Blockchain technology and potential applications in online advertising
Trang Tran/ MICA 2018 Proceedings
International Conference on Marketing in the Connected Age (MICA-2018), October 6th, 2018
Danang City, Vietnam
Blockchain Technology and Potential Applications in Online
Advertising
Trang Trana*
aThuongmai University, 79 Ho Tung Mau Street, Hanoi, Vietnam
A B S T R A C T
Blockchain is a new technology, although it has recent appeared for few years, blockchain is considered a
technology that has a great influence and can affect many different areas. Online advertising is also one of the
areas affected by this technology. To broaden our understanding of blockchain technology based services and
platforms, this article gives the potential applies of blockchain in online advertising. This article focuses on
introducing and clarifying the theory of blockchain technology. In addition, this article gives the problems that
online advertising is fcing now and how blockchain changes it by exploring the potential application of
blockchain in online advertising.
Keywords: blockchain; blockchain technology; potential apply; blockchain and online advertising
1. Introduction
Online advertising is an important part of any business organization on the internet. Nowadays, any business
wants to advertise their products and services to targeted customers fastly, online advertising is the best way.
Online advertising has grown tremendously in recent years thanks to its superior features such as targeted
advertising, accurate measurement, high efficiency and competitive cost. With the benefits of online advertising:
Measurability, Interactivity, Increase the revenue, Trust, Cost-Effective, no modern businesses can ignore this
media [27]. You can see, the roles of online advertising are huge. However, there are a number of issues that still
exist in online advertising. About users, they concern the confidentiality of information, the viewer's advertising
data. For publishers and advertisers, they concern about fraud; measurement and cost in advertising.
Blockchain is not a miracle technology that can change any problem in online advertising, but it is a potential
technology that is highly influential and can improve some the remaining problems.
This article will begin with an explanation of what the blockchain technology. And then, it gives issues
which still exist in online advertising. Many potential benefits were expressed to deal with these issues. The
purpose of the study is to provide a general theory of blockchain, to clarify the issues that exist in online
advertising, and to offer potential applications that blockchain can solve. For the purpose above and blockchain
is a relatively new technology, so the author uses the research method at the desk to clarify the problem. Because
of being a new technology that even many people did not about it, so author used research method at the desk to
execute this article.
2. Research method
This article was executed with three main objects are: (1) given the general theory of blockchain (concept of
blockchain, the way that blockchain works, the benefits of blockchain); (2) presented the remaining issues of
online advertising activities in the present; (3) given potential benefits of blockchain in online advertising; to do
* Corresponding author. E-mail address: huyentrangtmdt@gmail.com
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this research, author used desk research method.
Desk research is the study of the analysis of existing data from different sources. Such sources include: book,
press, Internet, analytical reports, statistical data. The main advantages of desk research are: faster and cheaper
data analysis and collection than the generation of new research; the ability to analyze data based on multiple
sources of information; suitableness for each stage of study [14].
Blockchain is a relatively new technology that was first introduced in 2008 by Satoshi Nakamoto with its
initial product Bitcoin - electronic money [2]. So far blockchain is considered as one of the most potential and
influential technologies in many fields from economics to politics and society. However experts do not know the
true level of development of this technology, they only know that this is a really potential technology [20]. The
research method at the desk will be a suitable method for new technology such as blockchain while in the
research stage, exploration.
3. Literature review
3.1 Blockchain technology
Concept of blockchain
Honestly, there is no specific definition of blockchain technology, experts only offer a common
understanding about this technology. In a pure sense of the term "blockchain", blockchain is a chain of
transaction blocks that are connected to each other. Blockchain is a series of blocks of information, which was
first described in 1991 by a group of researchers including Stuart Haber and W. Scott Stornetta [1,4]. In 1998,
Szabo designed a mechanism for a decentralized digital currency he called "bit gold". Bit gold was never
implemented, but has been called "a direct precursor to the Bitcoin architecture [8]. In 2000 Stefan Konst
published a general theory for cryptographic secured chains and suggested a set of solutions for implementation.
The first blockchain was then conceptualized by Satoshi Nakamoto in 2008 and implemented the following year
as a core component of the digital currency bitcoin, where it serves as the public ledger for all transactions.
Through the use of a peer-to-peer network and a distributed timestamping server, a blockchain database is
managed autonomously. The invention of the blockchain for bitcoin made it the first digital currency to solve the
double spending problem. The bitcoin design has been the inspiration for other applications: Identity, Personal
records, Financial services and banking, Supply chain management, asset tracking, and inventorying, Contract
and vendor management, Copyrights,... [12, ].
