BLOCKCHAIN TECHNOLOGY IN ONLINE ADVERTISING

I. Introduction

Online advertising is a vital stakeholder of the Internet’s economy. According to a 2015 IHS
technology report, in Europe, 50% of online video revenue is generated through advertisements.
With online editorial content, advertising generates 75% of the total revenue. In the mobile
application market, the share of ad-funded free apps is increasing compared to ad-free paid apps.
Online advertising revenue has registered double-digit growth over the past decade – in the US
in 2016, $72.5 billion in revenue was generated.

A growing trend in online advertising in recent years has been the move towards programmatic
media trading. Programmatic advertising is designed for small advertisers and publishers to ease
access to the online advertising market. The programmatic model enables dynamic advertising
budget allocation with the desired context of publishers and the targeting of specific audiences
efficiently and at scale.

In the programmatic model, advertisers use trading desks to connect to demand-side platforms.
Demand-side platforms connect trading desks with ad networks and exchanges. Publishers make
their inventory available through exchanges, ad networks, or directly through trading desks.
Programmatic advertising has the disadvantage of being opaque and exposed to threats such as
fraudulent activity. Programs can easily exploit the common event-based pricing model. The
detection of fraudulent activities is a challenging task due to the large volume of transactions.

The capacity to connect hundreds of thousands of publishers with a similar order of advertisers
in an automated manner, together with the promise of accurately targeted advertising, has caused
digital marketing to rapidly evolve into a complex ecosystem where different intermediaries are
focused on optimizing particular functions. This ecosystem operates effectively as a black box
for the three key players: advertisers, publishers and users.

The online advertising ecosystem has become infested with thousands of intermediaries, whose
business models range from exploiting user data to verification companies promising to help
advertisers secure their advertising budgets. The principal parties in online advertising – users,
advertisers and publishers – have recently all pointed out concerns related to these
intermediaries, the actual value they provide, and how in many cases they operate against the
interests of at least one of the above-mentioned key players. Advertisers are concerned about
fraud and ad misplacement, publishers about their diminishing share of advertising budgets, and
users about their right to privacy. So far, the self-regulation efforts of the online advertising
industry have not succeeded in mitigating fraudulent activities.

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We claim that blockchain can be a practical solution to addressing issues burdening online
advertising. An increasing amount of companies and experts in the online advertising industry
agree with us on this proposition. At the same time, we disagree with those claiming that
blockchain technology is ready to be applied to solving online advertising problems. In this
paper, we present a list of requirements to consider for blockchain to become a functional
solution for online advertising. While some form of blockchain-based approach may indeed
prove to be suitable for addressing transparency and authenticity issues eroding trust in online
advertising, multiple essential questions require answers prior to achieving a possible industry-
wide implementation. For example, whereas Bitcoin, the best-known implementation of
blockchain technology, handles 500k transactions per day, the programmatic advertising
ecosystem manages billions of transactions per day. Scale, therefore, presents an open challenge.

Other concerns regarding the utilization of blockchain technology in online advertising include
energy consumption and the rapid growth of the global carbon dioxide equivalent (CO2e)
footprint of the Internet. Current popular blockchain-based solutions offer poor energy efficiency
when applied at a much lower scale than what online advertising would require.

This paper aims to review blockchain technology, present the requirements for blockchain
adaptation in online advertising, analyze the current blockchain-based solutions available for
online advertising, and evaluate blockchain platforms against the requirements above.

A scalable and energy-efficient blockchain paradigm, where trading tokens, at least initially, are
pegged to currency, needs to meet the specific requirements of online advertising. In this regard,
we will make the following contributions: a thorough review of the blockchain technology and
its fundamental principles, requirements for utilizing blockchain as a solution in the online
advertising industry, an analysis of the currently available blockchain-based solutions addressing
online advertising, and blockchain platforms in respect to the requirements. These contributions
create a solid base for further discussion on the broader adoption of blockchain for online
advertising, particularly concerning addressing the scalability, energy-efficiency and token
volatility questions.

