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Blockchain is a decentralized digital ledger that securely stores records across a network of computers in a way that is transparent, immutable, and resistant to tampering. Each “block” contains data, and blocks are linked in a chronological “chain.”
What Is a Blockchain?
A blockchain is a distributed database or ledger shared across the nodes of a computer network. They are best known for their crucial role in cryptocurrency systems, maintaining a secure and decentralized record of transactions, but they are not limited to cryptocurrency uses. Blockchains can be used to make data in any industry immutable, meaning it cannot be altered.
Since a block can’t be changed, the only trust needed is at the point where a user or program enters data. This reduces the need for trusted third parties, such as auditors or other humans, who add costs and can make mistakes.
Since Bitcoin’s introduction in 2009, blockchain uses have exploded via the creation of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.
Key Takeaways
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Blockchain is a type of shared database that differs from a typical database in the way it stores information; blockchains store data in blocks linked together via cryptography.
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Different types of information can be stored on a blockchain, but the most common use has been as a transaction ledger.
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In Bitcoin’s case, the blockchain is decentralized, so no single person or group has control—instead, all users collectively retain control.
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Decentralized blockchains are immutable, which means that the data entered is irreversible. For Bitcoin, transactions are permanently recorded and viewable to anyone.
How Does a Blockchain Work?
You might be familiar with spreadsheets or databases. A blockchain is somewhat similar because it is a database where information is entered and stored. The key difference between a traditional database or spreadsheet and a blockchain is how the data is structured and accessed.
A blockchain consists of programs called scripts that conduct the tasks you usually would in a database: entering and accessing information, and saving and storing it somewhere. A blockchain is distributed, meaning multiple copies are stored on many machines, and they must all match for it to be considered valid.
The Bitcoin blockchain collects transaction information and enters it into a 4MB file called a block (different blockchains have different-sized blocks). Once the block is complete, the block data is run through a cryptographic hash function, which creates a hexadecimal number called the block header hash.
The hash is then entered into the following block header and encrypted with the other information in that block’s header, creating a chain of blocks, hence the name “blockchain.”
Transaction Process
Transactions follow a specific process, depending on the blockchain. For example, on Bitcoin’s blockchain, if you initiate a transaction using your cryptocurrency wallet—the application that provides an interface for the blockchain—it starts a sequence of events.
In Bitcoin, your transaction is sent to a memory pool, where it is stored and queued until a miner picks it up. Once it is entered into a block and the block fills up with transactions, it is closed, and the mining begins.
Every node in the network proposes its blocks in this way because they all choose different transactions. Each works on their blocks, trying to find a solution to the difficulty target, using the “nonce,” short for number used once.
The nonce value is a field in the block header that is changeable, and its value incrementally increases with every mining attempt. If the resulting hash isn’t equal to or less than the target hash, a value of one is added to the nonce, a new hash is generated, and the process repeats. The nonce rolls over about every 4.5 billion attempts (which takes less than one second) and uses another value called the extra nonce as an additional counter. This continues until a miner generates a valid hash, winning the race and receiving the reward.
Fast Fact
Generating these hashes until a specific value is found is the “proof-of-work” you often hear about—it “proves” the miner did the work. The sheer amount of work it takes to validate the hash is why the Bitcoin network consumes so much computational power and energy.
Once a block is closed, a transaction is complete. However, the block is not considered confirmed until five other blocks have been validated. Confirmation takes the network about one hour to complete because it averages just under 10 minutes per block (the first block with your transaction and five following blocks multiplied by 10 equals 60 minutes).
Not all blockchains follow this process. For instance, the Ethereum network randomly chooses one validator from all users with ether staked to validate blocks, which are then confirmed by the network. This is much faster and less energy-intensive than Bitcoin’s process.
Blockchain Decentralization
A blockchain allows the data in a database to be spread out among several network nodes—computers or devices running software for the blockchain—at various locations. This creates redundancy and maintains the fidelity of the data. For example, if someone tries to alter a record on one node, the other nodes would prevent it from happening by comparing block hashes. This way, no single node can alter information within the chain.
