Newsletter: Brands in Web3 & Web3 in Brands #18

Welcome to Edition #18 of “Brands in Web3 & Web3 in Brands“, your regular dose of the latest news from the blockchain, crypto, and Web3 space, curated to provide unique marketing and brand strategy insights with a pinch of spice. 

This week: Apple has been talking about blockchain at WWDC, but what do they really mean? Meanwhile, a Microsoft exec has an interesting take on how Web3 could tie into a future of AI agents, while Consensys launches a new startup aiming to democratize filmmaking. Finally, a cautionary tale and positive example of how Web3 can be harnessed by the luxury industry.

‍

Why was Apple talking about blockchain at its AI launch?

With AI soaking up most of the hype and attention at the big tech events recently, it took many by surprise when Apple started talking about blockchain, cryptography and “tamper-proof transparency logs” during the launch of Apple Intelligence at WWDC. 

So what’s it all about? Apple is in a bit of a catch-22 situation when it comes to AI and it sees blockchain-based tech as the solution. The Cupertino-based company knows that shareholders expect it to make big AI announcements to keep up with competitors like OpenAI, Meta and Google. But here’s the snag from Apple’s perspective: AI services rely on sending data to the cloud and that is perceived as bad for user privacy.

Most of the current generation of mobile devices, even those with Apple’s latest M-series chips, do not have the power necessary to run generative AI models natively on device. When you send a request to an AI model like OpenAI or Midjourney, for example, it is processed on a powerful cloud server, not your smartphone. In fact, very few consumer laptops can handle AI tasks natively, save for a few exceptions such as Microsoft’s new AI PCs which contain dedicated neural processors for AI tasks. In the short to medium term, therefore, AI services will rely on cloud computing to operate. 

But for a company like Apple that has long tried to foster a reputation as a guardian of user privacy, sending a load of user data to third-party servers could undermine one of its core brand promises: data privacy. And this would be particularly problematic if the data sharing were to be “baked in” at OS level, as is the case with Apple Intelligence. 

‍

Source: Apple

‍

The solution? Apple has set up a dedicated server network for AI computation called Private Cloud Compute (PCC). It claims that when a user contacts one of these servers, their IP address is anonymized and all data is deleted after each query. The code that runs on the servers has been made publicly available and to ensure that users can only connect with a valid PCC and not a rogue server, each node needs to publish cryptographic proof that it is running approved software to an append-only transparency log. Apple describes this as its “verifiable privacy promise”.

‍

Ultimately, this is not a zero-trust system because it is not decentralized, so while it provides a bit more reassurance regarding third-party access, users will still need to take Apple’s word for it that it is doing what it claims. Regardless of the technicalities of the implementation, however, it is a timely reminder that blockchain remains the best technology available for verifiable privacy and that even a highly centralized, vertically integrated company like Apple can’t help but acknowledge that fact. In a Web3 space that is so focussed on returns, rewards and token price, let’s not lose sight of this core advantage. As an industry, verifiable privacy is one of our core brand promises too, and we have more to back it up than Apple. 

‍

Microsoft plans to use Web3 to authenticate our AI agents

2023 was the year of hype about ChatGPT and GenAI. Now AI agents look poised to have a similar moment in the sun, attracting extensive coverage in the business and tech press and a flood of VC capital into related startups. Unlike standard AI chatbots or image generators, agents differ in that they can complete multi-step tasks, requiring less instruction and intervention from humans. So instead of responding to a single query with an answer, an agent will theoretically be able to use third-party services on a user’s behalf, automating complex tasks with fewer prompts. 

‍

Fast forward a bit further into the future, and AI agents may evolve to the point where they can represent different facets of an individual in online communities and the metaverse, according to Microsoft's director of digital transformation, Yorke Rhodes. For example, you could have an agent that gives keynote speeches for you based on your professional expertise and presentation style. Such agents may be able to access your digital subscription services and possibly even your email and social media accounts. 

‍

Trust will be crucial for personalized AI agents to gain traction. A user should be able to definitively know whether they are dealing with an authorized agent or unauthorized doppelganger. Blockchain could play an important role in such scenarios, according to Rhodes, emphasizing that decentralized identity verification is a key focus for Microsoft.   