The simplest way we can understand blockchain is the method of recording data, which can be thought of as
a scattered ledger that stores transactions, agreements, contracts and any data. we need to record independently
or verify its existence. This is a hierarchical database that stores information in blocks of information that are
linked together and expanded over time. Each block of information contains information about initialization time
and is linked to the previous block, so this database is called block chain. The key difference between blockchain
and normal ledger is that it does not exist in a particular location (meaning it has no authentication center or a
single ledger source). It is distributed over hundreds and thousands of computers around the world by a
technology that allows grouping of digital records into blocks and strings by complex algorithms and
synchronous encoding processes many computers [3,12].
Structure of a block
Blockchain owes its name to the way it stores transaction data — in blocks that are linked together to form a
chain. As the number of transactions grows, so does the blockchain. Blocks record and confirm the time and
sequence of transactions, which are then logged into the blockchain, within a discrete network governed by rules
agreed on by the network participants.
Each block contains a hash (a digital fingerprint or unique identifier), timestamped batches of recent valid
transactions, and the hash of the previous block. The previous block hash links the blocks together and prevents
any block from being altered or a block being inserted between two existing blocks. In this way, each subsequent
block strengthens the verification of the previous block and hence the entire blockchain. The method renders the
blockchain tamper-evident, lending to the key attribute of immutability.
To be clear, while the blockchain contains transaction data, it’s not a replacement for databases, messaging
technology, transaction processing, or business processes. The blockchain contains verified proof of transactions.
However, while blockchain essentially serves as a database for recording transactions, its benefits extend far
beyond those of a traditional database [6].
Blockchain – How it works
Blockchain allows for the secure management of a shared ledger, where transactions are verified and stored
on a network without a governing central authority. Blockchains can come in different configurations, ranging
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from public, open-source networks to private blockchains that require explicit permission to read or write.
Computer science and advanced mathematics (in the form of cryptographic hash functions) are what make
blockchains tick, not just enabling transactions but also protecting a blockchain's integrity and anonymity [4].
Fig. 1. Blockchain - How it works [4]
Step 1: Transaction - Two parties exchange data; this could represent money, contracts, deeds, medical
records, customer details, or any other asset that can be described in digital form.
Step 2: Verification - Depending on the network’s parameters, the transaction is either verified instantly or
transcribed into a secured record and placed in a queue of pending transactions. In this case, nodes—the
computers or servers in the network—determine if the transactions are valid based on a set of rules the network
has agreed to.
Step 3: Structure - Each block is identified by a hash, a 256-bit number, created using an algorithm agreed
upon by the network. A block contains a header, a reference to the previous block’s hash, and a group of
transactions. The sequence of linked hashes creates a secure, interdependent chain.
Step 4: Validation - Blocks must first be validated to be added to the blockchain. The most accepted form of
validation for open-source blockchains is proof of work—the solution to a mathematical puzzle derived from the
block’s header.
Step 5: Blockchain mining - Miners try to “solve” the block by making incremental changes to one variable
until the solution satisfies a network-wide target. This is called “proof of work” because correct answers cannot
be falsified; potential solutions must prove the appropriate level of computing power was drained in solving.
Step 6: The chain - When a block is validated, the miners that solved the puzzle are rewarded and the block is
distributed through the network. Each node adds the block to the majority chain, the network’s immutable and
auditable blockchain.
Step 7: Built-in defense - If a malicious miner tries to submit an altered block to the chain, the hash function
of that block, and all following blocks, would change. The other nodes would detect these changes and reject the
block from the majority chain, preventing corruption.
Characteristics of blockchain
Blockchain builds trust through the following five attributes [7]:
Distributed and sustainable: The ledger is shared, updated with every transaction, and selectively replicated
among participants in near real time. Because it’s not owned or controlled by any single organization, the
blockchain platform’s continued existence isn’t dependent on any individual entity.
Secure, private, and indelible: Permissions and cryptography prevent unauthorized access to the network and
ensure that participants are who they claim to be. Privacy is maintained through cryptographic techniques and/or
data partitioning techniques to give participants selective visibility
into the ledger; both transactions and the
identity of transacting parties can be masked. After conditions are agreed to, participants can’t tamper with a
record of the transaction; errors can be reversed only with new transactions.
Transparent and auditable: Because participants in a transaction have access to the same records, they can
validate transactions and verify identities or ownership without the need for third-party intermediaries.
