We are witnessing a paradigm shift: after centuries of expropriation of authors and rights holders by printers, publishers, reproduction and copying machines, platforms and pirates, the question of (intellectual) property is experiencing a new turn in the context of digital media and identities of all kinds – deriving from the spirit of non-fungible, albeit ubiquitous, cat pictures, so to speak.
Protocols and technologies such as blockchain, cryptographic hashing and public key cryptography make it possible to digitally sign and thereby appropriate certain rights and identities. The digital signature is the act of digital sovereignty, a new authority and control over a persistent and indissoluble binding that is able to link identities and self-descriptions, works and metadata.
This post is a transcript from a presentation that I gave on the 26th of May 2021 at the University of Hagen.
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Thank you for the invitation to speak at the University of Hagen, which brings me back to academia in a pleasant way. After a number of different positions in the publishing and media industries, for about five years now I have been dealing hands-on with the effects of blockchain technology on the media and creative industries. And here today, I would like to report on this work. In the computer sciences, which currently give me an academic home, the topic of blockchain is naturally omnipresent. But I am convinced that it is also of great importance for the studies of literature, communication and media to focus more closely on the topic of blockchain. Let me explain why. One can argue that blockchain represents a paradigm shift in the digital development of the last 50 years. Blockchain adds a whole new level to the internet as we know it – or seen from another perspective – blockchain shows a deficit in the way the internet has worked since the 20th century and how we publish and interact online today. I would like to go into this at the beginning of this presentation.
Let’s take a quick look at what’s going on in the digital media industries as we enter the 21st century. There, creative individuals, authors and publishers, TV broadcasters and filmmakers, composers and music labels, photographers and newspapers alike are struggling with a very serious problem: the concentration of power and the control of content and identities by very few centralized intermediaries and platforms, which are as of recently being referred to by political decision-makers as “gatekeepers”. In a period of only 20 years, the commercial trade in different goods and media types has become almost completely digital and has moved to online platforms. And also the social interactions, the exchange of photos, videos, music, texts or ‘messages’ largely take place in the cloud.
But although the Internet is designed as a decentralized network, which would in principle enable the exchange of data and content peer-to-peer, only a handful of popular platforms benefit from what is exchanged or traded online. They regulate supply and demand, define the general terms and conditions of trade and communication, organize payment flows and control access to services, content and goods. And not only that. In addition, platforms are centralized identity and trust service providers.
Each of you has probably already used what is known as a single sign-on procedure from a federated identity provider and, for example, logged into third-party platforms with Facebook, Twitter or other user accounts. Google alone provides 1.6 billion users with a digital identity so that they can use their telephone or e-mail. Amazon provides customers with a digital identity with which they can access digital media such as films, music or e-books. Federated, digital identities in the form of user accounts with centralized identity providers make perfect sense and digital life can no longer be imagined without them.
However, if one takes a closer look at the advantages and disadvantages of centralized identity providers on the Internet, it becomes apparent that trust in the power and responsibility of commercial, for-profit companies is based on a questionable and fragile basis. In addition, the question arises, what happens if users are denied the use of their accounts and thus access to a platform, content, goods, archive or – in the worst case – a bank account? What if a digital identity is deleted? It is no coincidence that blockchain and decentralized, self-generated, digital identities, so-called “self-sovereign identities”, are discussed particularly intensely at precisely the time when the weaknesses of centralized structures may outweigh their advantages.
Blockchain is sometimes euphorically attributed the potential to undermine the power of centralized institutions, companies and platforms. Different hopes and fantasies are associated with technology. In his book “Digital Cash”, the author Finn Brunton documents the history of the discourse around blockchain and cryptocurrencies in the various communities and mailing lists. He reminds of the mathematicians, cryptographers, nerds and activists. And he describes their desire for freedom from censorship, their desire for privacy, their striving for radical independence from the state and other authorities as well as for political renewal in times of crisis – and last but not least, the extropist desire for immortality in the face of the looming global apocalypse. (If one expresses oneself publicly on the subject of blockchain, it is sometimes necessary to distance oneself from the partly right-wing libertarian ideologies that are still circulating in the field today.)
The movement described by Brunton of the different ideas and individuals in search of the best concept for a digital money system accumulated in 2008 in a rather prosaic paper entitled: “Bitcoin: A Peer-to-Peer Electronic Cash System“. In the text, a number of already known cryptographic methods are brought together for the first time in a comparatively simple and ingenious way: cryptographic hashes, asymmetric encryption methods based on private and public key pairs (the so-called “public-key cryptography”), digital signatures and a consensus algorithm Basis of the ‘Proof-of-Work’ method.
