Virtual Insanity

Hello and welcome to my honeymoon.

If you’re a regular reader, you’ll probably know that the last few weeks – let’s be honest, months – of my life have been a little hectic.

I’ve been to two weddings, done a week-long roadtrip around Bulgaria and then got married myself.

Oh, and about half-way through all this, the company I work for in my other life fired my entire department. But somehow I escaped the axe (for now).

Now I’m writing to you from the Greek island of Kefalonia, while on my honeymoon.

So, the bad news is that once again, I can’t spend too long writing this issue.

The good news is that from next week we’ll be back to our regularly scheduled programming, where I’ll write sarcastic commentary about all the latest goings on in crypto.

The other good news is that for this issue, I’m republishing a piece from my paid crypto newsletter that I wrote back in my Southbank Research Investment days.

I got a pretty good response when I first published this. And reading it back now, all the points still stand.

It’s about the absolute madness that the advertising industry has descended into, and how crypto could restore some sanity to it.

So here we go. I once again ask you to step into my time machine and I’ll transport you back to the dark days of the 2018 crypto bear market.

Let’s go!

Virtual insanity

One of the main criticisms of cryptocurrency is it’s solving a problem that no one has.

For the average person on the street fiat currency and modern banking work pretty well.

The new challenger banks like Monzo and Revolut let you spend money abroad at the MasterCard rate.

They also update all your transactions instantly. No more waiting till Tuesday to see what you spent over the weekend. It’s all on the app.

Even traditional banks let you transfer money to anyone you want instantly and for free. The Faster Payments system we have in this country (the UK) works flawlessly.

In countries like Venezuela, which is suffering from a 1 million percent inflation rate, cryptocurrency makes much more sense.

But in “stable” countries with decent financial systems, cryptocurrency is a hard sell [2022 Harry here: oh, it’s funny reading this sentence back knowing what’s happened to the UK since the “mini budget”].

So I can see why many people trot out the “cryptocurrency is just a solution looking for a problem” line.

Now, of course you could argue, as many do, that the financial system is not “stable” in any country. Look at the 2008 crisis, look at the dotcom crash, look at black Monday… look at The Great Depression.

[Look at the UK right now.]

And it’s true. The financial system is not fair. It is corrupt. It is filled with patsies and cronies and zombies.

But most of the time it works. And more importantly, it just gets out of the way. People accept it. They live with it. And until there is another financial meltdown, the argument for switching to cryptocurrency will likely fall on deaf ears.

If it ain’t broke, don’t fix it

This is one of the reasons I don’t think crypto-currencies, or currency cryptos as I usually call them will take off.

People tend to take the path of least resistance.

So if you want your technology to succeed, it has to become the path of least resistance. It has to solve a real, not merely a perceived, problem.

And there is a real problem out there, which crypto is in the process of solving.

This problem probably isn’t something you’ve actively thought about. But I can guarantee it annoys you.

In fact, I can guarantee it annoys every single person you know, every single day of their lives.

This problem has become so ubiquitous, it’s almost comical.

And yet, we just mindlessly accept it. Oh, it annoys us. But we, for some reason, continue to put up with it.

It’s become background noise in our day-to-day lives.

But the thing about background noise is, if you turn it up loud enough, it drowns out everything else.

And that is the point we’ve now reached.

The background noise has become deafening

So, what exactly is this problem?

Online advertising.

But it’s not merely just “online advertising” it’s the absurdity that the entire online world has become, thanks to online advertising and regulators’ attempts to clean up online advertising.

Rather than helping the average person, GDPR and the like has led to users having to click through a series of popups, landing page and consent mechanisms before they are allowed to view anything.

How many times did you have to click “I consent”, or “I accept” today already?

And then after you manage to get through the waves of consent popups, you’re then faced with a webpage that changes in size as you try read it. Ads pop up from nowhere, they takeover your screen and block your content.

Here’s what I was faced with yesterday while trying to read an article on Forbes:

The column on the left that starts with “If Apple really is working on a self-driving car” is the article.