Because of this distribution—and the encrypted proof that work was done—the blockchain data, such as transaction history, becomes irreversible. Such a record could be a list of transactions, but private blockchains can also hold a variety of other information, like legal contracts, state identifications, or a company’s inventory. Most blockchains wouldn’t “store” these items directly; they would likely be sent through a hashing algorithm and represented on the blockchain by a token.
Blockchain Transparency
Because of the decentralized nature of the Bitcoin blockchain, all transactions can be transparently viewed by downloading and inspecting them or by using blockchain explorers that allow anyone to see transactions occurring live. Each node has its own copy of the chain that gets updated as fresh blocks are confirmed and added. This means that if you wanted to, you could track a bitcoin wherever it goes.
For example, exchanges have been hacked in the past, resulting in the loss of large amounts of cryptocurrency. While the hackers may have been anonymous—except for their wallet address—the crypto they extracted is easily traceable because the wallet addresses are stored on the blockchain.
Of course, the records stored in the Bitcoin blockchain (as well as most others) are encrypted. This means that only the person assigned an address can reveal their identity. As a result, blockchain users can remain anonymous while preserving transparency.
Is Blockchain Secure?
Blockchain technology achieves decentralized security and trust in several ways. To begin, new blocks are always stored in a linear and chronological order. That is, they are constantly added to the “end” of the blockchain. After a block has been added to the end of the blockchain, previous blocks cannot be altered.
A change in any data changes the hash of the block it was in. Because each block contains the previous block’s hash, a change in one would change the following blocks. The network would generally reject an altered block because the hashes would not match. However, a change can be accomplished on smaller blockchain networks.
Fast Fact
Not all blockchains are 100% impenetrable. They are distributed ledgers that use code to create the security level they have become known for. If there are vulnerabilities in the coding, they can be exploited.
A new and smaller chain might be susceptible to this kind of attack, but the attacker would need at least half of the computational power of the network (a 51% attack). On the Bitcoin and other larger blockchains, this is nearly impossible. By the time the hacker takes any action, the network is likely to have moved past the blocks they were trying to alter. This is because the rate at which these networks hash is exceptionally rapid—the Bitcoin network hashed at a rate of around 640 exahashes per second (18 zeros) as of September 2024.1
The Ethereum blockchain is not likely to be hacked either—again, the attackers would need to control more than half of the blockchain’s staked ether. As of September 2024, over 33.8 million ETH have been staked by more than one million validators.2 An attacker or a group would need to own over 17 million ETH and be randomly selected to validate blocks enough times to get their blocks implemented.3
Bitcoin vs. Blockchain
Blockchain technology was first outlined in 1991 by Stuart Haber and W. Scott Stornetta, two researchers who wanted to implement a system where document timestamps could not be tampered with.4 But it wasn’t until almost two decades later, with the launch of Bitcoin in January 2009, that blockchain had its first real-world application.
Bitcoin
The Bitcoin protocol is built on a blockchain. In a research paper introducing the digital currency, Bitcoin’s pseudonymous creator referred to it as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” 5
The key thing to understand is that Bitcoin uses blockchain as a means to transparently record a ledger of payments or other transactions between parties.
Blockchain
Blockchain can be used to record any number of data points immutably. The data can be transactions, votes in an election, product inventories, state identifications, deeds to homes, and much more.
Currently, tens of thousands of projects are exploring the implementation of blockchains in various ways to benefit society, beyond simply recording transactions—for example, as a means to vote in democratic elections securely.
The nature of blockchain’s immutability means that fraudulent voting would become far more difficult. For example, a voting system could work such that each country’s citizens would be issued a single cryptocurrency or token.
Each candidate could then be given a specific wallet address, and the voters would send their token or crypto to the address of whichever candidate they wish to vote for. The transparent and traceable nature of blockchain would eliminate the need for human vote counting and the ability of bad actors to tamper with physical ballots.
Blockchain’s Role in Digital Marketing
As digital marketing rapidly evolves, blockchain technology emerges as a transformative force. Here, we’ll explore the current digital landscape, the potential of blockchain in revolutionizing marketing strategies, and how it enhances transparency and trust between businesses and customers.
Current State of Digital Marketing
Digital marketing has become a complex ecosystem of channels and strategies, where businesses seek to leverage consumer data to drive engagement and conversions. Trustworthiness is paramount, as customers are increasingly conscious of how their personal information is used. As such, transparency has become not just a best practice but a necessity in retaining consumer trust.
