Blockchain technology in marketing - opportunities and pitfalls

Using blockchain technology in marketing, could it be something?

The technology has long been well-proven in the financial sector,

but also in other areas, including marketing, a breakthrough is said

to be imminent. With great effects to look forward to.

The benefits of the technology are clear,

but at the same time, there are legal challenges to watch out for.

You can read what this means for your marketing in this article written by lawyer Erik Ullberg and assistant lawyer Richard Fürst at Wistrand law firm.

Blockchain technology was initially developed to support transactions with the world's first cryptocurrency, Bitcoin. In simple terms, it involves some connected actors who form a network-based database by their computers, so-called nodes, sharing data.

New data is added to older data in blocks, which has given the technology its name. A central function is that all players in the chain have access to all data at the same time and need to verify and approve changes or added data.

The verification function creates transparency and security by allowing all actors to see when data has been changed, while at the same time making it virtually impossible to manipulate stored data. In addition, intermediaries are avoided, which means that the technology is decentralized in nature.

Blockchain technology in marketing

Although the technology has its origins in the financial sector, its potential has been identified in many other sectors such as logistics, biotechnology - and not least marketing.

In the article How blockchain might be useful in marketing and advertising, the digital magazine Digiday addresses many possible uses of the technology in marketing. For example, it can be used to verify that ads on the internet reach the target audience. To overcome the currently common problem where ads are "read" by fictitious browsers instead of the intended recipient.

By using a system based on blockchain technology, a review of reading ads can take place without intermediaries, according to the magazine.

Digiday also believes that the technology can be used to label goods to be able to more easily distinguish counterfeits from genuine goods. A telling example is the clothing brand Babyghost, which allows customers to verify the authenticity of their handbags. At the same time, they include a story about the product itself to create a personal experience for the customer in the interaction with the brand and the product.

Another example is using blockchain technology to handle large amounts of consumer data. The data is made available at the network level but is anonymized to such an extent that it cannot be linked to individuals. The purpose of this procedure is to enable brand communication directly between companies and customers without intermediaries.

Using blockchain technology to verify that ads are read by authentic browsers, or as protection against counterfeiting, should not encounter the same obstacles as in the example above where data about individuals, ie personal data, can be handled. As soon as personal data is processed within the framework of data, the Data Protection Regulation (GDPR) can be updated.

Investigation of blockchain technology at EU level

At the EU level, too, there has been interested in the development of blockchain technology. This is not the least because in many cases it may be about personal data processing.

In the autumn of 2018, the report Blockchain and the GDPR was released from The European Union Blockchain Observatory and Forum. In this, the problem of the processing of data on individuals, seen in the light of the GDPR, is highlighted in particular. The authors identify the inherent tension that arises between a technology that, on the one hand, is intended to be decentralized and transparent in that all connected actors have access to stored data and, on the other hand, legislation to protect the privacy of the individual.

Focus on three areas

In the report, three areas are highlighted as particularly important to consider.

• Identification of who determines the purpose and means of processing the personal data, ie who is responsible for personal data

• Anonymization of personal data

• The individual's right to exercise his rights, such as correcting or deleting personal data.

Four tips when building applications

Furthermore, the authors of the report provide four pieces of advice to entrepreneurs who want to create applications based on blockchain technology.

1. Look at the whole

The first piece of advice is to look at the whole and decide what the technology de facto needs to be used for and what value the use of the technology contributes to creating. It may be that solutions other than blockchain technology are better suited for the specific case. The use of the technology itself should not be an end in itself.

2. How you should store your personal information

The second piece of advice is to avoid storing personal data in a blockchain. If this is necessary after all, it is important to use techniques that make the information unrecognizable, encrypted, and aggregated to anonymize data. The requirements are very high and mean that it must be impossible to identify an individual. It should also be an "irreversible" measure. Thus, it is not enough to pseudonymize personal data, but these should never be able to be recreated and can be linked to a physically living person.

Here it is important to keep in mind that many existing technologies may be "impossible" to decrypt or recreate today, but history has taught us that technological development is fast. Sooner or later, this may well become possible.

3. Reduce the risk

The report authors' third piece of advice is to strive to reduce risks with personal data processing by storing personal data next to the blockchain, so-called "off-chain". If this can not be avoided, personal data should be handled on private blockchain networks with consent.

4. Not deterred by legislation

The last, and at least as important, advice to the contractor is not to be discouraged by legislation but to continue to develop solutions - but to be as transparent and clear as possible to users.

It should be emphasized that, according to the working group, this is not a general aversion to the technology itself at the EU level, but how the technology is used. Namely, there is no GDPR-compliant blockchain technology - or other technology for that matter - but only GDPR-compliant uses and applications.

It should also be added that the working group in its work has not been able to rely on either statement from, for example, data protection authorities or in practice, as the technology is so far so new.

Probable requirement when distributing your marketing

To return to the issue of the use of blockchain technology to distribute marketing based on anonymized data, and taking into account the advice above, such a solution would probably require that the personal data itself be stored "off-chain".

In conclusion, it can be said about blockchain technology that it is in a strong development phase. There is talk today from several quarters that technology is facing its breakthrough with major effects as a result. This is in several areas in both the public and private sectors. This probably gives us reason to return to blockchain technology in future articles.