Broken Business Models
All of this stems from the internet business models that emerged at the beginning of the Web 2.0 era in the early 2000s.
Now we all know that the internet has weakened the dominant position of traditional media publishers in content production and distribution.
In theory, this is a positive, democratizing step that allows for a wider, more diverse range of information sources and brings us closer to a utopian "marketplace of ideas."
The problem is, no one has been able to come up with a reliable way to monetize this free model. For publishers, readers have become frustratingly fickle, bouncing between independent blogs, websites, and mainstream publishers without the predictability that advertisers demand. If media companies can't make money, how will society pay for the production, verification, and distribution of trustworthy news and information?
Let's start with Google, whose powerful and constantly improving algorithms have given it an unquestionable leadership position in the search field, creating a massive user base that represents what every publisher wants: users. Then Google learned how to track user behavior, create definable, deliverable audiences, and sell them to publishers and advertisers. The era of surveillance capitalism began.
Google's model became the norm for Facebook and other social media platforms, diverting advertising revenue that should have gone to publishers.
Using increasingly complex user data to curate content and attract audiences to interest groups that are attractive to advertisers, the direction of algorithm development is behavioral modification. We've all had the experience of Google or Amazon recommending products related to topics we're interested in. And there are YouTube recommendation algorithms that can trap people.
There is clear evidence that these audience management models influence our political views. Cambridge Analytica used Facebook to build support for Brexit. The echo chamber effect of social media has deepened political divisions in the United States.
We have transitioned from a utopian market vision (the survival of the fittest ideas) to a nightmare (algorithmic recommendations, deliberate invisible guidance of thoughts).
Can NFTs help?
The solution to the problem is to disrupt the existing business models. This is where NFTs can be useful because they represent the first step in solving the core problem of Web 2.0: digital replicability.
With content being easily copied online at almost zero cost and then spread by anyone under the cloak of anonymity, traditional media companies have lost control over their products and revenue.
Traditional media companies attempted to address this issue through digital rights management (DRM). But as media companies combined with litigation copyright enforcement, Facebook and Twitter created a more open environment that encouraged ordinary users willing to provide content to publish, share, and engage. By inserting a package of relinquishment terms in their terms and conditions, they encouraged explosive growth of content and attracted audiences. Media companies couldn't ignore these audiences, so they had to comply with the platform's rules.
Eventually, as paywalls for news websites became more accepted, the largest publishers found a way to survive. But these barriers not only weakened the concept of an open "marketplace of ideas," but also made it possible to implement these barriers only for large companies that had endured heavy legal and production costs in the early difficult years. It was the closure of thousands of small newspapers that brought us to this point.
Then, NFTs emerged.
By establishing digital scarcity through unique tokens and enabling peer-to-peer digital media exchanges, NFTs provide a new way for media companies and brands to directly engage with audiences without the need for intermediaries.
NFTs also bring their own ownership issues. Many buyers have found that they don't actually own the art or content they paid for.
And, as demonstrated by the Chloe Kardashian bikini photo incident, it is difficult to prevent content from being copied, especially when it spreads like a virus. NFTs cannot physically stop or control the copying of digital content.
However, we can establish standards to ensure that the special rights associated with NFT-related content are not controlled by individual custodial platforms, but are allocated to token owners and encrypted with the tokens themselves, making them easily transferable to buyers in each downstream sale.
In addition to other design features, this model would require storing the original version of the content in a permanent location that cannot be shut down by any centralized entity, whether it be a media company, social media platform, hosting service like AWS, or government. To ensure that future digital content markets do not have flaws that require centralized fixes and ultimately develop into monopolies like Google, it also requires self-sovereign identity, decentralized exchanges, and interoperability protocols. If these technologies come together, they can fundamentally change the digital media economy.
There are people researching and tackling all of these technological challenges, addressing trust issues in a decentralized environment. Decentralized storage models like Filecoin and Sia exist, as well as the Web3 Foundation's focus on decentralized web infrastructure, interoperability protocol Polkadot, and Cosmos.
We must learn from the first two stages of the internet, where the network routing architecture, although touted as decentralized, overlooked the "double-spending problem" that hindered digital currency, identity, and content (which was solved by the Bitcoin whitepaper).