Potential of Blockchain in Marketing
Blockchain in marketing offers the potential to redefine the value exchange between brands and consumers. By integrating this technology, strategies could shift towards a more secure and consumer-empowered approach. For example, smart contracts can facilitate transparent transactions, reassuring customers of the legitimacy of their engagements.
Improving Transparency and Trust
The inherent features of blockchain—its immutability and decentralization—serve to bolster transparency and trust in digital marketing. It allows for a verifiable public ledger, ensuring that consumer data is not manipulated for ulterior motives. These attributes could foster a more trustworthy relationship with customers who demand transparency around their shared data.
By applying blockchain within our marketing strategies, we not only optimize engagement but also build a solid foundation of trust—an investment that’s crucial for sustainable growth in the digital marketplace.
Enhancing Customer Data Protection
In digital marketing, where consumer data is a valuable asset, protecting personal information cannot be overstated. We examine how privacy concerns are currently being addressed and how blockchain technology can enhance data protection strategies.
Privacy Concerns in Digital Marketing
Digital marketing hinges on data – from user behaviour to personal details. However, consumer privacy has become a pressing issue with the rise in data breaches and misuse. Consumers demand transparency and control over their personal information, leading to a need for robust consumer protection measures. Authentication of user data is also a challenge as businesses strive to verify identities without compromising privacy.
Blockchain Solutions for Privacy
Blockchain technology brings a transformative approach to protecting privacy in digital marketing. By design, blockchain provides a decentralised ledger, ensuring data integrity and the secure authentication of user information. It forges trust through enhanced transparency and virtually incorruptible transaction records. For instance, marketers can leverage blockchain to combat click fraud, thereby safeguarding the authenticity of consumer interactions with digital adverts.
Blockchain also offers a means to secure personal data in marketing operations through its advanced encryption capabilities, enabling users to control access to their information. By integrating blockchain, the potential for unauthorised data tampering plummets, leading to a stronger foundation for consumer trust and relationship building.
Our focus on incorporating blockchain solutions aligns with our commitment to providing not only cutting-edge strategies but also ensuring a respectful consideration of individual privacy. As ProfileTree’s Digital Strategist – Stephen McClelland notes, “By integrating blockchain, we’re not just following a trend – we’re setting a new standard for privacy in the digital space.”
In our digital marketing practices, the implementation of these technologies is central to ensuring that our clients are at the forefront of ethical data management, thereby solidifying their reputation as businesses that consumers can trust with their valuable personal information.
Streamlining the Supply Chain
In our efforts to enhance digital marketing capabilities, we recognise that streamlining the supply chain through blockchain technology is a pivotal step. This integration fosters a level of oversight and efficiency previously unattainable. Below, we examine the key advantages brought about by transparency and tokenization within the supply chain.
Transparency in Product Journey
Transparency is paramount in today’s supply chains. With blockchain, every product’s journey becomes an open book, allowing for real-time tracking from production to delivery. This not only ensures that suppliers and customers are constantly informed but also fosters trust through verifiable data integrity. For example, let’s look at leveraging blockchain to streamline operations. The immutable nature of this technology means that once data about the product journey is recorded, it cannot be altered or tampered with.
Tokenisation of Assets
The tokenisation of assets represents a transformative leap in supply chain management. By converting physical assets into digital tokens, we can streamline transactions, enhance security, and unlock liquidity. Smart contracts play a pivotal role here, automating the execution of agreements upon the fulfillment of predefined conditions, thus reducing administrative costs and eliminating delays.
In the realm of digital marketing, these advancements mean that small and medium-sized enterprises (SMEs) can now manage their supply chains more effectively and transparently, contributing to brand reputation and customer satisfaction. As tokenisation creates new avenues for asset trading, it opens up possibilities for innovative marketing strategies, such as customer loyalty programmes powered by tokenised rewards.
Impact on Social Media and Advertising
With the advent of blockchain technology, the landscape of social media and digital advertising is experiencing a significant transformation.
