Issue:
August 2024
Blockchain is the future of the future for news
You may know that Web3 refers to online services built around blockchains, which are linked online ledgers distributed across data centers. These can verify transactions without the need for regulation or oversight by a central authority. You also may have heard that somewhere, over the rainbow, will be using such technology in the journalism business.
Blockchain and Web3 may be part of the news media future, but in its present, these technologies are a bit like hammers in search of nails.
Waves of entrepreneurial enthusiasm and sustained funding to bring these technologies to bear in the news business have so far failed to revolutionize the industry, or mint any new media moguls. Some of the higher profile efforts have collapsed altogether.
Crypto-futurism
Nevertheless, proponents of using Web3 in news media are undaunted as sustained interest in making money around cryptocurrencies keeps hope alive.
Advocates, journalists, activists and entrepreneurs involved in some of these efforts spoke at the club last month at Supporting News Media with Web3 and AI Technology,’ organized by IT Committee co-chairs Hinza Asif and Yuusuke Wada. Asif herself is involved in covering blockchain news as Chief Executive Officer of NFTStudio24, a website covering industry news. She is also president of the Asia Web3 Alliance Japan.
Speakers included Yuma Tanimoto, a board advisor at Asia Web3 Alliance; Yasushi Teramura, head of blockchain business at Gumi; Sota Watanabe founder of Astar and Hideto Kawasaki, a Member of the House of Representatives.
Regulatory paradox
Kawasaki worked with NTT Docomo for more than a decade before winning a seat in the parliament. Since taking office, he video-blogs about these issues and is regularly featured at seminars and talk shows to explain his work and talk about the future of regulating blockchain enterprises, also known as Web3, also known as Decentralized Autonomous Organizations or DAOs.
He has taken leadership of the Liberal Democratic Party’s web3 Project Team, which wants to promote more effective regulations so that investors and big companies can jump into Web3 projects with greater confidence.
Regulating Web3 might be an enigmatic quest, since reducing or eliminating the need for regulation is one of its core promises. This is more or less what’s meant by autonomous in Digital Autonomous Organization. Discussions of how such organizations operate tend to swiftly transition from operational challenges and business plan targets to manifesto-like pronouncements about the wonders of decentralization.
The rise and fall of US-based Civil Media Company, introduced as a blockchain-based news media platform that governs itself, offers at least one lesson in why regulation is both so necessary and so challenging for these technologies.
“We set out to decentralize how the news is vetted, how journalism is funded, and how we stay informed as a society,’’ Matthew Illes, Civil’s chief executive officer, wrote in 2020 in a message announcing that the operation was folding.
While Civil Media’s promise seems utopian, it was to be fueled by means that some consider more ethically neutral: cryptocurrency. Specifically, a crypto “coin” called CVL was to be the vehicle for funding a network of independent newsrooms around the world. In 2017, interest in cryptocurrency was exploding, so the idea that readers or viewers and investors would snap up a digital coin to support journalism was able to at least get off the ground.
Coin flop
But the launch of CVL didn’t go well. The New York Times’ Jonah Engel Bromwich wrote in a November 2018 piece that: ``It was as if an Olympic weight lifter said that, at a minimum, he’d be able to clean and jerk 400 pounds, and then did not manage to move the bar more than an inch off the ground.’’
Sales of CVL fell $6 million short of the launch target and about 80% of what did sell was bought by Consensys, the blockchain software company that funded Civil as a startup, Bromwich reported in the New York Times.
On June 28, 2024, the US Securities and Exchange Commission charged Consensys with selling unregistered securities. The action wasn’t related to CVL, although the team that built Civil News and its coin was integrated into Consensys when the project was shut down in 2020.
“By allegedly collecting hundreds of millions of dollars in fees as an unregistered broker and engaging in the unregistered offer and sale of tens of thousands of securities, Consensys inserted itself squarely into the U.S. securities markets while depriving investors of the protections afforded by the federal securities laws,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “As this enforcement action shows, we continue to hold noncompliant actors in this space accountable, as we do across the securities market.”
For its part, Consensys says the regulator is going too far.
“This is just the latest example of [the SEC’s] regulatory overreach - a transparent attempt to redefine well-established legal standards and expand the SEC’s jurisdiction via lawsuit, Consensys said June 28, 2024, statement on its website.
Crypto cooling
Still, the SEC’s crackdown is likely to discourage plans for using cryptocurrencies to raise money for news media projects.
