In 2017, I wrote a discovery piece for a decentralized publishing ecosystem built on the Ethereum blockchain (Doug from Phin, Fran from Firebrand and I were working on a solution to decentralize the publishing industry to put more value and control back in the hands of authors, publishers and readers). Much has changed since then, but I’m posting the content here for posterity.
Current Environment: A centralized industry
Publishing has traditionally been a centralized industry serviced by large publishers selling books to readers in physical locations such as independent bookstores and large retailers. After Amazon joined the industry, retail outlets consolidated and many independent bookstores and Borders closed down, while authors and publishers, on average, earned less money. For readers, Amazon’s goals are not always strongly aligned to a reader’s, i.e. optimizing for revenue over optimizing a book discovery outcome (compare: an indie bookseller’s recommendation to bestseller lists and KDP promoted titles).
The publishing industry has continued to centralize around Amazon, and while Jeff Bezos has stated that gatekeepers are elitist, his business has become the ultimate gatekeeper between publishers and authors, and their readers, and now accounts for 42% of all book sales. Amazon’s centralization and monopolization of the industry is forecast to increase. (Update: in 2021 Amazon’s share was well over 50%).
New Decentralized Ecosystem Goals
This document introduces a new decentralized ecosystem for the publishing industry, moving value and control from centralized institutions such as Amazon, to individual authors, publishers, service providers and readers. It aims to do so by:
Improving operational efficiency by decentralizing elements of the supply chain, particularly in the areas of metadata, rights and distribution.
Providing publishers, authors and other service providers rich behavioral insight into how readers buy and read books.
Facilitating an open publishing ecosystem where entities are free to interact directly with each other (eventually to book sales, discovery, etc.).
Providing an open market for services and apps, where the best execution (publishers and readers) is rewarded (think: apps built by any developer and made available on the Apple or Play app stores. Another analogy: multiple twitter clients exist to connect to twitter - premium apps charge a fee for a higher level of service).
A Blockchain Solution
Blockchain technologies facilitate decentralized sharing of data in a trusted manner, without the need for a trusted intermediary, and are a natural fit to solving many of the goals listed earlier. While the underlying technology can be likened to a huge shareable database, the potential applications to solving significant business and technical challenges, is profound.
The rest of this document explores how this technology can be applied to solve challenges within the publishing industry, with a particular end-goal of democratizing book sales, data and processes. We’ll explore how a decentralized network might be deployed, with an early focus on low hanging fruit. The project will only be successful with industry buy-in, so to achieve this, we’ll target initial projects that deliver quick, early value to publishers while minimizing their investment.
While the project is ambitious, it’s impact could be far-reaching. To build such an ecosystem requires significant capital, which is why we turn to an ICO - a recently introduced, but highly efficient means to generate capital for projects of such scale.
Concepts
Below are some concepts you should have a cursory knowledge of when reading the remainder of this document.
What is the Blockchain?
A blockchain is a decentralized, online record-keeping system, or ledger, maintained by a network of computers that verify and record transactions using established cryptographic techniques.
Think of it as a distributed system, with shared memory. The most well known implementation is Bitcoin. So, at any point in time, the blockchain keeps track of how many bitcoins people own. It facilitates sending digital assets between two entities without requiring a trusted intermediary. E.g. transferring USD between two people requires trusting banks to make the transfer, and record it within it’s own ledgers. The Blockchain allows this transfer to happen without the need for any trusted third party, such as a bank. It prevents double spending of the transferred asset.
What is a Token?
A token is a digital asset that can be transferred (not simply copied) between two parties over the Internet without requiring the consent of any other party. Within a blockchain environment, it is physically a private key, which grants access to the asset stored on the blockchain. Think: API key - you pay for computing resources and use the API key to access and consume them. A token represents a digital store of value. Though, unlike an API key, you can legitimately transfer the token to anyone else without permission.
What is Ethereum?