‍

Microsoft seemed to be cooling on Web3 in recent years with the closure of Azure Blockchain in 2021, so the interview provides an interesting insight into an area where it sees growth potential. However, we’ll have to see whether these predictions come to fruition. After the initial hype subsided, decentralized metaverse platforms like Decentraland have struggled to attract interest, with a recent report showing that the platform had only 42 active users over 24 hours. The centralized alternatives have not fared much better. In reviewing Meta Horizon Worlds, Facebook's metaverse effort, a New York Times columnist described his experience as “sad, lonely and expensive”. 

‍

But when thinking about the best use cases for personalized AI agents, perhaps we need to look beyond VR. We can assume that fully immersive Metaverse environments will become far more technically sophisticated over time. But it remains to be seen whether a critical mass of users really want full immersion, which entails putting on a headset and completely isolating themselves from the real world. 

‍

In this regard, perhaps augmented reality offers a more promising alternative. Imagine being able to bring an AI consultant in to join your meeting, while still being able to converse with your team? Or being able to show an architect around your home and ask for advice on how to remodel it? These mixed-reality scenarios are clearly the ultimate objective of the Apple Vision Pro, which the company pitches as a “spatial computer” that “blends digital content with your physical space”. Less intrusive AI devices like the Meta/Ray-Ban smart glasses have proven to be more popular than full VR headsets with both tech reviewers and the general public. If blockchain can play a role in this mixed-reality space, it could be a major opportunity.

‍

New Consensys startup Film.io lets fans direct the action

Consensys has launched a new startup called Film.io that aims to help filmmakers and fans to collaborate on projects. The idea is that creators can submit and test ideas they have for new films, build an audience, and connect with production and licensing partners. The project harnesses two tokens: FAN and FILM. The native FAN token is used by fans to exercise governance rights and to back projects that they would like to see succeed. Meanwhile, the FILM token is used to fund successful projects through crowdloans. You can take a look at the full tokenomics here.

‍

I think there is definitely room for innovation in the TV and film space. In the early days of Netflix streaming, consumers got a great deal: $10 a month to access almost everything worth watching on demand. Now, the market has become much more atomized, with content spread over multiple different services like Amazon, Apple TV, Sky Cinema, Netflix, Paramount, Disney etc. A consumer can easily spend over $50 a month on such subscriptions. Ironically, while many people celebrated “cutting the chord” a decade ago and moving over to streaming, streaming is now starting to look very similar to the old cable TV market we all knew and hated. And in the race to find “sure-fire” winners to gain new subscribers, creativity has suffered, with studios increasingly opting for derivative copies of a successful formula rather than taking risks.

‍

Source: film.io

‍

Platforms like Film.io could offer fans a way to directly engage with filmmakers and exercise more influence over what type of scripts get greenlighted. I was personally involved with an innovative project in this field, a crowdfunded Swiss film called Mad Heidi (which I even had a small non-speaking role in). One area where I think the Mad Heidi team really excelled was in offering highly creative rewards and prizes for backing the film, such as attending recording sessions, appearing as an extra, getting your name in the credits, and keeping some of the weapons, costumes and props. In contrast, I was a bit underwhelmed by the rewards touted in the Film.io intro video. Badges, NFTs and reputation points sound like fairly generic gamified rewards rather than genuinely exciting film experiences. Nevertheless, I will definitely keep a close eye on the project and look forward to seeing what film projects emerge from it.     

‍

Fashion Forward: OTB Group shows a better way to use Web3 in the luxury industry

When it comes to Web3, much of the fashion industry’s focus has been on finding ways to monetize brands via NFTs. But this is a strategy that entails reputational risk if not executed well. For instance, Dolce & Gabbana faced a lawsuit last month when a customer claimed that the metaverse clothing they purchased was delayed and incomplete.  

In contrast, it is good to see examples of brands harnessing Web3 to offer real-world benefits to consumers. In my recent analysis of Web3 use cases in fashion, I identified product authenticity as one of the most promising applications of the technology. So I was interested to read earlier this month that OTB Group, which owns brands like Marni, Maison Margiela and Jil Sander, announced that it will be issuing blockchain certificates of authenticity for all products in its luxury lines. 

An NFC chip will be inserted into every item in the Fall/Winter 2024/2025 collections, totalling over 1.5 million products. Each NFC chip is twinned with a corresponding record on the AURA blockchain platform. The initiative was assisted by the Aura Blockchain Consortium, a Swiss non-profit founded by Mercedes-Benz, OTB Group, Prada Group, and Cartier to create technology-agnostic Web3 solutions to authenticate luxury goods. I look forward to seeing more brands following OTB Group in implementing Web3 authenticity solutions at scale.