Creating regulations that can restore confidence in the sector is essential, Kawasaki, the Diet member representing part of Mie Prefecture in Japan, said at the FCCJ event on July 19.
Kawasaki has helped organize a series of hackathons, or gatherings of programmers, aimed at developing rules for Digital Autonomous Organizations. These have drawn specialists from companies including telecom KDDI Corp., Toyota Financial Services Co. and Soko Life Technology Co.
“Mr. Kawasaki’s comment that Japan’s only revival method is via WEB3 and deregulation is intriguing,’’ said Wada, FCCJ IT Committee co-chair. "We need to decentralize so that good engineers would stay in Japan and produce good contents to challenge the world."
The Diet members’ efforts are ongoing, though widespread reluctance to build new media enterprises around blockchain remains.
As yet, Japan has no omnibus regulation governing blockchain-based tokens, according to a Global Legal Insights report by law firm Anderson Mori Tomutsune’s Keisuke Hatano, Takeshi Nagase and Takato Fukui.
Hammer and tacks
Yet beyond funding with cryptocurrency, there are still news media applications for Web3 and blockchain. Most center on two ideas: authenticity and payments for creators.
1. Verifying authenticity of origin: By creating a decentralized ledger for video, text, images and voice content, a blockchain can certify where a particular piece of content came from and that it has not been altered.
Deep-fake videos and recordings are already popping up in political propaganda all around the world and some of it is promoted as being sourced from major news organization. In late July 2024, US billionaire and owner of the X social media platform Elon Musk, shared a faked video that purported to show US Vice President Kamala Harris making embarrassing comments about her career. Criticism of the fake video was published by major news organizations including CNBC and the New York Times, but Musk has some 190 millions followers on the platform he owns. Most or all of them would have been able to see the video, and probably still can. Even if responsible news organizations like CNBC and NY Times can verify the authenticity of their own content, social media networks will still be spreading false content that can go viral within highly politicized online media ecosystems.
2. Payments: Smart contracts that use blockchain to verify compliance can ensure that payments are made automatically when certain conditions are met, increasing transparency and trust.
As more journalists get paid directly from subscribers to their work on platforms like Substack, improvements in methods of payments can streamline the process.
But secure, reliable payments aren’t a big challenge for these platforms. Credit card and electronic payments applications make it simple to reliably and securely pay journalists directly. At the moment, blockchains require vast computing resources and electric power, making them unlikely rivals for simpler and established payment systems.
3. Content ownership and licensing: Blockchain can help protect intellectual property rights by providing a transparent, indestructible record of content ownership and licensing agreements.
This goes to the core of what blockchains do in verifying transactions, so there may be a role. But IP licensing and theft hasn’t been a big issue for the news media industry. To the extent that news content is “stolen,” it’s not being resold directly, but is rather being used to drive traffic as links through search engines or aggregators. Verifying ownership wouldn’t help with that.
4. Decentralized content distribution: Blockchains can make decentralized distribution more robust, by creating indestructible records of content.
This could be especially important in places like China, where online access and distribution is strictly controlled.
7. Crowdsourced journalism: Blockchain can support platforms where citizen journalists can contribute content. Because the ownership of work can be confirmed continuously and anonymously by a blockchain, team-written or edited or produced stories can be distributed with less concern about anyone failing to get credit or trying to get credit without helping.
10. Rewards: Cryptocurrency or tokens can be offered as rewards to readers with less central authority and regulation than other types of awards.
Evolution vs revolution
All of these may be worthwhile, but none seem relevant to the bigger crises journalism as we know it is facing. The collapse of newspaper and magazine advertising and the rapid shift in television viewing habits toward much shorter, varied and non-professional online content, don’t seem likely to have fixes related to cryptocurrency, blockchain or artificial intelligence.
At the same time, entrepreneurs may well build fortunes by inventing new approaches to parts of the news media business, from ways to count and verify advertising impressions to mechanisms for more efficiently syndicating and distributing news stories.
“By bringing together government, businesses, and media, these events show that Web3 isn't just an idea—it's driving real innovation and digital progress,’’ said Asif, FCCJ IT Committee co-chair. "These technologies enhance data security, increase transparency, and empower communities and consumers. Today, big tech often profits from user data despite concerns. These gatherings are crucial for discussing how blockchain can promote fairer access, encourage creativity, and revolutionize how media content is shared."
Dave McCombs is the President of the FCCJ.