Bitcoin has one purpose - it is a currency or store of value (depending on who you listen to). Think of Ethereum as a general-purpose blockchain that was built to serve multiple purposes. They generalized out the blockchain implementation, so instead of building a new blockchain from scratch for every new project, you can instead build your project on top of the Ethereum blockchain (which isn’t possible with Bitcoin). Ethereum has it’s own coin/currency called ‘ether’ and also includes it’s own virtual machine - developers can run decentralized applications on the Ethereum blockchain.
This environment allows the creation of ‘smart contracts’ which are just programs written to control and distribute digital assets. Custom tokens can be built on Ethereum by implementing the ERC-20 token standard.
The majority of ICOs today, are built on the Ethereum blockchain, and use smart contracts to manage the collection of Ethereum funds and then automatically distribute the ICO’s custom token to participants.
See: https://www.coindesk.com/ethereums-erc-20-tokens-rage-anyway/
Decentralized Applications (dApps)
dApps are applications that run autonomously on the Ethereum blockchain.
A dApp has its code running on a decentralized peer-to-peer network (vs. a traditional app running on a central server). A dApp can have frontend code (and be accessible as a website) and user interfaces written in any language (just like an app) that can make calls to its backend.
dApp = frontend + contracts that access the blockchain
Compare to a traditional website = frontend and server code that accesses databases and APIs.
They can be used to manage ownership of property, rights management, fund distribution, executing contracts, etc.
Flashpoint - A Decentralized Publishing Ecosystem
The Flashpoint ecosystem aims to facilitate transactions between participants through the exchange of value, paid for in PUB tokens. Much of the power of the ecosystem is in the size of its network - the more participants, the more valuable it is to each participant.
Flashpoint will incentivize value-add companies and individuals to be more equitably rewarded for their contribution, and will anyone to partake in the creation and selling of books and related services. The best products achieve the most market share, distributed fairly in accordance to pure market forces, and not by the rules and direction of a centralized monopoly, such as Amazon.
Note that not all activity and business must be conducted “on-chain” (on the Ethereum blockchain). Much will occur ‘off-chain’ as part of standard business processes and systems, and only communicate with the blockchain to submit or query data.
PUB Tokens
Participants in the Flashpoint ecosystem will be able to spend and earn PUB tokens. PUB tokens will conform to the ERC20 token standard, and will initially be distributed to participants through a smart contract. A finite supply of PUB tokens will be made available, this means that an increase in participants in the Flashpoint network, will increase the demand for PUB tokens - increased demand leads to a rise in PUB token value. PUB tokens will be tradeable (and exchangeable) for other cryptocurrencies, such as Ethereum and Bitcoin, on exchanges. These in turn, can be bought and sold for fiat currency, such as USD.
PUB tokens can be transferred as tiny fractions of a token, and support micropayments for small units of work.
PUB tokens can be stored in an ERC20 compatible wallet, such as My Ether Wallet (https://www.myetherwallet.com/).
Use Cases
Metadata Repository
A shared single source of truth for book entities (works, products, contributors etc.), stored in the blockchain ledger
History of all changes and editions is retained
The most up-to-date version of an entity is queryable in real-time
Remove need for point-to-point (publisher to retailer) or hub-and-spoke intermediaries (e.g. Firebrand, Ingram) to distribute data
Integration to 'off-chain' systems can be undertaken by a company such as Firebrand. ONIX to blockchain adapters/APIs - work with existing systems.
Benefits: lower ETL costs for data recipients (only source to query), high data integrity, queryable history, real-time access to the latest version of data
Integration service providers earn PUB tokens for their work in bridging off-chain system with the blockchain.
Monetize and Share Customer Behavioral Data
Consumer-facing websites are a rich source of data on readers. Currently, most revenue is sourced through sales commission, or advertising. Accessing this data is challenging - the data isn’t uniform, requires technical expertise and is spread across many sources.