Our final contribution is the conclusion of our study: to create a solution for overcoming the
issues in online advertising, we identified six requirements that a possible solution must fulfill.
These requirements are scalability, quasi-transparency, inability to modify blocks, non-
repudiability, quality information and energy efficiency. We find that none of the reviewed
blockchain-based online advertising solutions have the market adoption to suggest significant
buyer confidence. We provide novel recommendations for solution developers on how to
proceed in fulfilling the requirements.

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II. Materials and Methods

The aim is to present the current state of knowledge on blockchain technology and its
possibilities in online advertising. We first review relevant articles previously published on
blockchain, and secondly analyze the blockchain-based publicly available solutions to online
advertising.

The blockchain technology review has been gathered from published articles and industry white
papers. Blockchain is a somewhat new technology, and academic publications have not
adequately addressed vertical solutions outside of cryptocurrency. In particular, there are no
academic publications for online advertising, to the best of the authors’ knowledge. Online
advertising’s specific requirements have been formed from industry sources, and the researchers’
extensive knowledge of the industry and its primary challenges and constraints.

The analysis of currently available blockchain-based industry solutions and blockchain platforms
are mainly based on publicly available sources. We have analyzed the solutions against the
known specific requirements of online advertising. The gaps between existing solutions and
online advertising requirements that need researchers’ attention are based on the reasoning of the
researchers and are open to falsification and future discussion. We suggest possible development
and research topics regarding each of the presented requirements.

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III. Blockchain Technology

The world is undergoing rapid change. This change is accelerated by the development of Internet
technologies and the exponential growth of data. Blockchain could be the fifth disruptive
technology after mainframes, PCs, the Internet, mobile communication and social media. A
blockchain is a distributed peer-to-peer database, which provides a technology for the
decentralization of systems. Blockchain alone does not guarantee decentralization, but it does
guarantee the distribution of data storage and transactions. The decentralized model has the
potential for increased equality in storage, and the availability of information and resources.
Blockchain technology implementation alone is not synonymous with decentralization.

a) Decentralized Architecture
There is a well-established taxonomy for decentralized architectural objects. The first one is
decentralized applications (DAPPs). A DAPP utilizes a network in a distributed fashion. Member
information is secure and pseudonymously protected. The execution of operations is
decentralized between member nodes. A blockchain-based DAPP must be an open source
application operating autonomously without the possibility for a single stakeholder to control the
majority of tokens. In addition, data and records must be cryptographically stored in a public
blockchain. In DAPP, tokens must be generated with a standard algorithm and some or all of its
tokens must be distributed at the birth of its operation. The protocol and the application must be
further developed according to proposed improvements and feedback based on a majority
consensus decision on these changes.

The second architectural object is decentralized autonomous organizations (DAO). DAO

originates from artificial intelligence. It is a decentralized network of autonomous agents
performing tasks without any human involvement. A set of rules controls DAO. Smart contracts
act as agents, running on blockchains, which execute a range of pre-defined or pre-approved
tasks. Execution is founded on events and changing conditions.

The third architectural object is decentralized autonomous societies (DAS). DAS can consist of
many smart contracts, or multiple DAPPs and DAOs operating autonomously. Examples of DAS
include automatic markets and trading networks. DAS automatically transact unitized,
packetized, and quantized resources. It is based on dynamically evolving conditions, user
profiles, authorization, and bidding capabilities. DAS technology is used in smart energy grids,
and it can have automatic bidding functions on the supply and demand side of operations. All
stakeholders have automatic clearing mechanisms. The online advertising market can be
considered a DAS.

