What the Ad Industry Gets Wrong About Blockchain

While the ad industry seems to be warming up to the applicability of blockchain technology, misuse and misconceptions remain. Sam Kim, CEO of Lucidity, discusses some of those misconceptions and offers readers insight on how to spot them

Blockchain.

It’s too slow. It doesn’t scale for programmatic. It’s just conceptual. It’s all hype. 

Misconceptions around blockchain technology and its specific use cases in digital advertising abound. Some of these notions are based on ungrounded assertions from companies who fear they have something to lose from the advent of blockchain.

Others are simply based on outdated information.

Almost all of this is unhelpful at best, damaging at worst. We need to cut through the noise, the rumors, and the false information in order to paint an updated and accurate picture of where blockchain in advertising is going.

Let’s begin. 

Don’t Make Decisions Based on Outdated Info

Innovation in blockchain is happening at an astounding pace. So it’s understandable why opinions in bylines, panels and industry presentations can’t always keep up with the latest.

Basing decisions about blockchain on info 2+ years ago is kind of like forecasting the weather based on climate data from 1,000 years ago.

The climate has changed dramatically. And so has the blockchain industry..

What was once the primary concern -- that blockchain is simply too slow to have anything to do with programmatic advertising -- simply isn’t the case anymore.

The Need for Speed

The root chain Ethereum is a public utility that provides two key features for the development of blockchain-based applications.

• First, it provides a decentralized network on which smart contracts can operate.
• Second, it provides a tokenized ecosystem to manage incentives and penalties. 
   

It was not designed to support applications directly. And therefore, it initially suffered from serious scalability issues.

This might be why some members of the ad tech community wrote off blockchain years ago, especially for programmatic advertising.

For blockchain to work as an advertising solution, it obviously needs to be able to keep up. Luckily, there are recent innovations that allow it to do so.

Welcome to “Layer 2” Blockchain Technology

In a public root blockchain, there is always a tradeoff in how decentralized the system is and how scalable it is.  Ethereum elected to be the most decentralized system in the world. Now, Layer 2 solutions allow it to be one of the most scalable systems too.

Layer 2 programming solutions function “on top” of existing blockchains and promise massive improvements in scalability, interoperability and functionality.

Today, there are many Layer 2 solutions that can support the scale necessary in digital advertising.

One of the ways blockchain can scale is via sidechains. Sidechains are separate, private blockchains built on top of a main root chain. Creating a sidechain allows developers to distribute the burden of verifying transactions. Instead of having to wait for the root blockchain to verify every transaction individually, sidechains make it possible to verify multitudes of transactions simultaneously.

This allows blockchain to scale limitlessly while maintaining the decentralization of the root chain. Which means it can more than handle the amount of transactions (millions per second) in order to keep up with the blistering speed of programmatic advertising.

One way marketers could use Layer 2 technology is to ensure everyone in the ecosystem has access to the same data. Verifying metrics on the blockchain would allow marketers to determine if their ads were indeed delivered as directed, how well their ads performed, exactly how much of their budget went towards media, and more.

The First to Test Will Be the First to Succeed

Like many changes we’ve seen in advertising, advertisers and platforms who learn, test, provide input, and build the new world together only stand to benefit. Those who hang back and wait in the wings (header bidding comes to mind) will have plenty of earnings calls to enumerate the reasons why they got left behind.

Don’t be fooled by the purely conceptual blockchain projects. Talking on a panel is one thing. Building a product is another. Companies that let you test, kick the tires, advise, and build together will ultimately shape the future of advertising where the voice of the customer is in the product’s DNA.

Advertising is at the top of the list of industries that can be positively impacted by blockchain. Let’s invite education, testing, debate, and collaboration across the industry early.