Blockchain In The Adult Industry: Problems, Trends, and Solutions

Since the earliest days of bitcoin, Porn has always been associated with Blockchain, in one way or another.
In 2013 and again in 2018, links to child pornography were found in Bitcoins’ coinbase transactions. Then, at the beginning of 2018 the privacy-focused Verge was added as a payment method to Pornhub and in July Pornhub announced to add Tron and zencash as additional payment methods 1.

Using Researchly’s crypto database, we have found that Blockchains offer more to the Adult Industry than child pornography and payments. In this post, we dig into these findings. Concretely, we explain issues and trends in the Adult Industry and present blockchain-based solutions.

Executive Summary

  • In total seven companies from the Adult Industry have raised around $40 Mio.
  • Three of these companies’ websites are believed to be inactive
  • Although inactive the allegedly inactive companies might indicate the prevalence of fraud the solutions proposed by these companies meet industry-wide problems
  • The Adult Industry suffers from piracy, inefficient payment methods, unverified identities, and lack of privacy
  • Two trends are driving the Adult Industry; the avoidance of siloed and unbundled memberships and increasingly independent industry participants
  • Blockchains’ openness, privacy, low fees, micro-transactions, permissionless propose a better alternative to prevalent payment systems
  • Content-certification platforms make piracy and copyright infringement more difficult
  • Token-curated registries help provide dynamic authentication
  • Blockchains can be used to satisfy user demand for bundled and open platforms

This is a series of posts on Blockchains and the Adult Industry. Subsequent posts will cover the three strategies companies in the Adult Industry use and what the overall space can learn form the Adult Industry. Sign-up for the newsletter to be informed when they come out

Table of Contents

In total seven companies from the Adult Industry have raised around $40 Mio. However, three of these companies’ websites, Nocta, Redchain, and FAPcoin, weren’t accessible by the time of this writing. FAPCoin was the only one that received ICO investment, namely $5,250.

ICO Funding ($) in the Adult Industry
ICO Funding ($) in the Adult Industry

The inaccessibility of these websites leads us to the conclusion that – because no contradictory information was found – these companies are inactive. Whereas this might be an indication that fraud prevails in the ICO(-Adult Industry) space, the solutions proposed by these companies are interesting nonetheless. However, before diving into the solutions, let’s first understand the problems and trends.

Problems in the Adult Industry: Piracy, unverified identities, inefficient payment systems

The issues in the Adult Industry center around high piracy, inefficient payment methods, unverified identities, and lack of privacy.

  1. Piracy and copyright infringement: As in many other industries, content producers suffer from pirated content and other types of copyright infringement.
  2. Unverified identities: According to SpankChain 2 specifically came sites suffer from age-verified models switching with un-verified (underaged) models.
  3. Inefficient payment systems – fraud, high fees, powerful payment processors, unsuitable infrastructure for pay per minute business models, lack of privacy: Above all, payment is the most pressing problem in the Adult Industry. Issues are payment fraud (e.g. chargebacks) and high payment fees due to lack of competing payment processors (payment processors tend to avoid the industry due to controversial content, legal and regulatory complications such as age restrictions, and reputation concerns). And those payment processors that are in the industry have great power over their customers’ accounts; there have been reports of companies closing bank accounts belonging to pornographic film actors or companies from the Adult Industry. 3 4. Also, the pay per minute business model many companies follow is difficult to achieve with current financial infrastructures. Finally, lack of privacy for consumers hinders spending; because payments to adult sites appear on bank statements, users hesitate to spend money on such sites. The recent reveal that developers can read users’ Gmail e-mails 5 certainly won’t improve this reservation.

According to SpankChain 6 two trends are emerging in the Adult Industry; avoidance of siloed and unbundled memberships and increasingly independent parties.

