Cryptocurrencies and the blockchain are all the rage nowadays, and they’re beginning to affect social media. CNBC reports that influencer platform indaHash is set to launch a new cryptocurrency, “allowing brands to pay social media stars in virtual tokens rather than cash.”
indaHash’s argument is that it takes too long for social media influencers to get paid by advertisers, the average payment term running between 30 and 60 days. By using cryptocurrency, however, influencers can get paid immediately. Not only that, but influencers can reward their followers with the same digital currency.
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“For example,” writes CNBC’s Lucy Handley, “if a follower shares, subscribes or comments on a post, the influencer can issue its own coins to them under their own name. The fan can then exchange the coins for various rewards that might include exclusive content, real-life meetings with the star, or an appearance in one of their posts.”
While innovative, this isn’t the first time that social media and the blockchain have interacted. Far from it, in fact. Forward thinking tech companies are cooking up new ways to tie social media, cryptocurrency, and the blockchain together everyday. While none of the “pasta has stuck to the wall” yet, so to speak, it’s only a matter of time before it does. That’s because these innovators aren’t driven solely by profit, but also by ideology and the excitement at possibly revolutionizing social media and the attention economy as we know them.
Privacy and Security At Its Finest
Privacy and security of data seems to be one of the fastest evaporating commodities of the 21st century. This is because we equip our homes with inherently vulnerable technology that “often lack the protective measures that many computers and mobile devices employ.” It’s because we’d rather agree to stifling Terms of Service agreements than suffer the societal penalties associated with lack of social media use. It’s because we’re coerced into giving companies like Equifax our lifetime data, and don’t hold them accountable when they fail us.
Fortunately, one company that seeks to give us back some of that privacy and security is Nexus, the creator of the Social coin. Steve Olenski, writing for Forbes, reports that “Nexus is designed to be a social media platform where users are able to post information, send private messages, and create public transactions, sales, and crowdfunding, all through the blockchain.”
Because the blockchain essentially represents the current pinnacle of privacy, any instant message, transaction, or data created by any interaction between two users — or by the actions of one — would be completely private. This type of security is sorely lacking in many company’s current data infrastructures, as evidenced by the Equifax hacks.
Nexus has also announced that its Social coin will serve as a monetary device within the platform, endowing users the ability to make completely private purchases of goods and services, the only records of which will exist on the blockchain. Nexus is going so far as to link Social to debit cards, allowing users to spend it as USD, GBP, or EUR fiat wherever Visa is accepted.
Incentivizing Social, Decentralizing the ‘Attention Economy’
Like indaHash and Nexus, many other platforms have begun experimenting with the idea of “incentivized social media”, or blockchain-based social media platforms that support some type of cryptocurrency. Steemit, Synereo, Brave, Userfeeds — all of these platforms aim to cultivate a more credible system of content ranking and social engagement, whereby users are rewarded for their attention and activity, instead of punished by a barrage of hollow content from advertisers and publishers.
While this puts more power in the hands of the average user, advertisers could still benefit from these new platforms, (i.e. indaHash), and could also be further protected from the legal risk associated with adopting user-generated social content with clearer attribution of ownership and even crypto-royalties to original social content creators.
Nevertheless, it is the transfer of major power back to the users’ hands via a decentralized platform that is driving incentivized social media. As blockchain theorist and strategist, and author of The Business Blockchain, William Mougayar states:
“If Facebook was re-invented today, we should all be partially compensated for letting them monetize our attention. The average user spends 50 minutes per day on Facebook, and time is that critical measure of engagement. So, why do we have to give our time away for free?”
These incentivized platforms cut out the middleman and allow for content creators to be compensated directly for their time and creativity spent on social media, rather than allowing the social media platform to leverage this content for profit. Justin O’Connell, writing for MaxKeiser.com, explains how social news service Steemit, founded in 2016 by Ned Scott and Dan Larimer, accomplishes just that.
“Creators of posted content on Steemit, which is saved in a blockchain, receive tips for posts and comments with the native digital token… Authors whose comments and posts are upvoted receive cryptocurrency monetary rewards,” he writes. “People can also be rewarded for curating content. Reputation on Steemit is managed by upvotes and downvotes to incentivize etiquette, like Reddit.”
Legal Implications and Technical Hangups
If the idea of incentivized social media sounds too good to be true to you, you’re not alone. The decentralized nature of these platforms and cryptocurrency in general flies in the face of conventional regulation, and the IRS has been working hard to get a handle on this disruptive new technology. Because the exchange of any type of cryptocurrency is a taxable event, the IRS released guidance in 2016 on reporting virtual currency as income, noting that:
- Virtual currency paid as wages must be reported on a W-2. These wages are subject to standard withholding procedures.
- Self-employed workers must report any virtual currency payments they receive.
- In some cases, virtual currency counts as a capital asset, which means that the currency may be treated similarly to stocks and bonds when realizing gains and losses.
This means that anybody receiving cryptocurrency for content creation, no matter how small an amount, is legally required to report their earnings to the IRS. Not only that, but those who hold on to cryptocurrencies that appreciate in value will be subject to capital gains taxes, as virtual currency in the US is legally treated as a capital asset, like property. Anybody audited by the IRS who has failed to report cryptocurrency earnings in any capacity is subject to penalties associated with tax evasion.
Every country has its own set of laws dealing with cryptocurrency, some more complicated and restrictive than others. The complex legal minutiae surrounding virtual currencies and digital assets, and the potentially harsh penalties that can befall those who fail to understand and observe said minutiae, will only impede the growth of incentivized social media.
Legal implications aside, others are still skeptical, and worry that a more fundamental problem lies in the human tendency to “game the system”.
“One thing to note about the idea of incentivized social media is that, where there’s money, there’s also the potential for rampant fraud, as well as mass spam,” writes IT Specialist Daniel Imbellino.
In his Medium post, “Steemit — An Incentivized Social Media Platform or a Scam?”, Imbellino focuses much of his criticism on Ned Scott’s platform, and the namesake of the article.
“The problem is,” he writes, “such a system that relies on thumbs up metrics to gage the worthiness and overall value of content is a system that’s likely easy to game. Anyone could simply register with as many virtual IP’s as possible and thumbs up their own content in mass.”
The Social Platform of the Future
While Imbellino offers a skeptical opinion on the current state of incentivized social media, he doesn’t dismiss it as a whole. Instead, he offers an optimistic outlook on the future.
“All being said, the entire idea of incentivized social media is still in its infancy for sure, and it’s likely someone will eventually get it right,” he writes. “When the day comes that an entity can make incentivized social media work, it’s more than likely we’ll see a massive shift of social users follow.”
While it’s not clear when it will happen or which platform it will happen on, many agree with Imbellino that “someone will eventually get it right.” Businesses and social marketers would do well to keep up with the news and trends concerning this space, so that they’re ready to adapt when the full extent of the blockchain’s implications on social media are finally realized. Because, while it may be a slow transformation, blockchain technology truly is revolutionizing social media and the attention economy as a whole — and the social platform of the future will undoubtedly be built with that same blockchain as its backbone, lifeblood, and digital soul.