Everything else around it is bloat. There are three ads for the same thing on the right, a banner telling me I’m on Forbes at the top, and an auto-playing video I cannot close on the bottom left.

The actual content takes up less than a quarter of the page.

Why do we accept this? It’s ludicrous.

And because there is so much added bloat on every page, your browser slows to a crawl. It’s like surfing the internet before broadband was invented.

If you use an adblocker, it’s even worse.

Most websites force you to turn it off before you can browse. So you have to consent to their tracking software, then consent to turning off your add blocker, then reload the page and then close wave after wave of ads and popups before you can even view any real content.

“Do you want to accept our cookies?” I don’t care! Just let me view the damn webpage

Just think about the process you have to go through whenever you visit a website.

It’s bad enough on a desktop or a laptop. But on your mobile, with its limited screen space, it’s insane.

And let’s not forget. You are the customer here. These websites should be providing you with as friction-free an experience as possible.

Seriously, how long can a system like this last?

Think about it. Really think about the absurdity of it. How have we just accepted this?

A few years ago websites would insist that their page loaded in under three seconds. Any longer than that and users would simply click off and go to a different site.

Well what’s the point of going on a different site when every single site now loads at a snail’s pace and makes you jump through hoop after hoop before you can even view anything?

It’s not like the websites want this to happen. They are just as much a victim here as the users are.

That’s the genius of it. Everyone in this scenario is losing. There are no winners. It’s comic absurdity at its best.

I’ll breakdown the problem from the point of view of every involved party.

It is a problem for users

For users this is a two-pronged problem.

First, it’s a straight up usability problem. You don’t want to have to jump through hoops and click consent forms to view a webpage.

And when you’re there you don’t want to have to close ad after ad that pops up or appears over what you’re trying to watch or read.

It’s like walking into a shop and the assistant standing in front of you, making you sign a form before you can go in.

Then when you finally get in, the assistant follows you around flashing products you don’t want in front of your face as you try to find what you actually came in for.

No one, in any country in the world would stand for this kind of treatment in real life. Yet when we go online, we just lie down and take it willingly.

The more I think about the situation we’re in, the more I can’t believe that we all just put up with it.

But it’s even worse than that. As I said this is a two-pronged problem for users.

Remember that to get into the website in the first place you had to accept the site’s data and cookie policy? Well now they own you.

Only it’s not really the site that owns you, it’s the companies that run the ad space on the site that own you.

They get your browsing history, your personal information, your habits… sometimes even your email address and phone number. And then they use it all against you.

With this data they can promise companies more “personalised” ads. They can target specific demographics and charge more for their ad spaces.

That’s why the same ads follow you around from website to website and from platform to platform. Someone has paid to get your personal information so they can target you specifically.

Of course, they may not have that information themselves. If they don’t they can simply buy it from other ad companies.

Because as well as retaining your personal data for themselves, to better target their own ads, these companies also buy and sell your data between themselves.

Now thousands of ad providers have your data and they can all send you “personalised” ads.

This is why those tracking cookies are so important to them. No cookies, no data. No data, no money for them.

That’s why they force you to agree to these tracking cookies before you can enter any site.

GDPR was supposed to help us with this, but all it did was add another hoop we have to jump through when browsing.

It hasn’t stopped companies cashing in on our personal data. It’s just made it so we have to “consent” to it first.

Only consent in this case isn’t really consent at all.

You do have the choice not to consent. But then you don’t get in. You’re exiled.

It’s like when you’re at the airport and you have the choice between consenting to a search or not getting on your flight.

Of course, you have the choice not to consent. But how many people take it?

It’s a problem for the websites themselves

It’s not like these websites want to abuse you. They want to treat you well. But they’ve got to eat too. And this is currently the only way to do it.

Unless they are a shopping website, they need ads to survive. This is the online business model.

Advertisers pay websites for space on their pages. The more visits a page has the more they pay.