Transactions are time-stamped and can be verified in near real time.
Consensus-based and transactional: All relevant network participants must agree that a transaction is valid.
This is achieved through the use of consensus algorithms. Each blockchain network can establish the conditions
under which a transaction or asset exchange can occur.
Orchestrated and flexible: Because business rules and smart contracts (that execute based on one or more
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conditions) can be built into the platform, blockchain business networks can evolve as they mature to support
end-to-end business processes and a wide range of activities.
3.2 Many issues in online advertising
Advertising industry have lots of problems that are facing. Technology is growing fast, especially the world
is in The Fourth Industrial Revolution, so the method of online advertising must bring efficiency to the
participants. There are many existing issues that make it difficult for users, publisher, advertiser, details are:
Many middlemen in advertising
The fig 2.1 below shows that the simple model in online advertising and relationship between them. This
model includes: user, pulisher, network and advertiser.
User (Customer): Users are people that visit a publisher website/ or apps and they are interested in products
and services.
Publisher: A publisher is simply the entity who receives money for showing ads on their website. The
publisher advertises the actual product or service and drives the user to the advertiser page to make a purchase or
read more details about the product. Typically, the publisher can be an affiliate or a reseller, or just a website
promoting a business. Its main profit comes from publishing the advertisement itself. For example: The ones
who sign up in Google Adsense are called publishers and they get money from publishing ads.
Advertiser: An advertiser is the one who pays money in order to get his or her ads shown on a mobile app or
a website. An advertiser controls the actual product or service that is being advertised as they are the one who
commands the product advertising process. The advertiser is also known as a retailer or a merchant.
Network (Ad Network): Ad networks help advertisers to buy digital ads across a slew of publisher sites and
apps. At the most basic level, ad networks pool inventory of unsold ads from publishers and sell it to advertisers.
They match the supply with demand.
In here, Ad Networks, Ad Exchange, Agencies can be understood as middlemen that match advertisers and
publishers and support advertising display (Fig 2.2).
Fig. 2.1. The flow of online advertising [18]
Fig. 2.2. Intermediate in online advertising [9]
In the advertising industry, there are a lot of middlemen that lead to cost for business to pay more because of
these middlemen. The problem with display online advertising is that it has become an inefficient and costly
process, both for advertisers and publishers. Publishers aren’t able to sell most of their inventory and the
inventory they do sell is sold for way too low a cost. Advertisers on the other hand, are also losing money
through middlemen deal as not every impression is made equal. Originally, the publisher would send his
available inventory to a mediator (ad exchange, ad network, or agency) and the advertiser would purchase in
bulk, to serve his ads on the site. Advertisers and publishers are actually limited by these mediators. The
advertiser gets a limited amount of sites to choose from and most of those will most likely be irrelevant. Also,
the variety of those ad-networks results quite a cumbersome process managing campaigns in multiple ad-
networks simultaneously, creating a huge burden on the advertiser side.
About the confidentiality of information and data viewers
The second issue that causes trouble for users is the privacy of data users. In most cases, a user's search query
is tracked and archived, and then the ad service provider will display relevant ads on the user's browser. In some
case that users allow, but this is an issue that almost internet users do not like and this can also be interpreted as
violating personal privacy.
For example, Google automatically scanned email users to retrieve the data used later for targeted ads. Many
people think that this is a worrying issue and even if the company recently announced it had stopped functioning,
most experts say that this move is due to the adequacy of data collection, not due to privacy concerns, but this is
also a concern for viewers [15,16].
Fraud in advertising
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The third issue that affects directly to advertisers is ad fraud, this is also a problem that the professional
advertising community is concerned about. Ad fraud is a type of scam in which the perpetrator fools advertisers
into paying for something that is worthless to them, such as fake traffic, fake leads or misrepresented and
ineffective ad placement [22].
The media industry has been under fire as problems with online ad fraud, more precisely bots instead of
humans seeing or 'clicking' on ads, have shown unrealistic measurement of campaigns. Usually, online
advertising uses automated technology, and it can be unclear where precisely the ads are placed, leading to vast
amounts of money being wasted because they cannot be properly monitored [17].
A well-known and recent example of this case is Methbot (this is the name of a fraudulent campaign
conducted by a Russian criminal group AFK13 which estimates it earns $3 million to $5 million a day by click
fake ads). This is a fraudulent campaign by creating fake domains for advertisers to buy ads, and then the
phishers invest a bot to click on the ad that boosts revenue thanks to the paid system money per click that they
exploit. It's the biggest digital ad fraud ever uncovered and perpetrated by faking clicks on video ads.