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b) Blockchain Technology Overview

Blockchain technology includes three essential components: the application, the protocol, and
the cryptographic solution. The fundamental principle of a blockchain is presented in Figure 1. A
blockchain consists of blocks, hashes, and hash functions. In FIGURE 1, the n−1 block in the
middle records its hash into the block. Also, the hash of the n−2 is also recorded to the same
block. The addition of the previous block hash cryptographically chains the current block to the
previous block, forming a chain of blocks. A hash function is a mathematical algorithm that
transforms input into an output. A cryptographic hash function is complicated to revert. This
feature of a blockchain is called collision resistance. Every block includes the timestamp of its
creation and additional information based on the configuration of the blockchain in question. All
blocks have the payload of their block and all the previous blocks’ payload.

FIGURE 1. The fundamental principle of a blockchain

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The functionality of a blockchain can be described in the following way: the node sending new
data records the data into a block and then sends a broadcast about the new available block to the
blockchain network. The nodes receiving the new block verify the block from the hash. If the
payload was correct, it is added to a block. Proof-of-work (PoW) or proof-of-stake (PoS)
algorithms are executed to the block by all member nodes. The new block is added to the
blockchain once a consensus has been reached and all nodes verify this block.

c) On-Chain, Off-Chain and Sidechain Technologies

There are three different system architecture components that can be used when designing a
blockchain-based solution. The three basic ideas are presented in FIGURE 2. Information into a
blockchain can be entered on-chain (a) directly. Alternatively, information into a blockchain can
be entered (b) indirectly, via an off-chain insertion. There can also be a trust relationship
between a parent and a sidechain (c). Off-chain and sidechain concepts are explained in more
detail in the following paragraphs.

FIGURE 2.The basic idea of on-chain, off-chain, and sidechain

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Sidechain is a blockchain that can validate data from other blockchains. Sidechains extend the
decentralization of trust to other digital assets. A sidechain is a separate blockchain attached to
the parent. Sidechains are attached to the parent chain with a two-way peg. The idea of a
sidechain is to avoid unnecessary trust on top of the parent chain. The processing of transactions
can also take place in permissioned and private sidechains, allowing transactions from one chain
to be used in another separate chain and vice versa, securely. Sidechain is a more efficient and
flexible consensus mechanism with substantially less significant nodes. Such interoperable
chains are called pegged sidechains. Sidechain technology has been implemented to established
blockchain platforms, but there are still challenges.

Off-chain applications provide real-time, verified transactions to all users of the application
without transaction fees by committing transactions between users in a separate ledger. Off-chain
transactions have serious risks. Most off-chain systems require that the users trust them. An off-
chain system could be hacked, leading (among other things) to economic losses. It should be
carefully considered when to use on-chain or off-chain transactions, as both have pros and cons.
There are tradeoffs with both.

Distributed applications include a full application stack for accessing blockchains and off-chain
solutions like databases and storage. Nowadays it is possible to store the records in a blockchain
with smart contracts. Depending on the smart contract solution, there are different rules for when
to store in the chain, what kinds of records are stored, and what the data being stored is. Smart
contracts usually use API interfaces to communicate with off-chain applications, allowing off-
site data utilized efficiently.

Regardless of the way data is created, off-chain or on-chain errors affecting accuracy can occur
in both single and multiple chain architectures. The inaccuracies in a blockchain are not easy to
overcome. In a private and permissioned chain, the risk of a single party gaining the majority of
the tokens is higher. For instance, a concentration of nodes, adding a significant computing
power altogether, could create collusion that affects trust, which is the basis of the blockchain
technology.

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IV. Specific Requirements Related to Online Advertising

The online advertising ecosystem has many stakeholders between the advertiser and the web
page requesting an ad. Typically, a publisher leases ad spaces to an ad network. When a user
connects to a web page with ad spaces, an ad request is generated. The request is typically passed
to the ad network, which in turn can forward it to other ad networks or the Supply Side Platform
(SSP), passing through many intermediaries before arriving at the Ad Exchange. The process
until this point is called the supply side.