The text was written by probably the most famous pseudonym in modern technology history: Satoshi Nakamoto. Nakamoto himself first pointed out the text in a public mailing list on 1 November 2008, which can still be downloaded from the Bitcoin.org website. His name together with his email address at a German email and identity provider sign the paper – as a signature from the old world of federated digital identities, so to speak. GMX, committed to privacy and data protection, has not been persuaded to help reveal the true identity of the legendary Nakamoto, despite a series of legal proceedings that have unfolded around the question of his identity and fabulous wealth.
Modern cryptography proposes an alternative model for the foundation of digital identity, which has been discussed for some years under the term “self-sovereign identity” coined by Christopher Allen. These decentralized, self-generated, digital identities are generated almost autopoietically from a mathematical interplay of randomness and algorithms. They are based on public key cryptography, which is also the prerequisite for – according to my thesis – one of the most important cultural techniques of the coming digital age: the digital signature. The cryptographic, digital signature (not to be confused with the electronic signature) is primarily used to verify the integrity of data, documents or messages. In addition, it establishes an indissoluble connection between the data, documents or messages and their senders, precisely those self-sovereign identities to which real people can be assigned with the help of digital certificates. So the sovereign is the one who can sign digitally!
Digital signatures come into play just a few weeks after the Bitcoin paper is published, when Nakamoto signs the Genesis block of the Bitcoin blockchain in January 2009. With this signature, he not only heralds the start of the Bitcoin blockchain, but also a new era in monetary policy. The signatory is fully aware of the scope of his action. As if there was a need to justify Bitcoin, the headline of an article on the front page of The Times newspaper on January 3, 2009 is irrevocably and immutably inscribed on the Genesis block of the Bitcoin blockchain forever.
On a footnote, one of the still existing verified printed copies of this edition of The Times could be purchased as a physical collector’s item for approximately $1 million. If you consider the amounts for which digital collectibles based on blockchain technology are being traded 12 years later, these sums appear comparatively small.
In monetary terms, the Bitcoin paper solves for the first time a very tangible, so to speak, billion-dollar problem of the electronic money system, the so-called double-spending problem: How can digital money be reliably transferred peer-to-peer between two accounts without banks or other intermediaries? And how can it be ensured that the sender only spends the “electronic coin” once?
Nakamoto defines an “electronic coin” on the blockchain – and I quote – as a “chain of digital signatures”. These digital signatures must be provided whenever a sender wants to sign over an electronic coin to a recipient. With the signature that the sender makes with his private key, the sender refers to the provenance of the electronic coin and thereby acknowledges, as it were, all previous transactions in the past. In addition, the sender includes in his signature the publicly verifiable identifier of the recipient, his “public key”. The signature can be described as a repetition, so to speak, because in the act of signing, the past and the future of the electronic coin manifest themselves.
The blockchain, in itself, consists of a chronological chain of records listing all the transactions of a given period of time. On the Bitcoin blockchain, this period lasts about 10 minutes. These lists are called blocks. In them, the transactions are sorted and it is documented which state changes the transfers initiated by the senders through their digital signature have caused in the system. In this sense, a blockchain is also quite rightly called a “state machine” or “state transition system”.
All data in a blockchain are transparent and publicly accessible and can be verified quickly and efficiently on the basis of cryptographic hashes. One can therefore think of a blockchain as a cash book (with an attached signature folder), with the only difference that after each finalized block, the copies of this book are distributed to thousands of auditors. There are currently around 10,000 so-called nodes that validate transactions and document changes in status. The aim of this reproduction is to ensure that transactions in the lists cannot be manipulated. For this purpose, a “bad actor” would have to work on all the cash books on all computers at the same time. A single malicious manipulation of a transaction in a block would be rejected by the network and and not be considered further. However, it is not entirely impossible to rewrite history in a different way. For this purpose, the majority of the network would have to follow a completely new strand of history.
To prevent this, Nakamoto introduces the concept of “proof-of-work”, a fundamental principle for the security and trust of public-permissionless blockchains: Stake and reward. To be able to write a block, you have to win a lottery game. The only condition for entering this lottery is that you are willing to invest an obscene amount of energy. This energy is required to draw many hundreds of billions of tickets in a very short time – in a cryptographic sense with brute force. Whoever wins the lottery is allowed to write the block and thus finalize the list of transactions from the previous period. For this, the player receives a financial compensation of currently 6.25 BTC as a reward – this converted to around 250,000 EUR last week (on May 21, 2021) plus the fees for all transactions that are listed in the block. The probability that the same player wins the lottery several times in quick succession is so low that manipulation of the system is virtually impossible – unless an attacker controls more than 51% of the nodes or the computing power of the entire network.
