also benefit from considering how blockchain, and its transparent transactions, can support our business model. MLG is testing the waters today with a production supply-chain blockchain in one of our agencies, offering our clients transparency in our production activities. On the media side of the world, we see an astronomical growth in companies wanting to use blockchain to better improve the media buying and analytics process. Brands that have online shopping portals can use blockchain to reward frequent customers, verify true purchases, and validate real recommendations or referrals.
Taken further, as companies figure out the role of blockchain for their brands, we could see more than just transparency for the brand. What if this transparency also offered up an opportunity to pay consumers for interacting with them? What if a brand could see the true value of a content creator and their ability to influence their audience? Brands could pay that content creator not only for promoting the brand, but also for each transparent transaction of the audience with the creator or the brand’s product. If these actions were recorded, companies could have a better understanding of the true relationship between brand and consumer, sales, and awareness – the entire brand lifecycle. We might even be able to reduce our dependence on the middlemen we use today to get that information!
But this change in the information dynamic has risks for companies. Only a few years ago, the information exchange between the company and the consumer was a one-to-one relationship controlled by the company. The company would offer information to a consumer through advertising, product labeling, or a customer help line. And if a customer had an issue with a product, it was privately reported to the company. With the advent of social media, Twitter, Reddit, and crowd-sourced information in Web2, the exchange of information about brands became more public. Now if a customer had a problem with a product, they might discuss their issues on Twitter or post a negative review on the product webpage. Yet even that information can be altered or deleted altogether by the company or the social media host. Now with blockchain, however, customer interactions - and their experiences - become public, immutable, information. No company or platform can control the content.
Brands have learned that Web2 platforms enable consumers to not only see or experience their brand awareness activities, but also to create a public discourse about the brand. Yet while Twitter and some social media platforms have helped brands get closer to their consumers than ever before, the potential for better information in the relationship between brands and consumers in a Web3 world, based on blockchain, is exponential. Will brands be ready for more radical transparency than they are used to having? Will consumers be better served by knowing more about the brands they love or hate? For better or worse, we’re going to find out soon: the blockchain is here to stay.