The Ad Exchange proceeds to a bidding process. This part of the process is called the demand
side. The standard for a bidding process is the open real-time bidding (RTB) protocol. An Ad
Exchange generates a bid request according to the open RTB standard. The bid request is
forwarded to the Demand Side Platforms (DSPs), which are registered in the Ad Exchange in
question. The DSPs configure programmatic advertising campaigns. When a bid request is
received, the DSP verifies a match to the configuration parameters of any of its ongoing
campaigns. If there is a match, the DSP generates a bid response with the price the advertiser is
willing to pay to display its ad on the web page. The latency of bid responses to a given bid
request received by the Ad Exchange must be less than 100 ms. The Ad Exchange runs an
automated auction and informs the selected winning bid to DSPs. The Ad Exchange coordinates
the delivery of a URL of the ad, which is downloaded by the web browser. A delivered ad is
referred to as an ad impression. This whole process is presented in FIGURE 3.

FIGURE 3.Online advertising ecosystem.

The technology requirements for an online advertising specific implementation of blockchain fall
into two categories: online advertising specific requirements and general requirements for
blockchain. The general requirements for blockchain include scalability, inability to modify
blocks, and energy efficiency. Online advertising specific requirements are based on the
assumption that blockchain implementations should be able to address the significant challenges
in online advertising: privacy, ad fraud, and lack of transparency. In a public statement in May
2017, David Weldon, the president of the World Federation of Advertisers and the CMO of
Barclays Bank, said that a reform leading to a safe and transparent marketplace.

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Examples of ad fraud include advertisers paying for advertising space not seen by consumers,
traffic that is generated by bots, and other means. All programmatic impressions can be exposed
to ad fraud. The amounts of fraudulent ad impressions vary between 15–30% and result in an
economic loss of 20% of total digital ad spend wasted. The situation is similar across video and
banners. In 2014, the Association of National Advertisers (ANA) reported that 23% of video
views are fraudulent. Ad fraud is approximated to grow to $50 billion by 2025. Transparency
issues aggravate ad fraud. Almost 30% of the top 5000 websites use privacy solutions that
prevent the possibility to connect the website to any individual or company for media buyers.
Other transparency challenges include lack of pricing information, black box bidder strategies,
and masked inventories.

Our proposed requirements address the above challenges from a technical point of view. In the
following chapters, we will provide an overview of the requirements presented in FIGURE 4.

FIGURE 4.The requirements of online advertising to blockchain technology.

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a) Quasi-Transparency
Online advertising-related transactions require anonymity; whereas typical blockchain based
systems do not. Whilst typical blockchain systems expose information about nodes, an online
advertising implementation needs to protect it. Every transaction must provide privacy, secrecy,
and transparency, all at the same time, for different data sets inside the transaction. Privacy
relates to the Internet users’ rights and ability to protect their data, and secrecy to the advertising
actors’ need to keep sensitive trading data secret. Transparency requires the availability of
relevant information for rational decision making, in contrast to hidden agendas and conditions.
For example, information that helps advertisers to reduce their exposure to fraud or brand safety
threats, or information that helps Internet users understand why particular ads are shown to them.
The lack of transparency may affect the advertisers’ interest to buy online advertising as a result
of creating an unreliable marketplace.

Conceptually, in blockchain protocols, the blocks form a distributed database, including

information about the transactions. The information is public for all nodes in the network.
However, this principle is not suitable in the online advertising marketplace. The information
recorded in each transaction is considered sensitive by the creator of the block. It might, for
instance, include financial information related to the transaction, the name of the publisher, and
the name of the advertiser. Specific factors such as protecting children should be considered
regarding data protection. Therefore, to develop a blockchain protocol suitable for the online
advertising industry, irreversible anonymity of sensitive information included in a transaction is
a business-critical feature. This requirement is not specific to online advertising and has far-
reaching potential across a multitude of fields where authenticity is required, but sensitive
information cannot be compromised.