Enable website operators (eCommerce or content) to monetize their customer behavioral data
Define a standard model for behavioral data
Website owners make their behavioral data (user reviews, ratings, search queries, traffic, mentions, purchases, reads, etc.) available for purchase
Data is matched with the corresponding entity in the metadata repository (simple, because there’s only one correct version of the book/author)
Publishers or service providers (for example a search or recommendation service provider) can purchase the data with PUB tokens
The website owners earn PUB tokens whenever their data is purchased.
Provide website owners with CMS or javascript plugins that capture customer behavioral data and post it back to the blockchain.
Rights Management
Challenges: current approaches are centralized, complex, with fragmented information in several silos.
Create a ledger of publishing industry rights trades
Allow participants to search for and establish rights holders
Reduces discovery and coordination costs for new contracts
Similar to the metadata use case - functionality is retained at the organization level, with data queried from the blockchain and new events posted to it
eBook Distribution
Securely distribute eBook/audiobooks directly from publisher/author to reader or retailer, paid for in PUB tokens
Just as bitcoins are distributed securely between parties, the same cryptographic assurances can be applied to the secure transfer of digital assets between parties, without the reliance on a centralized service (e.g. Adobe) to facilitate. Today, 300-400k bitcoin transactions worth 10s of millions of dollars are transferred securely between parties every day (exchange trading is in the hundreds of millions).
Discovery Service Providers
Leverage customer behavioral data to provide book search and recommendations as-a-service
Each query results in a micro-payment of PUB token to the service provider, who in turn pays a micro-payment of PUB token to access metadata and behavioral data.
Value-Added Data Providers
Firebrand’s Eloquence on Alert and Kadaxis’s data services could be employed to enrich the record of a book/author, by attaching pertinent attributes to the entity in the Metadata Repository, accessible for a micropayment of PUB tokens.
EReaders
Allow readers to purchase and read books directly from authors and publishers, or through third parties (e.g. a recommendation service).
Books can be purchased with PUB tokens
Readers can opt to share back their reading habits with the network (enriching the customer behavioral data associate with the book), in exchange for PUB tokens. They may choose to share their identity, only their demographic information, or to do this entirely anonymously.
Readers may be surveyed directly by publishers through eReaders in exchange for PUB tokens.
Reader/Reviewer Websites
Aside from selling behavioral data for PUB tokens, website owners can offer readers tokens as promotions or rewards
BookishFirst might reward readers with PUB tokens for sharing their first impressions of books, which they can use to buy books.
NetGalley might reward stellar reviewers with PUB tokens.
Decentralized Identifier Issuance
Shift issuance from a high cost monopolized centralized system (Bowker) to a low cost decentralized system.
ISBN/ISNI registry and issuer, interim bridge to current identifiers.
Decentralized application that runs autonomously at a low cost, accepting PUB tokens (defined in a smart contract) in exchange for identifiers.
eBook Lending
From libraries and between readers (where rights, which can be enforced on the blockchain, allow).
Conceptual Application Stack
dApps (decentralized applications) are predominantly open source, and interact with users or each other and the blockchain, to perform a function.
Loose analogies/breakdown for a user-facing decentralized app:
The blockchain is the database
Smart contracts are programs written in code to perform data-driven business logic, such as transferring PUB token to and from entities, or retaining them itself. They ensure trust in the enforceability of the contract and identity of the parties. It essentially eliminates the need for a third party.
User Interface code is written to interact with the user and pass information to and from smart contracts.
dApps are the overarching application that encompasses the above.
dApps may also connect with standard web-based APIs over HTTP to send/receive data.
Role of the Operator
As operators of the FlashPoint ecosystem, we have a choice in our level of involvement in operating the network. Generally, the higher the level of involvement, the more centralized the network becomes.
Some examples:
Minimal role - defines exchange rules, like ICANN with the internet (protocol).
Outsized role - build/maintain infrastructure, define/enforce rules, intermediate exchange, levy commissions, like Uber.
