Blockchain Technology: Is It Changing Affiliate Marketing?

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Introduction

Today’s global market is extremely dynamic, which can be partly attributed to a great deal of new technologies that find their way to us, almost on a daily basis.

Stuff like AI, big data, and the internet of things are only some of the potentially disruptive tech trends of the past decade – trends that can completely change our lifestyle and the way we go about the world.

One technology that could have the same effect, and which is making splashes in financial and IT circles is blockchain.

More and more people see the potential there, and terms such as bitcoin and cryptocurrency are quickly becoming common household words.

Naturally, marketers that are always on the prowl for the shiniest new toy can ask themselves:

How can this impact marketing in the long run?

There are actually two sides to this story. One is how blockchain can affect the underlying technology that we use for affiliate marketing to work, and the other is how we can do crypto affiliate marketing and the blockchain niche.

But before we get to that, it would be prudent to understand the basic principles behind blockchain and how it all actually works.

The story behind cryptocurrency

It all started with bitcoin, when a mysterious entity called Satoshi Nakamoto created an encryption protocol which could be used in peer-2-peer trading in 2008.

At first, this was of interest only to a small community of cryptographers and hackers, but it quickly found its way to the mainstream realm.

The best way to portray this change in opinion is to consider that bitcoins are worth over a thousand dollars at the time of writing this article.

In contrast, in 2009, one cryptography fan tried to auction off 10,000 bitcoins for $50, and didn’t find a buyer.

Indeed, smart people who bought bitcoins by the thousands in their infancy are now effectively millionaires.

Since the bitcoin market is getting saturated, numerous “knock-off” currencies are cropping up, called alt-coins (alternative bitcoins) with varying success, and often unfounded hope by the buyers that they might replicate the financial success of the bitcoin pioneers.

Where do bitcoins come from?

Like any currency, in order to have value, bitcoins have to be limited.

They are created in a process that is conveniently called bitcoin mining, in which a bitcoin is awarded to people that use their computer’s processing power to encrypt certain data.

What this means is that cryptocurrency is a by-product of a much more revolutionary tech: the blockchain.

How does blockchain technology work?

Blockchain is a form of encrypted, decentralized database that is virtually unhackable.

All the transactions that involve bitcoins (or other cryptocurrency in question) are stored in blocks that are chained together – hence blockchain.

Every block and all the information in it is verified by a large number of computers that are at the same time solving the same crypto logical problems, and comparing results.

If all the computers in the network agree on the results, the information is considered verified and stored into blockchain.

For each block that is completed, bitcoins are awarded and shared among the miners, giving them incentive to actually do all this work.

The longer the chain, the more complicated the problems computers have to solve, which means that it takes more and more work to earn bitcoins, emulating the scarcity of real-word monetary units like gold.

Blockchain can store more than just transaction data. It can hold virtually any sort of information in it, but it is best used as an online ledger where transaction information is safely stored.

This system eliminates the need for the middle-men, such as banks, which in turn makes all transactions faster, cheaper, and more secure.

The reason for the added security is simple: once one block is finished, a new one is started and it ties to the previous one.

This means that if you want to hack any of the blocks to get to the information that you might be looking for, you would need to decrypt EVERY block that is chained after the block in question, all while trying to break some of the most complicated encryption that is constantly verified by a huge number of independent computers.

In other words, cryptocurrency and a related blockchain are intertwined in a very complex way, but this technology allows us to create something we call smart contracts.

These smart contracts are automated digital contracts created by two parties.

The smart contracts are stored and executed via blockchain.

Blockchain technology can be used for literally anything, from insurance policies, lending your camera to a friend, or any sort of purchase.

Every step of the contract is stored into a blockchain, all transactions are immutable, and there is a clear audit trail, which is of crucial importance to all the people in the financial sector.

From the user’s end-point, smart contracts are fairly straightforward:

Two persons (or parties) agree on the terms and sign the contract, after which they each get digital tokens so that they can look up the necessary information.

When the contract, or contract clauses are executed, it is also stored on blockchain with a timestamp, along with the contract’s end.

Where is blockchain used?

Of course, blockchain as described is far more complex than that. For one, the relationship between blockchain and cryptocurrency is a tenuous one.

A new altcoin doesn’t necessarily need to have its own blockchain.

In fact, it might have some other way of storing and encrypting data.

On the other hand, blockchain can be privately funded, without any sort of cryptocurrency tied to it – it would work as a super secure distributed database.

True enough, various cryptocurrencies have their own technology, both for verification, data storage and encryption.

The field is developing very quickly and new coins and ledgers are cropping up on a daily basis, with new models and usages in mind.

To muddy things up even further, sometimes companies and technologies feed off of each other.

For example, Ethereum, one of the biggest cryptocurrency names – along with bitcoin – is built on its own custom blockchain specifically designed for smart-contracts (the bitcoin blockchain doesn’t have this feature at the moment) and it has its own coin, called Ether.

However, Ether is not supposed to be used as a cryptocurrency on its own, but rather among the developers that work on various Ethereum applications.