b) Inability to Modify Blocks

The challenges in online advertising ecosystems often relate to the various intermediaries
operating with proprietary technologies, at times preventing advertisers from assessing the
quality of advertising campaigns. As it stands, advertisers are left dependent on the reporting
from their Ad Network, DSP, agency partner, or third-party verifiers. Blockchain protocols
respond to the need for creating trustless systems where there is no need for third-party
verification of any kind. One of the fundamental properties guaranteeing trust is the inability of
nodes in the network to modify created blocks. In the case of Bitcoin, this is achieved through
the proof-of-work paradigm. Unfortunately, proof-of-work does not scale to billions of
transactions per day needed in the online advertising context. Alternative solutions need to be
explored. In the case of online advertising, we call for a blockchain technique where, without
moving fundamental transactional aspects off-chain, or otherwise impeding the ability to
evaluate individual transactions later, the inability to modify blocks is guaranteed. This is done
while meeting the scale demand as per the requirement of 10^11 to 10^12 transactions per day.

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c) Non-Repudiability
The requirement of non-repudiability is a fundamental property defining the concept of trustless
systems. This property can be guaranteed with current blockchain technology, but is only
meaningful in cases in which the important transactions are in the blockchain. Many of the
reviewed implementations in TABLE 1 show that this is not the case with online advertising
implementations; actual transactions are handled off-chain. In a trustless system, a node making
a transaction should provide proof of identity together with information such as the date of
creation of the block, unequivocally linking the associated identity and transaction to the block.
The result is that a node cannot repudiate the associated transaction to the block. Unless
important transactional information is stored in the block, as opposed to being stored off-chain,
the proof of identity loses its value. The proof of identity is as valuable as the information
associated with it.

TABLE 1 A Comparison of Adtech-Related Blockchain Solutions

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V. Review of Blockchain Platforms and Implementations in Online

Advertising

There are many blockchain platforms already available. Developers have implemented various
blockchain-based technologies; file storage, communications, file serving, archiving, data
processing, bidding, predictions, and recently, online advertising and many other critical digital
economy capabilities. We will focus on platforms which provide support for distributed
application development. We have selected a set of platforms from those available based on
popularity. We also seek a varied selection of different kinds of platforms to get an overall
picture of the available platforms. There are many blockchain-based solutions under
development that are directed at supporting the online advertising ecosystem. We selected the
most popular and platforms with the greatest potential. Section A analyzes blockchain platforms
and Section B the solutions created for online advertising.

a) Analysis of Online Advertising Vertical Blockchain Solutions

Blockchain technologies promise to offer solutions to transactional systems. No well-established
blockchain-based application for online advertising has been implemented as of Q2/2018. We
conducted a thorough literature review and industry analysis. We did not find any academic
papers, only one technical disclosure of blockchain verification on the online advertising
ecosystem [51] and several industry white papers. One industry body has been established to
guide online advertising companies regarding blockchain [10], but nothing has been published
by them to date. Several commercial entities have made proposals or actual proof of concept
implementations of blockchain in the online advertising context. We analyzed the following
solutions: AdChain, AdEx, Comcast blockchain, Basic Attention Token (BAT)/Brave, NYIAX,
Madhive, and Papyrus. In the following paragraphs, we will explain and analyze solutions on a
more detailed level. BAT/Brave and Adchain have the most comprehensive white papers that are
publicly available. Results of the analysis of all solutions are presented in Table 2.

TABLE 2 A Comparison of Blockchain Platforms

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Adchain/Adtoken is the second online advertising network to leverage the Initial Coin Offering
(ICO) funding scheme, one wherein cryptocurrency tokens are sold in an initial offering in a
land-rush style event to raise capital for the company. Adchain is an Ethereum-based blockchain
solution for online advertising. It is a decentralized solution and uses modified PoS as consensus.
AdChain does not utilize off-chain application logic, and it supports sidechains. AdChain is open
source, but some of its applications are private. Quality information is based on whitelisting.
AdChain does not address transactions. Therefore, scalability to handle online advertising
transactions is not relevant. As opposed to the model introduced by BAT, Adtoken (ADT) cannot
be used to buy ads. Instead, advertisers still pay for ads with currency and Ad tokens are used for
voting for which sites can be included in the Adchain advertising network. This proposal creates
a conflict: if the majority of the token holders are not advertisers, or if advertisers do not take an
active role in the voting process, there is potential for conflict of interests. Adopting such a
voting mechanism for inventory selection implies that voters have the required knowledge about
sites and are incentivized to make decisions that are beneficial for the advertisers’ spending
money on the network. There is no evidence to suggest either of these is correct.