Moreover, the players are paid in the native currency of the blockchain. Therefore, they naturally have a great economic interest in ensuring that all transactions are correctly recorded. The value of the currency is largely based on trust in the security of the blockchain, the immutability of the transactions stored on it and the possibility of transparent and simple verification of the integrity of the network.
In addition, the value of cryptocurrencies is generated by the possibility of scarcity of the coins that are in ‘cryptographic circulation’, so to speak. With his digital signature, Nakamoto not only launched the first blockchain. In the same ‘signature’, an alternative model of monetary policy was also launched, a model that knows no bank bailouts or economic stimulus programmes, but in which the total money supply is calculated with unsentimental, mathematical precision and monitored algorithmically. By the year 2140, 2,099,999 Bitcoins will have been distributed to the miners, or so it is inscribed in the code of the Bitcoin blockchain for all time.
The tokens of the Bitcoin blockchain are fungible tokens, similar to the so-called “FIAT money”, i.e. the money that requires trust in banks and financial institutions. Because the tokens are not unique in themselves, the electronic coins of the same currency can be exchanged just like a physical coin and always retain the same value.
With the launch of the Ethereum blockchain in 2015, second-generation networks are emerging. They allow small scripts to be executed by the blockchain, called “smart contracts”. However, these smart contracts on the Ethereum blockchain are neither smart, nor are they contracts in the usual legal sense. Instead, smart contracts are deterministic computer programs that execute code according to predefined rules. Among other things, they also allow the generation of non-fungible tokens, so-called NFTs. Unlike fungible tokens, NFTs are unique and thus distinguishable from each other. They can only be traded as a whole unit and cannot be split. NFTs are not interchangeable per se, as two tokens can each represent a different value.
Second-generation blockchains firstly guarantee the fungibility of their native currency. Secondly, they guarantee the execution of smart contracts, in which fungible, i.e. exchangeable, and non-fungible, i.e. unique, tokens can be created. Depending on the objective of a blockchain, the type of token or the programming of the smart contracts, tokens can represent either a utility value or a monetary value, or they could theoretically also represent completely different assets, such as digital or physical things, goods, commodities – or art. In fact, pretty much anything could be tokenised, and if you keep the concept of the “tokenisation of everything” in mind, you understand that the blockchain heralds a completely new system of circulation of values and goods that will not only have an impact on existing economic systems. The legal system will also be challenged when it comes to the new link between tokens and property rights.
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Four Lessons of Cryptoart
If you had spent the last few months on a desert island, you wouldn’t believe it. But for some months now, the crypto world has been discussing art. A real hype has arisen around the tokens of the Ethereum blockchain, which are used in the so-called cryptoart and have recently been traded in the auction houses and galleries of the world.
You may remember that four years ago, there also was a lot of buzz around the topic of NFTs — triggered at that time by colourful cat pictures. Around the turn of the year 2017/2018, auctions of tokens assigned to cryptokitties were sometimes responsible for 10% of the total trading volume on the Ethereum blockchain. Some NFTs were sold for up to USD 200,000 — bargains by today’s standards.
The First Lesson of Cyptoart
Let’s take a closer look at how the whole thing actually works. For this purpose, we will visit the currently largest and best-known marketplace for NFTs called: Opensea. Opensea is not only an auction platform, but also a digital gallery. This means that all sold NFTs are listed on the platform and can potentially be resold. Here you can see the Cryptokittie linked to the NFT which I own.
So the first lesson of cryptoart is to understand that the artwork on the one hand and the token on the other are two different things. In the public discussion, this distinction is often ignored. The NFT is not the work of art, but only – and how could it be otherwise – the non-fungible token, an identification number in a smart contract. The artwork represents this identification number. And since the ID is unique, it must also be the artwork that stands in for the token. On the platforms, the work is described in more or less detail by properties, attributes or metadata that – in this case – distinguishes my cat from other cryptokitties.
The Second Lesson of Cyptoart
Further down on the website, you will find the complete transaction history of the NFT: from the creation of the token, to the listing on the auction platform, to the transfer of the NFT to my personal wallet after the successful auction – all steps are transparently documented.