  1. Avoidance of siloed and unbundled memberships: SpankChain argues that viewers are increasingly migrating towards tube sites that bundle videos from different producers instead of individual membership sites which unbundled content into separate accounts.
  2. Increasingly industry participants: SpankChain further argues that parties from the Adult Industry are increasingly becoming self-promotional and independent. According to them producers and actresses are increasingly marketing their content independently from producers on social networks, using marketplaces for direct content distribution to viewers and offer services through Skype.

With this in mind, the following section presents blockchain-based solutions to these issues and trends. The section looks at companies directly from the Adult Industry as well as industry-agnostic solutions but also general blockchain concepts.

Using blockchains to combat issues in the Adult Industry

Blockchains provide solutions to solve the above-mentioned issues of ineffecient payment systems, piracy and copy right infringements, and identification shortcomings.

Solving payment problems through blockchains as independent payment systems

Blockchains solve the above-mentioned payment -related problems (fraud, high fees, powerful payment processors, unsuitable infrastructure for pay per minute business models, lack of privacy); Blockchains allow private transactions, with low fees, micro-transactions for pay-per-minute business models, are permissionless/content-agnostic (i.e. the blockchain does not care for what the funds are used or who uses them), and reduce fraud to a minimum. With this in mind it should not come as a surprise that the above-mentioned use of privacy coins was such an early large scale consumer-oriented blockchain use case;

Corey Price, VP of Pornhub on cryptocurrencies
Corey Price, VP of Pornhub on cryptocurrencies 7

Combating piracy and copy right infringement through content-certification platforms

Whereas piracy itself cannot be prevented, distributing it can be made more difficult by marking content. Content-certification platforms like allow for secure attribution of content to at least confine or make piracy and copy right infringement more difficult.

The Poet platform enables blockchain-based licensing of digital work (Source: Website-Screenshot)
The Poet platform enables blockchain-based licensing of digital work (Source: Website-Screenshot)

Using Token-curated registries to provide dynamic authentication

There are two aspects to digital identity management that are relevant here; identification (static one-time issuing of identities) and authentication (repeated proving that whoever somebody claims to be is indeed that person). For both situations, several blockchain-based digital identity management platforms exist. And in most cases they do both, identification and authentication; with companies such as Civic users can generate a digital identity and use this as an authentication to log-in onto services. As such Civic (and any other digital identity management platform for that matter) can be used for, for instance on adult camsites. They cannot, however, combat the mentioned problem of changing actresses where verified actresses switch with unverified ones. A solution to this are so-called dynamic token-curated registries. A token-curated registry (TCR) is a human-curated registry/list of items that satisfy some criteria where all curators (those that maintain the list) of a token-curated registry are financially incentivized to create the best lists possible by voting for/against items to be added to the list.

Token-curated registries were first proposed by adChain to curate a community-driven list of trusted publishers. Read more about how adChain’s token-curated registry here

Read more about token-curated registries in general here

SpankChain proposed such a TCR called “Proof-of-SPANK”. In their case, the criteria is “presence” (i.e. whether the actress from the profile is indeed present in front of the camera) and viewers vote for/against the actress whereas a “for-vote” equals “presence” and “against” means “not present”. The majority of voters then constitutes the truth; if the majority voted “for” it means that the actress is indeed present (even if it might not be true) and vice versa. Winning voters are then rewarded and losers are penalized.

Proof of Location services use a similar dynamic token-curated registry. Read more about Proof of Location services here

Finally, blockchains can also be used to combat shifting user trends in the Adult Industry.

Using blockchains to satisfy the demand for bundled and open platforms

Viewers’ move away from unbundled site-specific memberships to bundled tube sites rooted in the desire to get access to more content and increasingly independent parties are two trends that can be met by blockchain-based adult platforms.
For instance, SpankChain’s Red Light District is a P2P-marketplace for adult content built using district0x, where viewers and different studios can coordinate directly without intermediate studios. Furthermore, SpankChain’s Vynos wallet creates an unified access to the content from all studios. By combining an automated, open marketplace with a Single Sign-on, SpankChain can ensure liquidity for viewers and sellers while keeping transaction and coordination costs to a minimum.

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