How Blockchain Will Change Marketing As We Know It

Abstract

Blockchain is a special type of database that cannot be easily manipulated or hacked. Sometimes called distributed ledger technology, the database is shared by many computers, called nodes. The components of the database are broken up into blocks or sheets. One of the ingenious ideas is that the end of each block contains a cryptographic signature. This signature (sometimes called a digest or a hash) summarizes all the information in the block, and any trivial change in the data in the block causes the signature to be completely different. This last line of the block is then repeated as the first line of the next block — which is where the “chain” comes in. This feature makes a blockchain immutable. If anyone tries to edit an old block (rewrite history), the block signature will change, and the network will see that the block signature does not match the first line of the next block. The network throws out the corrupted block and automatically replaces it with the original. Hence, it is practically infeasible to alter history to commit fraud or unwind unwanted transactions. Given that most of the blockchain applications have been focused in finance, the technology has been largely under the radar screen in marketing. We argue that blockchain will fundamentally impact the practice of marketing. There are potentially large rewards for the early adopters in marketing — and costs for those left behind by this innovation.

Keywords: Martech, Fintech, Blockchain, Distributed Ledger, Social Media, Microtransactions, Machine-to-Machine Payments, Advertising, Incentives, Tailored Pricing

JEL Classification: M31, M37