The appropriate level of control for Flashpoint is likely somewhere in between. Most ICOs are structured with a Foundation entity and an Operational entity (more on this later). As we acknowledge that the success of our venture is reliant on buy-in from publishers, our Foundation might be run similar to how the BISG is today. Industry representatives meet to define standards and determine rules, standards, functions to be supported in the network and other items of governance.
As operators, our role is also ensuring the proper functioning of the network and growing the user base.
Pre-ICO Roadmap
A pre-ICO campaign is a little like a resume. Its sole goal is to progress to the next stage of the ecosystem’s evolution. The following are standard pre-requisites to launching an ICO sale:
Build an ERC20 token implementation to collect Ethereum from subscribers and to distribute PUB tokens once the minimum target has been met.
Build a website outlining the ICO, including a simple dApp that queries the Ethereum blockchain to display the level of contributions to date.
Legal consultation, including the establishment of any entities required
Write a whitepaper detailing our plans for Flashpoint
Build a marketing plan
Hire a PR specialist
Community management (critical capability)
The success of an ICO sale is predominantly based on the confidence people have in the team and their plans for the company/product. Common questions are:
Does the team have relevant industry experience?
Does the team have crypto experience?
What is the stage of the project? (is it brochureware or do they have functionality?)
Who has already invested?
How accessible are they? (community management)
What do they need the token for? Is blockchain necessary?
Do they have an unlimited or hard cap?
How and when are they distributing their token? Is it immediately or are the tokens locked for a period of time?
How will funds be spent?
How robust is the whitepaper?
To aid in supporting due diligence queries from participants, we should:
On-board initial partners (publishers, retailer such as B&N) signed up (no risk for partners, but a PUB token reward if the sale is successful)
Build a basic MVP, for example a simple dApp to write book metadata to the Blockchain - potentially adding an adapter to Firebrand’s Title Management and a simple search service to retrieve book metadata. Publishers could then easily participate in the MVP, and Firebrand would be compensated out of the pre-ICO fund. This service should be accessible by the public.
Create an advisory board of well-known, respected industry names
To fund the ICO launch, a pre-sale of tokens at a discount can be conducted. Typical investors are angels, crypto hedge funds or partners. As a successful ICO sale generates an immediate liquidity event, the return is often significant for early investors.
A staged public pre-sale is also an alternative.
Post-ICO Roadmap (tentative)
Target low hanging fruit to provide early value and show progress to token purchasers. Additionally, early low-friction participation by publishers will provide a foundation to test and build the more ambitious projects in future (such as rights management).
Deeper integration of publisher data feeds
Define customer behavioral data model
CMS plugin development (Wordpress, Django, Drupal, etc.) and social media libraries to enable consumer-facing websites to (such as book bloggers, retailers, etc.) to save customer behavioral data back to the blockchain, tied to book metadata. Content site owners monetize by receiving PUB tokens.
Dashboard dApp to allow publishers to view consolidated metrics/behavioral data associated with their books/authors.
EoA integration of book review/rating data tied to book metadata.
ICO Structure
| Number of tokens | 200 000 000 |
| Public Name | Flashpoint |
| Token Ticker | PUB |
| Public Sale | 100 000 000 PUB tokens |
| Minimum goal | $2M |
| Soft cap (target fundraising goal) | $10M |
| Hard cap | $25M |
| Rate | 1 ETH = 1200 PUB = approx $USD 300 |
The rate changes depending on how rewards for early investors are structured.
Implied market value of PUB tokens if soft cap met: $20M, hard cap: $50M (based on purchase price at token sale, and total number of tokens to be created)
This structure is implemented as a smart contract, which automatically refunds the money if the minimum isn't met.
Purchase methods accepted: ETH (and maybe BTC)
Tokens not sold will be burnt.
Raised ETH will immediately be transferred to a multi-sig wallet (with all founders as signatories).
Closed pre-sale for invited buyers at a discount.
Tiered pricing to reward early backers.