This model is what created “clickbait”.

Because advertisers pay more for more clicks, websites began baiting people into clicking onto their pages. It doesn’t matter if the content is any good or not, so long as it gets clicks.

As Medium’s CEO, Ev Williams put it well in a blog post about the state of the industry in 2017:

Upon further reflection, it’s clear that the broken system is ad-driven media on the internet. It simply doesn’t serve people. In fact, it’s not designed to. The vast majority of articles, videos, and other “content” we all consume on a daily basis is paid for — directly or indirectly — by corporations who are funding it in order to advance their goals. And it is measured, amplified, and rewarded based on its ability to do that. Period. As a result, we get…well, what we get. And it’s getting worse.

Williams is talking about online publishing, but it is applicable to almost all online content. His point is a good one.

It’s even a problem for the ad industry

Like I said. No one is winning here.

Ad companies know you hate them. They know many people use ad blockers and they know they are in a constant war for clicks.

These companies make money by taking your personal data, analysing it and then using it against you. The more personal the data. The more detailed the stats they can draw from it are. And the more money they can make.

And that’s if these companies themselves aren’t being lied to by all the middlemen in the ad industry. Because this process is so complicated and has so many moving parts it is rife with fraud.

A lot of the time the ad companies can’t trust the data they are getting. In fact, according to Statista, online ad fraud will cost the industry $19 billion this year, and $44 billion a year by 2022.

So, not only are they hated by society. But they are victims, too.

And because of their ignoble tactics, they now have an even bigger problem. The world is now fighting back.

This year the GDPR regulations came into force and ripped through the industry.

How many emails did you get in April and May from companies pleading with you to keep in contact while that was going on?

At one point I was getting around five a day, from places I’d never even heard of.

All it’s resulted in is more popups. More consent forms. Worse user experiences. And just a ridiculous state of affairs that I have talked about above.

But it’s not only regulators that are clamping down on the harvesting of private information. It’s the media and the public, too.

Facebook has, rightly or wrongly, been demonised. (Probably rightly, to be fair).

Its data harvesting and manipulating was, if you believe the click-bait news headlines, responsible for the outcome of both the Brexit result and US election.

People are leaving Facebook in record numbers.

Data harvesting has now become a societal issue.

To steal a line from The Lord of the Rings, the advertisers “delved too greedily and too deep…”

They have sown the seeds of their own destruction.

If advertisers are getting access to less personal information, how can they expect to keep making the same amount of money?

Access to personal information is what their entire business model is based on.

A situation like this cannot stand

No one is winning here. It’s just a horrible depressing spiral of despair.

Bill Bonner talks a lot about win-win and win-lose deals in his writing. Well the world of online advertising is neither. It’s lose-lose-lose.

When you take a step back and think about it, it’s insane.

It’s like a sketch from a dystopian sci-fi comedy. It’s the kind of thing you’d watch and write off for being too unrealistic. But it’s real.

Like most ridiculous situations that we just accept. It crept up on us. But it’s now got to such a point of absurdity that people have started to notice.

It’s the kind of thing that people will look back on and say, why the hell did we put up with that for so long?

Quite simply, it cannot go on like this.

It needs… a solution.

Perhaps a solution like… yes, you guessed it: crypto.

Finally, the “solution in search of a problem” that crypto is may have met its perfect match.

I think it’s fair to say online advertising is a problem – a worldwide multibillion dollar problem – crying out for a solution.

And late last year, some very clever people may have just solved it, with the creation of BAT.

What is BAT and how does is solve this multibillion dollar problem?

BAT stands for Basic Attention Token.

The idea is that as an advertiser you pay for people’s attention. As a website you make money by maintaining people’s attention. And as a user you get paid for giving your attention.

Hence the name: Basic Attention Token.

This is all facilitated by the BAT ecosystem and Brave browser. Here is how it works and what it solves.

It solves the problem for users

Instead of using Chrome, Internet Explorer, Safari, etc. you use the Brave browser.