The listing details also include the address of the smart contract on the Ethereum blockchain and the identification code of the individual token stored in the smart contract. Clicking on the link takes you to the explorer of the Ethereum blockchain.
There, you can examine the smart contract and find out who owns the NFT, for example. In this case, the address you see here is my personal wallet address, the ID of one of my public keys of my Ethereum wallet. If I now publicly acknowledge this wallet address, it can be cryptographically verified that I authorised the payment for the purchase of the cat token by signing it with my private key. This signature was included in the list of transactions of a block – as described before – and this block was recorded in the blockchain. As long as I now have control over my private key and do not transfer the token to a third person through another signature, I am in possession of the token.
The second learning of Cryptart is to understand that I have become the holder of the token through the signature of a third party, but that this possession only lasts as long as I have the power of disposal over the token and as long as I do not transfer it through my signature. Possession is defined in the German Civil Code (BGB) as actual control of a thing (“tatsächliche Sachherrschaft”), which is acquired through “actual domination over a thing” (“tatsächliche Gewalt über eine Sache”).
But is the possession of a token on the blockchain subject to property law, at all? Can the control of a token be called ownership, considering the fact that a holder will lose this ownership when he factually and cryptographically loses control of the token! Does it therefore make any sense at all to speak of “possession” and “ownership” in a legal sense, or is this not rather a new legal category that is emerging there, based on technical factuality? These are the relevant questions that the community will have to address in the coming weeks and months.
The Third Lesson of Cyptoart
Here is an example of another artwork on another platform: Superrare. Through the history of the bids you can see how desperately I tried to bid for the NFT. But the current holder did not want to sign the token over to me. It is interesting that the technology for the auction, the payment and the transfer of the token are not exclusively bound to the respective platform, but are provided by the blockchain. The fragile bunny is therefore listed on several NFT auction platforms, and every bid and every transaction is visible on all platforms at the same time. The payment of the artists takes place – at least in principle – directly and immediately, peer-to-peer between buyer and artist.
All the information needed to list the NFT, i.e. metadata, licence information, sales commissions, is either stored in the smart contract of the token itself or linked in it. In this example, the link in the smart contract leads to metadata stored on IPFS, the Interplanetary Filesystem, a decentralised hosting platform for any kind of data or files. This is also where the URL to the actual artwork can be found, which in this case is also stored on IPFS and can be downloaded from there. It may come as a surprise to see the artwork presented here in high resolution without any technical hurdles or restrictions.
So the third lesson of crypotart is to understand that it is not the digital artwork that is the rare collectible, but the NFT. As with fungible tokens, the value of the NFT is generated by the limitation of the total quantity of digital tokens. On the perceptual level of the artwork, on the other hand, this scarcity is referred to by the fact that it is ubiquitous. The cryptoart of the 21st century is meant to be seen and shared. Its value is generated precisely through the public display of the artwork – in digital and physical museums and galleries. With the token on the blockchain, its holder acquires “bragging rights”, so to speak, and the more publicly and prominently the artwork is seen, the more exclusive the possession of the corresponding token.
From an economic perspective, the legitimate question arises as to whether the model established in the visual and fine arts of the scarcity of non-fungible tokens with simultaneous public distribution of the digital artwork is also suitable in economic terms for the media formats of those industries that do not aim at collector’s items but at a mass market. This is because the value of the content of the entertainment or information industries is not generated by the free, public provision of the actual content, but rather by the restriction of the possibilities of use of a content before the actual licensing.
The Fourth Lesson of Cyptoart
And this is where the fourth lesson of Cryptoart immediately follows: Even though an holder of a token on the blockchain may brag about the corrsponding artwork, the possession of the NFT does not mean that he has thereby automatically acquired all rights to the artwork! From a structural point of view, we are dealing with two different domains or legal systems: a technical one, which cryptographically establishes the actual possession of the token, and a copyright one, which is regulated by a licence agreement. From a technical point of view, no one is usually prevented from using digital artworks on the digital auction platforms in every conceivable way. But of course, copyright also applies to the artworks that represent a token. What the holder of the NFT is allowed to do with the corresponding artwork is also traditionally regulated by a licence agreement. This is drawn up by the creator of the artwork himself or by the auction platform and is at best linked in the metadata of the NFT. How this important link between the artwork and its terms of use can be established in cryptoart is the subject of discussions and proposals for the first standards in the community, but in practice they have not yet become uniformly accepted.
So how do I reliably find out what I am allowed to do with a digital work? This question arises completely independently of whether a digital content has been assigned an NFT or not. ‘How can I use a digital work?’ is, so to speak, the cardinal question of copyright law that arises again and again in digital times when politics, law and technology reinvent and readjust themselves.