Innovations in Online Advertising
Blockchain is introducing a new level of transparency to online ads. It creates an immutable ledger that can track ad engagement and consumer interactions, making it difficult for bots to create false metrics. This also means that advertisers can be more confident in the quality of their data, leading to better-targeted advertisements. With concepts like Basic Attention Tokens, users are rewarded for their engagement with ads, ensuring that genuine interest is incentivised.
Social Media Interactions
On social media platforms, blockchain is reshaping the way interactions are managed and valued. The technology’s inherent security features enable the safe storage and transfer of data, thereby increasing trust among users. By integrating blockchain, social media companies can prevent unauthorised access to personal data, enhancing user control. Moreover, ad engagement can be accurately tracked and compensated, potentially changing the entire ecosystem of social media monetisation.
For example, Stephen McClelland explains, “Blockchain technology enables a verifiable and traceable exchange of data on social media, fostering a new wave of digital marketing strategies that are more transparent, secure, and user-focused.” This type of innovation underscores our commitment to offering SMEs not only the latest information but also actionable insights to harness technology for their marketing efforts.
Customer Engagement and Loyalty
In the digital marketplace, blockchain represents a significant innovation that can significantly enhance customer engagement and loyalty. These technologies enable brands to create secure and transparent loyalty programmes, fostering deeper consumer relationships and offering tailored promotions that resonate with individual interests.
Revolutionising Loyalty Programs
Loyalty programmes are no longer just about collecting points; with blockchain, they become a secure and immutable record of customer interactions and transactions. Customers can easily track their rewards and enjoy a simplified process that eliminates fraud and unauthorised access. From a business’s perspective, blockchain facilitates a transparent loyalty ecosystem that can lead to enhanced trust and, subsequently, a more loyal customer base.
Brands and Consumer Relationships
We see relationship marketing entering a new era with blockchain technology. By offering a transparent transaction ledger, customers can see the direct impact of their loyalty, while brands can gain a better understanding of their customers’ buying habits. This fosters a mutually beneficial relationship where personalisation becomes paramount, ultimately leading to stronger brand loyalty.
Blockchain-Powered Promotions
Promotions become more effective when they’re backed by blockchain. Personalisation is key; customers receive offers that are relevant to them, enhancing engagement. Moreover, every promotion can be securely tracked, ensuring that both reward distribution and redemption are handled with integrity. Blockchain’s ability to verify the legitimacy of promotions in real-time helps in building a trustworthy brand image.
In deploying blockchain in your digital marketing strategies, you’re not just investing in technology, but in strengthening the very fabric of customer relationships and loyalty. With reliable rewards management and incentive programmes, blockchain is setting the stage for a new chapter in customer engagement. Through our rigorous testing and innovation, at Productdelight, we’ve observed these dynamic shifts first-hand and have implemented them, yielding phenomenal results.
Token Economy in Marketing
In the emerging digital landscape, token economies are redefining how value is created and exchanged in marketing. Specifically, they integrate unique assets like digital tokens and smart contracts to incentivise and reward consumer interaction, tying directly into the capabilities of blockchain technology.
Usage of Digital Tokens
Digital tokens perform crucial roles in marketing strategies by encapsulating value in a transferable and programmable form. Companies utilise tokenisation to represent loyalty points, rewards, or access to specific services, turning routine transactions into opportunities for engagement and retention. For example, using basic attention tokens (BAT), advertisers reward users for their attention, which not only monetises user engagement but also encourages a more transparent advertising ecosystem. In this context, NYIAX leverages blockchain to bring more honesty to ad contracts, linking digital tokens to the value exchanged.
Smart Contracts and Rewards
Smart contracts are self-executing contracts with the terms of the agreement directly written into code. In marketing, we use smart contracts to automate rewards distribution, ensuring transparency and removing the need for intermediaries. Notably, when users complete specific actions, like watching a video or participating in a survey, smart contracts can immediately release tokens as a form of reward. This instant gratification reinforces positive consumer behaviour and fosters brand loyalty.
Our approach integrates such innovative strategies, setting an advanced digital marketing playbook that not merely informs but engages and converts. We’ve built expertise in implementing robust, innovative contract architectures that not only provide immediate rewards but also foster sustained relationships with consumers. For example, Stephen McClelland states, “Smart contracts are changing the game in digital marketing by providing an unprecedented level of trust and efficiency in reward systems.” We keep pace with this dynamic field to ensure that our strategies resonate with consumers and match current trends.