This browser is based on Chrome and works in pretty much the same way, with one major difference, it blocks ads and trackers by default.

Aside from the obvious benefit this has of getting rid of all the obtrusive ads you see and letting you keep your private information private, it also means everything runs much, much faster.

On Brave, webpages load between two and eight times faster than they do on Chrome and Safari.

It solves the problem for websites

This is great for users, but how are websites supposed to support themselves now, with all their ads blocked?

Well, users can choose to unblock ads and get paid for doing so.

[These figures were accurate in 2018 – I’m not sure if they still are today in 2022.]

If you let websites display ads, you get 15% of the revenue the website receives from the advertiser for your view. Brave itself gets 15% and the website gets 70%.

For viewing private ads, directed at you more specifically, you get 70% of the revenue and Brave gets 30%.

BAT and Brave’s CEO, Brendan Eich estimates from viewing these ads users could make between $9.60 and $224 per year, depending on how many they viewed and how in-demand their demographic was.

And of course, that’s only if you choose to view ads at all. You can still keep them blocked if you want.

Websites can also make money from being paid directly by users. The Brave browser allows you to buy any amount of BAT and have it distributed to websites.

You can either choose which websites get what percentage, or you can have it auto assign amounts based on how much time you spend on each website.

So, say you decided to pay for your web browsing like you pay for Netflix or Spotify and not view any ads at all.

You could put in say £10 a month and this would get you access to paywalled websites, like The Wall Street Journal, The Times, etc.

These sites would get a certain cut of your £10 a month depending on how much time you spent on each one. It’s a much fairer subscription model.

Oh, and this isn’t a farfetched idea that will never take hold. Many of the big paywalled sites have already partnered with BAT to offer this service.

[Again, I’m not sure how all this is going in 2022.]

And it solves the problem for advertisers

Advertisers don’t get any access to your private data, so they don’t fall foul of any data-protection laws.

Their ads only go to people who are okay with seeing them and getting paid for seeing them, so the hatred towards the ad industry diminishes and everyone sees it in a batter light.

They also get the chance to target their ads more directly and much, much more accurately. So they make more money for their clients and for themselves.

And, as it cuts out so many middlemen and is all done through the blockchain, it eliminates ad fraud.

Not only does this save the industry billions of dollars but it means the statistics they get on their ads become much more usable. So it in turn also makes them much more money.

But how can advertisers target ads without getting access to user data?

Probably the best part of the whole system is that all ad matching is done within the user’s device. No user data required for ad-matching ever leaves the user’s device.

Basically the Brave browser sees everything you do. What websites you visit, how long you stay on them, what you click on, what you scroll down on, what you close, what you search for, etc.

That sounds incredibly invasive, but remember, this data never leaves your device. No third party has access to it. It’s never sent anywhere.

The Brave browser downloads a cache of ads and then it matches these ads offline, within your device and displays them on websites or directly to you if you choose.

So, say you spend a lot of time browsing websites about Labrador retrievers and how to care for them. Your browser knows this, but no one else does.

A dog food company, with a specially formulated Labrador retriever food buys ad space and wants its ads targeted at people who are likely to own Labrador retrievers.

Their ad is put into Brave’s ad cache, which your browser downloads. Within your device, the cache matches you to relevant ads.

When you next go on a website, the add you see is for this brand’s dog food.

The brand has no idea who you are. The website has no idea who you are. It’s all done within your browser on your device.

The matching is done locally, rather than having all your data sent out to a server and then analysed and then having the ad matched and then downloaded and displayed.

And because this matching and analysis is all done offline, directly on your device, the webpage loads much, much faster and uses much, much less data to do so.

But how can advertisers analyse their ads performance without getting access to user data?

As advertisers never get any data from users, you may think it would be impossible for them to check if their ads are working or not. But BAT has solved this problem too.

It uses zero-knowledge proofs to work out how to pay websites for the time you’ve spent browsing them – and also for reporting how ads have performed to advertisers.

