What changes will blockchain bring to business models?

Japan's largest blockchain conference, "b.tokyo2019," was held on October 2nd and 3rd at Hotel Gajoen Tokyo.

The internet, as the "infrastructure of information," has significantly transformed business models across all industries. So, how will the emergence of blockchain, often called the "infrastructure of value," change business models?

To answer this question, Takatsugu Fujii, CEO of blockchain R&D company SIVIRA, and Junichi Suzuki, Producer at Dentsu Inc. Innovation Initiative, took the stage. They analyzed recent changes in young people's consumption behavior and explained the marketing strategies companies should adopt.

Takatsugu Fujii, CEO of SIVIRA (right), and Junichi Suzuki of Dentsu Inc. (left)

Trust is Key in Marketing to Young People

Blockchain, which emerged as the foundational technology supporting Bitcoin, is, according to Suzuki, "a technology primarily targeting younger demographics." Prefacing his remarks with "traditional methods don't work with younger generations," he pointed out, "The fundamental reason we've entered an era where products don't sell is the shift away from physical reality, where 'smartphones suffice for everything.'"

Suzuki also presented survey data showing that 15% of young people do not own a television, and one in four watch TV via their smartphone, with this trend growing annually. Furthermore, the percentage of people who consider social media essential to their lives is exceptionally high among teens and those in their twenties, indicating that social media significantly influences the behavior of young people.

"Rather than thinking for themselves, following trusted influencers is a defining characteristic of today's youth," Suzuki states. For young people, a trustworthy service is one "recommended by someone they trust." By forming a "contract of dependence" with trusted individuals who share their values, they are entering an era of "living without thinking."

"We're entering an era where people are willing to pay others who share their values for guidance on matters involving philosophy or values that can't be judged purely by financial gain or loss—such as career planning or romantic decisions," Suzuki explains. "For young people, it's becoming clear as a societal shift that anyone—not just celebrities, but ordinary people too—can become a fully trusted influencer if their values align with the individual's." For companies devising marketing strategies targeting young people, "earning trust" is paramount.

To earn trust, a relatable philosophy is essential

For companies to gain consumer trust, they need a "philosophy consumers can relate to." For example, Starbucks asks its fans, the consumers, to bear the cost of employee tuition assistance and fair-priced coffee bean sourcing. This has led some consumers to choose a distant Starbucks over a nearby cafe. We are in an era where consumers buy philosophy, not just products.

Mr. Suzuki explained, "You could say Starbucks is nurturing its users," adding, "For companies to build long-term relationships with consumers, the key concept is 'user nurturing' – strengthening communities among fans who trust the service."

This could be described as the "DAO-ization of fans." A DAO (Decentralized Autonomous Organization) is a new type of organization that functions autonomously without a central authority.

"At Starbucks, we often see fans attracting other fans, but this isn't driven by Starbucks actively managing fan organizations. It's purely the result of voluntary, spontaneous actions by enthusiasts. A DAO is an organization where such fans find joy in being committed. User nurturing and DAOs are a good match," said Suzuki.

SIVIRA CEO Fujii explained that considering the "user nurturing × DAO" perspective, three forms can be identified.

● Consumer DAO
Users who resonate with a company's philosophy form fan communities. Users autonomously promote or sell products, contributing to the company and transforming the relationship between company and user. The boundary between employees and fans also becomes blurred.

● Enterprise DAO
Individual companies may lack influence alone, but by collaborating to build a collective, they can provide value unattainable individually. Hot spring resorts and tourist destinations serve as clear examples. Companies, like tourist destinations, increasingly share customers and resources, fostering dynamic collaboration and collective entities.

●Government DAO
Administrative infrastructure can be easily shared across nations, removing geographical constraints and redefining countries and cities. Estonia, which has virtual citizens worldwide and whose virtual population exceeds its own, is a leading example. Introducing this model to depopulating local governments could potentially contribute to regional revitalization.

Mr. Fujii stated, "Blockchain is DAO. For example, Bitcoin functions as a product despite having no central operating entity. Blockchain will accelerate the DAO-ization of the world."

New Reward Acquisition Systems Enabled by Blockchain

So, how is blockchain actually changing business models? In the gaming industry, works leveraging blockchain technology are emerging.

"Characters and items are created using cryptocurrency (tokens). Every time a game item circulates, the original creator—the game company—can easily collect royalties automatically via smart contracts (programming all contractual actions for automated execution). This also improves the current system where creators suffer no matter how vibrant the secondary market becomes," explained Fujii.

The blockchain-based social media platform "Steemit" employs a novel system where the value and impact of content are automatically measured. Tokens are paid from the blockchain to those who post outstanding content, as well as to those who discover and evaluate it. "It's a system where better content is recognized and rewarded, independent of relying on an advertising revenue model," says Fujii.

Challenging the Social Implementation of Blockchain Technology

Next, both parties introduced examples of Proof of Concept (PoC) for the social implementation of blockchain technology, a joint effort between Dentsu Inc. and SIVIRA that began four years ago.

They conducted experiments connecting farmers, logistics, and restaurants via blockchain to achieve ingredient traceability. By clarifying ethical consumption, they measured changes in purchasing behavior. They also reported testing a system where consumers who purchase wine or ingredients contributing to the SDGs receive rewards proportional to their contribution level.

The experimental phase by the two companies has concluded, and they are now moving into full-scale social implementation. Mr. Suzuki concluded by stating they will advance implementation from two perspectives: user nurturing to build a fan community, and monetization strategies for an era where content inheritance progresses from primary to secondary and beyond. He called out to the audience, "If you're interested, let's work together."