Innovative Marketing through NFTs and Digital Currency
In the fast-paced realm of digital marketing, the emergence of NFTs and digital currency is a game-changing evolution. We’re exploring how these technologies are redefining branding and e-commerce, offering fresh opportunities for profound engagement and transaction efficiency.
Leveraging NFTs for Branding
NFTs, or Non-Fungible Tokens, present a unique proposition for brand differentiation in new media landscapes. They act as tokens of authenticity and exclusivity, which can be instrumental in transforming a brand’s narrative.
Traditionally, branding was about establishing a visual and emotional connection with the audience. However, with NFTs, we can now foster a more profound sense of ownership and belonging among consumers. As a collector of a brand’s NFT, a customer becomes part of an exclusive community, often with perks like special access or products. Stephen McClelland noted, “Branding strategies that integrate NFTs are not just about adding a digital layer but are fundamentally reshaping customer-brand dynamics, engendering a powerfully loyal community culture.”
Digital Currency and E-commerce
The integration of digital currency into e-commerce platforms represents a significant shift towards seamless transaction experiences. Digital currencies, underpinned by blockchain technology, make transactions quicker, often more secure, and borderless.
For SMEs, this means access to a global market without the friction of currency exchange and with the added benefit of reduced transaction fees. E-commerce powered by digital currency ensures that customer convenience is paramount, building trust and encouraging repeat business. Furthermore, when we combine e-commerce strategies with the traceability and security of blockchain, we imbue our digital storefronts with a strong sense of reliability, a critical factor for online consumers.
How Could Blockchain Change the Marketing Industry for Data Security?
This new technology may be on track to disrupt digital marketing, including how we collect data and interact with customers.
Here are some ways the technology could change everything from keyword tracking to creating more data-driven campaigns.
Improved Keyword Tracking
Over the last couple of years, tracking keywords has become easier.
With tools like Ubersuggest, it’s easy to see how you’re performing in search. What if you could combine that with this new technology?
Marketers could use the technology to track keyword positions across all devices in any location. With blockchain, you have real numbers to use for more data-driven and accurate campaigns.
Decentralized Social Media
Data breaches and Facebook’s involvement in the 2016 US elections are causing social media users to become more aware of how their data can be used against them.
As a response, there’s a growing market for decentralized social media networks. These sites allow users to share, connect, and discover content without surveillance.
What does this mean for marketers?
If sites using this technology grow in popularity, it will force us to stop relying on easy data collection and look at new ways to generate leads.
Generate Better Leads
Like most marketers, you probably pull information from various sources and run your campaign based on what you’ve found.
The only problem? The data is not always accurate.
With blockchain, marketers can go straight to the consumer for data collection. You could incentivize people to give you access to their information.
For example, if you want someone to subscribe to your newsletter, you could pay the reader a small amount each time they read an email.
While this would likely have a higher upfront cost, a customer is a much stronger lead if they’re prepared to hand over their data. Using this type of method could tighten your sales funnel and give you more qualified leads ready for nurturing.
Eliminating Click Fraud in Online Ads
One of the most significant problems in the digital marketing space is click fraud.
This is when a human or a computer program clicks on ads pretending to be a legitimate user. Site owners often use this tactic to boost their ad revenue.
Using blockchain, you can make sure ad impressions and clicks are authentic.
adChain is a company working to combat this problem. The adChain Registry uses a smart contract on blockchain to ensure authentic engagement.
Their results show it can help increase transparency and reduce online digital advertising fraud.
Transparency for Customers
When using blockchain technology, your customers know who has access to their data and how they got it.
It can stop nefarious companies from selling cold lead marketing data and help customers control the spam filling their inboxes.
For marketers, less time could be wasted on leads who don’t care about your business. You’ll have a pool of real people with the problem your product or service solves.
Conclusion
Blockchain is far more than just technology for processing cryptocurrency payments.
Digital marketers can tap into its power to give consumers more control over their information, add an extra layer of security to build trust, and tap into valuable, distilled data without all the fluff.