They planned their machinations in meticulous detail. First, they created more than 6,000 domains and
250,267 distinct URLs within those that appeared to belong to real big-name publishers. But all that could be
hosted on the page was a video ad. With faked domain registrations, they were able to trick algorithms that
decided where the most profitable ads would go into buying their fraudulent web space. Those algorithms
typically make bids for ad space most suitable for the advertisement's intended audience, with the auction
complete in milliseconds. But AFK13 were able to game the system so their space was purchased over big-name
brands. AFK13 then invested heavily in a bot farm, taking up space in data centers so they could fire faked
traffic from more than 570,000 bots at those ads, thereby driving revenue thanks to the pay per click system they
exploited. As part of what White Ops called the Methbot campaign, those bots "watched" as many as 300 million
video ads a day, with an average payout of $13.04 per thousand faked views. And the fraudsters had their bot
army replicate the actions of real people, with faked clicks, mouse movements and social network login
information [16].
3.3 Potential applications of blockchain in online advertising
Blockchain is considered as a potential technology which allows to solve the problems mentioned above.
Applying blockchain allows to connect directly without middlemen helping to reduce costs
considerably
In finance, the removal of middlemen involves the removal of intermediaries, such as bankers, used to
transfer and store your money. In the case of online advertising too, this middleman is an agency like Google or
Facebook, ensuring the reliability of the money through the advertising campaign. Blockchain is likely to break
this pattern by allowing direct advertisers to buy and sell to advertisers instead of through middlemen. Applying
blockchain, advertiser can directly contact the owner of the website when they want to publish their
advertisements, blockchain can help them connect via the app to the owner. Through the application, it can be
easily proven that the viewer of the ad and the click is real through the display data, ensuring that the website
owner and the business do not need a middleman to mediate the transaction and authenticate the deal. No need
for middlemen and no fraud, blockchain provides accurate information to the parties: who, when, how often to
see the ad on the page and how many users actually click on it [19].
For example: Platform of XCHNG (XCHNG.io)
The XCHNG platform is an open source digital advertising platform based on blockchain technology that
simplifies the buying and selling process for advertisers, agencies and partners. With XCHNG, the future of
advertising is simplified, secure, verifiable, scalable and standardized. Through the use of blockchain
technology, buyers and sellers outline their terms in a smart contract. Smart contracts may be subject to
additional verification and enforcement layers by optional online service providers, such as measurement
providers, rating providers, payment providers, and payers. accountant.
The payment provider is responsible for paying the publisher payments when the contract terms are met.
Additional offers for payment providers include providing fast payments to publishers for a fee, which
encourages publishers to deliver [25].
Kochava has designed and developed an open, crypto-based ledger framework that is the manifestation of a
smart contract system for advertising. Unlike the paper-based version of the contract to buy and sell digital ads,
the smart contract IO codifies all the elements of a well-formed IO into a fully traceable and immutable
electronic Ricardian contract, binding the following key elements:
(1) Identification and pre-verification of inventory being bought, sold, or traded with associated targeting
capabilities against an open blockchain framework
(2) Identification and pre-verification of the Buyer and Seller of the media with unique keys
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(3) Embedded and programmable terms for the agreement that address traffic and brand safety verification,
targeting (from 1, above), allowance of re-brokering, flight times, payment approach: CPM (Cost per Mille—
impression-based pricing), CPC (Cost per Click), CPI (Cost per Install), CPX/CPA (Cost per Action) and other
details for the digital ad buy; General Data Protection Regulation (GDPR) compliance
(4) Identification of the associated ecosystem partner to be used for the purpose of measuring performance of
IO terms (called the Measurement Provider)
(5) Identification of the optionally associated ecosystem partner to be used as the Ratings Provider
(6) Identification of the optionally associated ecosystem partner to be used as the Payment Provider (For
clarity, Kochava will not serve in this capacity on XCHNG).
(7) Identification of the optionally associated ecosystem partner to be used as the Arbitration Service in the
event there is disagreement between the Buyer, Seller or Measurement Provider upon delivery By codifying the
IO into a smart contract written to the XCHNG distributed ledger, the associated inventory is replete with a)
traceable history, b) capacity for delivery verification, c) arbitrage opportunity and, most importantly, d)
liquidity.