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Currently, the question is gaining importance due to the new European Directive on Copyright, which will come into force next month and must be transposed into local law by all EU Member States. The Copyright Directive is one of three EU directives that aim to stabilise the digital market imbalance mentioned at the beginning of this presentation.
The infamous Article 17 of the so-called DSM Directive requires online platforms such as Facebook or Instagram to have verified the rights of use of all digital media content uploaded to their platforms before publication. If the content has licences that restrict its use, they must seek permission from the rights holders to publish the content. If the platforms violate the rights of third parties by publishing prematurely, they can be held legally responsible by the rights holders.
Any of you who have ever tried to license even a single digital work will have experienced that licensing digital content is sometimes a far too complicated and inefficient process. So how should platforms dealing with hundreds of millions of pieces of content deal with this directive?
Article 17, paragraph 4(b) of the Directive suggests that there is a duty of cooperation on the part of rightholders, which is to provide platforms with “relevant and necessary information” to enable them to enter into licensing agreements with rightholders. However, from an operational point of view, this means that rightholders must publish accurate and complete metadata and rights management information in an easily accessible and timely manner. In addition, licence offers should be expressed in a machine-readable form to enable efficient exchange of data and automated transactions peer-to-peer or machine-to-machine.
A few weeks ago, I presented a conceptual proposal for a framework based on the use of the aforementioned new standards for decentralised identification and the fundamental cryptographic methods and protocols.
Standards for decentralized, self-generated, digital identities are currently being established not only for people, companies or things – at the W3C level –, but also for digital media content. At the end of this presentation, let me briefly introduce you to the International Standard Content Code. The ISCC is a project that I co-initiated and that I have been promoting on a voluntary basis for the last several years.
The ISCC is a proposal for an open standard for the decentralised identification of digital media files of all media types (text, image, audio, video). It can identify and cluster identical or similar files. The open specification of the standard and the development of the open-source software to generate the ISCCs are maintained by the ISCC Foundation in Leiden, of which I am co-founder and chairman of the board. This open approach aims to ensure adaptation, interoperability and transparency of decentralised digital content identification. The ISCC was initially adopted by ISO in 2019 as a preliminary work item. In the next few weeks, however, it will be decided whether the ISCC will be adopted as a full work item to develop of a global standard for the identification of digital media.
The main difference of the ISCC compared to existing standard numbers for books, music or films is the fact that the ISCC is generated from the digital file itself – in this case a photograph.
This means that an ISCC can be generated by anyone who has access to a digital media file – decentralised, without the prior exchange of metadata, independent of file naming, without manual effort, free of charge through the use of open source software.
Any platform that has access to the file, will generate the same or similar ISCC from the same or similar content – even if the content has been unintentionally or maliciously modified to some degree or is available in different file formats.
And if the rights holders have provided metadata or licensing offers for the content, anyone with access to the digital file can also learn about the licensing terms, which can be linked indissolubly to the image on the blockchain.
Eventually, in line with the DSM Directive, platforms will be able to decentrally identify content in a fully automated way and license it based on the proposed rights management information, cryptographically ensuring that the data has been provided by the authorised rights holders!
The prerequisite for the model is the registration of the ISCCs generated from the digital media files on public-permissionless blockchain networks. In this way, the rights holders sign the transactions with their private key, thereby linking their decentralised, self-generated, digital identity, their “self-sovereign identity” indissolubly with the ISCCs generated from the digital content. Public-permissionless blockchain networks provide the trust architecture that allows third parties to cryptographically verify data, claims and signatures on the blockchain.
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The power of decentralisation can thus be seen above all in the self-empowerment of rights holders through the digital signature. If the age of digital reproduction and abundance is understood in principle as the culmination of the artist’s expropriation of his work (e.g. through the digital copy), one can argue that public-key cryptography as a fundamental principle potentially enables the possibility of re-appropriation of digital works by their rights holders.
Protocols and technologies such as blockchain, cryptographic hashing and public key cryptography make it possible to digitally sign and thereby appropriate certain rights and identities. The digital signature is the act of digital sovereignty, a new authority and control over a persistent and indissoluble binding that is able to link identities and self-descriptions, works and metadata.
In the age of cryptography, the actual sovereignty over the digital token manifests itself through the digital signature. In addition, the digital signature also manifests a new, indissoluble connection between identity and work, which can be described as the digital sovereignty in the age of cryptography.