If you want to trade it, you would need to convert it to bitcoin first, or create some other form of tradable currency based on smart contracts.

The possible usages are numerous, and there are hundreds of altcoins currently in circulation, almost all with a different purpose in mind.

Some are simply used as currency, while others are just a part of a bigger platform that is specially designed for a certain purpose.

A smart contract would also allow for microinsurance among people without any middle-men.

Imagine you want to lend your car to someone, but you don’t really trust the person.

You could create a smart contract where you both agree on the terms.

The contract is then stored on a public chain and both persons can look it up whenever they want, via digital tokens they receive in the process.

It could be used to create limited copies of digital assets, which would include art, music, and anything else that should be unique.

A person could own something, but it wouldn’t be copyable. Or rather, it could be copied but it would be clear that it’s not the original and proper legal action could be then taken.

With the rise of renewable and decentralized energy generation, blockchain could be used to guarantee that the selling and buying of electricity is error-free and that every household that produces electricity gets an appropriate amount of money for all the electricity they put into the power grid.

This requires a considerable amount of automation to avoid the bureaucratic nightmare – an area where smart contracts shine.

In addition, since the Internet of Things (IoT) has become a real thing, one of the biggest concerns is the array of potential security issues that could range from a nuisance of someone remotely operating your printer and printing memes all day, to outright dangerous crimes, if someone was to hack into your car.

Blockchain could be used to remotely command and monitor all these devices and systems in a much more secure environment.

Plus:

Blockchain could be used in fraud detection, Anti-money laundering (AML), identity management, data management, and so on.

People have started even more unusual projects, such as a blockchain-based social media platform and a decentralized supercomputer.

How blockchain can be used in affiliate marketing

The more tech-savvy among the readers might have already seen how this technology could be applied to make affiliate marketing easier and cheaper.

The most obvious one is that bitcoin could be used for transactions instead of standard money, making the verification process and the payment much simpler.

However, some of the biggest issues in digital marketing are tracking and fraud detection, where the true power of blockchain could be unlocked.

How can you track where clicks come from, and how can you be sure these were actual people and not some sort of automated process?

Learn More: What is Affiliate Fraud? The Definitive Guide for Marketers

Typically, you’d use a tracking pixel for this purpose, where you’d embed Javascript code into an invisible pixel right next to the ad (or referral) link that allows the advertiser to know which publishers are responsible for their customers, so they can make appropriate payouts.

Of course, this process is largely automated and typically done through affiliate programs, ad markets, and Demand and Supply-Side Platforms.

Publishers and advertisers communicate through these channels and agree on their price per click, conversion, sale and so on.

This communication is far from perfect, and it can be manipulated, hacked, and abused. For one, all the information is stored in a central location, such as a server of the affiliate program, making it vulnerable to hacking, human error, and equipment malfunction.

In case the server goes down, the data on it is lost, which could make people lose tremendous amount of money and information.

When blockchain is used, this is impossible, as all the information is stored on all the computers in the network that communicate between each other. In addition, you can use smart contracts to make sure that all tracking is 100% accurate and fraud is avoided.

You can easily use a smart contract instead of a tracking pixel – every time someone clicks on the referral link, a smart contract is created with a unique id of that specific visitor, with the timestamp and the activity in question. This information would be available to both the advertiser and the publisher, and it couldn’t be manipulated in any way.

Ad verification and auditing could work in a similar way. Instead of using an auditing company, which are usually pretty costly, an advertiser could pull an ad from the server and run it through blockchain to check it for any tampering and verify that there are no irregularities (non-live browser seeing an ad, suspicious visitor behavior, and so on).

Smart contracts could potentially work really well with DSPs and SSPs, due to the parametric nature of both technologies.

Since Supply-Side Platforms allow the buying and bidding of individual impressions in real-time, parametric smart contracts could really simplify the whole transaction, while allowing you to track and store every single transaction.

Can affiliate marketing be done in the blockchain/cryptocurrency niche?

Short answer?

Sure, why not. It’s just a niche like any other.

Long answer?

Cryptocurrency and blockchain are two technologies on the rise. In the last few years they have seen much more exposure, and the interest is growing fast.

This could potentially be the best time to get into the blockchain affiliate game, as the market is still not saturated.

You can even join an affiliate program where you invite miners, and gain a percentage of their profits, or gain a fixed amount of cryptocurrency in exchange.

Unfortunately, things are not so clear-cut. For one, the cryptocurrency market is pretty volatile, and the values of even the most stable ones, such as bitcoin, can fluctuate wildly from month to month.

In addition, there are very few established affiliate programs in this niche, so getting into it takes a bit of advanced knowledge at best, and can be a financial disaster at worst, if the affiliate program you join, or the currency you support turns out to be a dud.

There is a potential to earn a fortune if you play your cards right, but it is a risky endeavor, so be sure that you are well-informed and that you know what you’re doing.

Blockchain is seeing more and more real-time applications, particularly in financial, insurance, and health sectors.

Affiliate marketing can be another vertical where this technology could be neatly applied, so try to be on the lookout for the most recent developments.

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