Splitting the difference, using Bitcoin & centralised trust to split payments (NOV 16)

A lot of the basic splitting concepts here are discussed in the video below from November 2014.

Centralisation is often a feared by the Bitcoin community, but as discussed in a previous article there are valid reasons to have centralisation such as acting as a trusted authority, in an area where splitting transactions is concerned it’s advantageous to have an authority guarantee that the funds end up where they’re stated. (If you’re thinking wait, hang on! We’ll get into this a bit more shortly)

The concept isn’t entirely new, but the application and consequences in the Bitcoin system are.
We can take the “humble bundle” a popular games site as a case study, it of course uses the legacy fiat system, but highlights some of the advantages of using split payments.

By default the payment is simple, but the customer is able to select and configure a granular transparent payment as we see in the screenshot above, but how do we know the money is going to end up where they say so? Here we see humble bundle acting as a trusted authority, can we check for ourselves? No, not really, due to the fiat system not being open ledger or transparent.

Bitcoin allows us to take it this basic concept a step further, not only can we configure something like the above, you could go on to make a case that due to the blockchains open ledger we can ensure that the exact amount selected is paid to the party without further work, there are 2 major problems with that assumption,

1.) We can “follow the money” afterwards by using the blockchains open ledger, this verification step is only valid for subsequent transactions.

2.) If we “follow the money” successfully, how do we actually know the address belongs to the entity stated? This is no good if the address is fraudulent!

A centralised trusted authority would for example be able to perform at least basic due diligence and “know your user” checks, ensuring that the funds really are being shared as advertised, the centralised service is adding security & value by performing these checks, so is likely to require a small fee.

splitThe significant value and opportunities added by offering split payments.

Let’s look at movies, if we’re using Bitcoin split payments and everyone’s getting paid a percentage per watch, that’s great, but let’s look deeper at the further advantages…

Speculative productions become viable on demand, each actor for example could complete their work based on earning a percentage of the takings per play. This is also a huge paradigm shift for crowdfunding movies or similar productions, not only can staff associated with the movie get paid a percentage, but investors can buy shares in a movie, getting a return on their money every time the movie they invested in is watched, meaning that the market sets the demand…

If 5,000,000 people each with a single £/$/etc worth of Bitcoin want a movie about a talking Zebra, then the market can crowdfund a £/$5,000,000 budget and set the terms to make it happen. If the movie sucks, then investors just get to watch the terrible movie they brought to life, if it’s a commercial success investors could all receive a return on investment in line with the initial terms, for example £/$10 worth of Bitcoin back per £/$1 invested.

Boost contracts
Perhaps the market isn’t quite appreciating the movie about the Zebra, maybe it needs an advertising campaign, or the endorsement of a respected movie buff? Both could be tempted to help, for example, if the movie is struggling the creators could offer a short term “boost” contract offering “boost” investors a short term return on investment in a 3 month window.

For example, an advertising company could’ve watched the zebra movie and be confident about bringing it to a new audience, after investing a large sum of Bitcoin in this “boost” contract, it could then run a global marketing campaign.
If this campaign successfully exposes the movie to a new audience the advertising company receives a solid return on investment, while all the original investors and staff still receive their cut, albeit slightly diluted until the “boost” contract expires, everybody wins.