Token Distribution
5-10% Pre-sale - early investors pre-ICO - to help fund ICO (whitepaper, legal, website, marketing, ICO smart contract development etc.), MVP/Proof-of-concept and initial operations.
20-25% for the foundation for long-term development of the ecosystem
10-15% to early publisher/retailer/service provider partners, authors, reader promotions to help grow the network
50% to the public in token sale
12% to founders and early developers (generally above 25% is considered too high)
Funds Distribution
All funds from the FlashPoint ICO will be used to support the ongoing growth and development of the FlashPoint Ecosystem/Network.
Funds will mostly be used for salaries and open source bounties, but also to pay for early service provider integration (e.g. Firebrand, Kadaxis). It is also not uncommon for the founders to be initially rewarded a bonus on achieving a successful ICO.
Note that incentives for publishers, authors, web site owners and other parties to use the system will be provided in PUB tokens. It is expected on completion of a successful ICO, that PUB tokens will be available for trading on several cryptocurrency exchanges. (Exchange listing is currently not particularly difficult with a minimum market cap and circulating token volume).
Competitive Analysis
Most competitors ignore incumbents and don't address integration with or operation alongside existing publishers - their approach is to build a new environment from scratch that everyone will migrate to. It's unlikely such platforms will gain significant mainstream traction without buy-in and support from the industry.
Po.et
Primary focus on author attribution for content such as blog posts and articles
Not planning to look at ebooks until Feb 2019
Wider future remit, tackling audio, video, SEO
Strong team, working alpha version of core tech
(Update: What happened to Po.et?)
Author Tokens
Currently trading with approximately $4M market cap (!)
Author focus
Team doesn't have much publishing experience or deep technical resourcing
No working product
Publica - https://publica.io/
Whitepaper: https://publica.io/whitepaper_economy.pdf (mostly about token economics)
Oct ICO has just opened for pre-sale
"Publica will be a platform for authors, readers, books of all kinds and the people who make them. And for smart contracts to carry all kinds of transactions and exchanges for the publishing economy."
Third party marketplace to enable peer-to-peer transactions.
Authors offer token launches for their books. 1 token = read access to the book in an online reader
Legal/tech f/w for tokenization of IP rights. Instead of 90% royalties to one publisher, decentralize to many, attracting investors, etc.
Aims to disrupt traditional publishing to take focus from publishers, and put more power and revenue in the hands of authors
Established team with strong blockchain capability
Also targeting rights
EReader + wallet combo app
(Update: pivoted to Book NFTs)
Launch Risk - Areas to investigate
Regulatory - new laws come out before sale.
Market becomes too crowded by the time we launch.
Access to blockchain development expertise.
Someone else beats us to it.
Corporate Structure
A separate entity is necessary, otherwise FlashPoint will be classified as a general partnership with general liability attached to each partner, jointly and severally.
Token based organizations are typically structured as two entities:
The Foundation
The Foundation is the token issuance entity - issues tokens (may be based in a country such as Switzerland, HK, Singapore, Cayman - countries with 0% offshore tax for non-profits, see: http://incorporations.io/), has grantor/founders, board and members.
The Operating Entity
The Operating Entity operates the day-to-day business, has directors and shareholders (and may be based in Delaware). The Operating Entity owns the IP.
Rationale for this split:
Tax efficiency
Securities law
Liability laws, depending on jurisdiction
Transfer pricing agreement between the two
Legal
Tokenized equity shouldn’t be offered. The critical distinction is whether the token is simply a useful and tradable digital item like a paid API key. Purchasers have no right to any future return from their token.
Key legal decisions
Should tokens be made available to US citizens at all.
Should tokens be made available to all US citizens, or only accredited investors
Trade-offs
Higher scrutiny, compliance costs/risk by offering tokens to non-accredited US citizens, but a significantly higher base if they are included
Considering that many of the eventual participants in our network will be readers and authors, an ideal scenario is to make tokens available to all US citizens.