Applying blockchain allows the user to gain control over the information
Applying blockchain allows users to increase control over their own information. Instead, users will have
greater authority in determining when, for whom, and for how long their information is available. People may be
able to buy and sell their own personal information, giving them greater autonomy in information. Advertisers
will then have a better set of loyalty and quality in the long run.
For example: Platform of Snovio (snov.io)
The Snovio platform marries the interests of businesses (the buyers of the data) and data providers
(contributors) from all over the world. For that purpose, Snovio uses blockchain technology in order to provide
transparency in revenue distribution among participants that complete the databases with efficient leads. So, the
main actors are:
Platform serves for both contributors and buyers. It works on the blockchain and smart-contract – instruments
that guarantee a fair distribution of revenues from data sales among the contributors.
Contributors refill the database with new leads contacts. They also update the obsolete information. Snovio
saves every activity of contributors in a history log and demonstrates which data turned out to be the most useful
and sought. This is considered in calculation of the reward paid to a contributor after the data is sold.
Customers set the criteria for the search of the needed leads. While buying leads they will be able to check
the origin of the contacts, see how many times this data was bought and understand whether these leads were
useful for another business or not. Such transparency is enabled by Snovio’s blockchain. Whenever information
in a purchased lead is updated, customers are immediately notified.
The platform will also function as a marketplace. The customers will no longer have to carry out the search
by themselves. They will be able to place an order for search inside the platform that will be performed by an
agent [23].
Ensuring information is safe and confidential
Applying blockchain, user information will be confidential and not disclosed to third parties, data is only
viewed by system members such as advertiser and publisher, large amounts of information and data will be
stored by blockchain not available to third parties.
For example: Platform of Blockstack (Blockchack.org)
Blockstack applies blockchain to build an open source project that allows users to access web pages while
maintaining their privacy and security. This service is supported by blockchain technology, where people have
the ability to grant read / write permissions to their data. The information is then encrypted directly on their
personal device, eliminating the need for a third party. Blockstack customers can access the content they want,
without having to worry about getting unwanted targeted ads - the power back to the consumer [11].
Blockstack has the following design goals:
(1) Decentralized Naming & Discovery: End-users should be able to (a) register and use human-readable
names and (b) discover network resources mapped to human-readable names without trusting any remote
parties.
(2) Decentralized Storage: End-users should be able to use decentralized storage systems where they can
store their data without revealing it to any remote parties.
(3) Comparable Performance: The end-to-end performance of the new architecture (including name/resource
lookups, storage access, etc.) should be comparable to the traditional internet with centralized services
Ensuring the reliability of statistical data
In online advertising, it is almost impossible to know whether the statistics are accurate or not, the business
itself does not know whether the clicker is a real person or a robot or a software that used to simulate data to be
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charged higher. Applying blockchain, we can know that. Each chain in the system is transparent and encrypted,
and companies may be able to determine whether their ad is a member of the system. This helps the companies
to have accurate statistics on the target customers and help them reduce cost.
For example: Platform of Adchain (Adchain.com)
Adchain is an open protocol on Ethereum’s public blockchain. Its stated goal is to allow for building of
decentralized applications, specifically for use in the digital advertising ecosystem. Adchain is an open protocol
that uses blockchain technology to solve digital advertising’s persistent issues of brand-safety, fraudulent traffic,
and lack of financial transparency. The way this works is that there is an open access ledger, available to all
parties, that tracks and reports the life cycle of an ad impression. That is the advantage of the blockchain: an
open and transparent ledger, that is irreversible and practically impossible to compromise [10].
4. Conclusion
At the present time, all the applications studied are potential projects being tested and no applications are
widely applied. It can be said, until the present time, early in 2018, blockchain technology has not yet integrated
much into our daily life. One of the main reasons is the functionality, the interface of the blockchain applications
are quite poor, not friendly and still in development. Even so, the basic term is still not uniform, causing
confusion over time.
Although still relatively new, but with the relatively high consensus today, the application of this technology
in all areas of life will not be too far away and gradually become the mainstream. With this article, author hopes
to contribute a part of the blockchain theory and to present some potential applications of blockchain in the field
of online advertising that will be applicable in the future. Author is confident that this article can serve as an
inspirational starting point for other future studies of blockchain.
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campaigns/
[17]https://www.forbes.com/sites/steveolenski/2018/02/16/why-digital-advertising-needs-a-blockchain-
[23] https:/token.snov.io/docs/WhitePaperEn.pdf
[27]https://www.researchgate.net/publication/258341850_The_Review_of_Different_Aspects_of_Online_Adver
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