From Brave’s website:

How much personal information does Brave Payments collect about its users?

Brave Payments uses a technology called Anonize that permits anonymous-but-accountable transactions. Here’s an analogy from the real world: someone walks into a polling place, identifies themselves, and gets a ballot and an envelope. They go into a voting booth, mark the ballot, put the ballot in the envelope, and seal it. They then drop the envelope in a ballot box. The people running the polling place and counting the ballots know that each person putting an envelope in the ballot box is authorized to vote, but they aren’t able to determine which envelope in the ballot box goes with which person. In the case of anonize, a special branch of cryptography called “Zero Knowledge Proofs” are used to achieve the same result.

So, basically advertisers get to see how their ads are performing, but they can’t get access to anyone’s personal data, just like a polling station knows how many votes a candidate got, but they don’t know who voted for them.

BAT takes this lose-lose-lose situation and turns it into a win-win-win one

It’s a win for users:

No one gets access to your data. Pages load faster. You only view ads if you want to get paid for viewing them.

And, if you want to support websites and encourage them not to have ads you can use a fair subscription model. It’s crazy having to pay many subscriptions to many different websites. With BAT you could just pay a single subscription that would give you access to all the sites you want.

It’s a win for websites:

Their content takes priority. Only people who want to get paid for viewing ads will view ads. And they can offer a subscription service as a way of monetising and avoiding ads altogether.

It’s a win for advertisers:

They get much better ad matching with less fraud and manipulation. They don’t fall foul of any data protection laws because they never even get access to any user data. And only people that want to view ads will do so.

This means their ads will perform better, make them more money and make people hate them less.

There is just one problem with this whole system.

Will people really switch to Brave over Chrome and Safari?

This was probably my biggest objection.

It is very difficult to get someone to change their habits, even if it will benefit their life.

However, let’s not forget that Chrome got so big in the first place by displacing Internet Explorer.

If Brave offers a much, much better user experience, people will switch to it. This happens all the time in tech. Better tech comes a long and people just switch to it.

Facebook did it to MySpace. Chrome did it to Internet Explorer. Spotify did it to iTunes. Netflix did it to blockbuster and now to Sky. Apple has made a career of doing it in many different industries.

And it turns out people are switching over to Brave, in record numbers.

Brave browser now has over 3 million active monthly users.

And it is in the top 10 most downloaded Play Store apps in the “free communications” category in 21 countries.

It is projected to hit over 5 million monthly active users before the year is out.

[2022 Harry here: It now has 57 million monthly active users.]

Still, that’s a drop in the ocean compared to the more than 1 billion monthly active users Chrome boasts.

Users can also use a BAT plugin on their normal browser, which will allow then to use BAT payments to pay their favourite websites and content creators directly.

However, with this plugin, people don’t get all the benefits of Brave browser. Websites will still be able to steal their private data.

So, for BAT to succeed it doesn’t need to kill Chrome. But the whole system works a lot better – the way it’s supposed to – if people switch to it.

If they don’t they are still giving away their private data and they can’t get paid for viewing ads.

And we’re back in 2022

Its quite interesting to see that since I wrote this Brave browser has gone from strength to strength.

It’s gone from 3 million monthly active users to 57 million monthly active users.

As for Basic Attention Token (BAT)… I haven’t really been keeping up with its progress.

Let’s see how it’s done since I first published this in August 2018…

Okay, so like most crypto it flew in 2021. It got as high as $1.90, which is 533% up from August 2018.

Then, also like most cryptos, it crashed hard in 2022. It’s currently at $0.30… which is the exact price it was when I first published this in 2018.

I guess that’s kind of fun.

What will happen to its price in the future? I have absolutely no idea.

Okay, that’s all for this week.

Thanks for reading.

Harry

PS Yes, I stole the headline of this month’s issue from Jamiroquai.

Full disclosure: At time of writing, I held the following cryptos: Ethereum, IOTA, Radix, Mina Protocol, Aleph Zero.

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