AdEx is an Ethereum-based blockchain solution, which primarily addresses fraud and privacy
issues in online advertising. It is a decentralized system using smart contracts and modified PoS
as a consensus. Only critical data is verified and stored on the blockchain. The idea behind AdEx
is to create a user profile web page, which allows the user to select exciting advertisers on a
voluntary basis. This mechanism is called whitelisting. Users also voluntarily provide more
specific information on their interests to these favorable advertisers in order to receive highly
targeted ads [53]. AdEx does not support off-chain functionality. AdEx does not use blockchain
for individual transactions. Therefore, the scalability requirement can be fulfilled. New solutions,
which require end-users to be active in taking the solution into use, face challenges of broad
adaptation. AdEx is an open-source solution, which is promising for the future development.

Comcast is developing a blockchain-based platform with Disney, Channel 4, NBC, and several
other large cable TV companies. The solution uses blockchain to share information securely
between the consortiums. The solution lets members share marketing data encrypted in a way
that allows each member to ask marketing questions from other members’ tracking data without
exposing all the information. Sharing marketing data improves targeting precision and analytics.
The Comcast blockchain solution is operating at the campaign scale. There is no information
about the technical specifics of the solution, but with a consortium of powerful companies,
expectations are high [54]. The Comcast solution is not going to revolutionize the whole online
advertising industry; instead it targets cable TV markets. We will exclude the Comcast platform
from the comparison in Table 2 as the necessary data is not available.

Most of the blockchain-based solutions available for the online advertising ecosystem are based
on Ethereum. Next, we will investigate the alternatives for Ethereum.
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b) Review of Blockchain Platforms

We have analyzed the following platforms: Bitcoin, Ethereum, Ripple, Counterparty, Omni,
Open Transactions, BitShares, and Colored Coins. In the following paragraphs, we will provide a
brief outline of these platforms.

Bitcoin is the oldest and most widely used blockchain platform. It uses PoW as a consensus.
Bitcoin supports off-chain and sidechain technologies with a two-way peg. The core of Bitcoin is
open source, but some of its components are not. Bitcoin currently scales up to 6.8 transactions
per second. It is a secure decentralized platform. Bitcoin is not a feasible platform for online
advertising purposes, mainly due to its lack of scalability.

Ethereum is a blockchain-based decentralized multi-purpose cryptocurrency platform, which

runs smart contracts. Smart contracts are applications that run precisely as programmed without
any downtime, censorship, fraud, or third-party interference. In the case of downtime and third
party interference, both claims have recently been brought into a discussion. Ethereum is a
stateful platform and includes a programming language that allows users to create decentralized
applications. There is a range of applications based on smart contracts.

Ripple provides a total solution with a gateway, a payment solution, an exchange solution, a
remittance network, and a smart contract system. The Ripple network provides a globally shared
ledger, which assigns applications authoritative information about the state of accounts and
creates a new ledger in seconds. The Ripple network contains many distributed nodes, which
process transactions. Client application transactions are relayed to the entire network. Ripple
enables decentralized server architecture for the movement of value among financial institutions.
Ripple allows member companies to make payments directly to each other. Unfortunately, the
energy efficiency of Ripple is as bad as that of PoW.

Colored Coins is a method for transferring metadata to the Bitcoin blockchain and a platform for
cryptocurrencies. It is an open-source platform. Colored Coins utilizes Bitcoin and is integrated
into Lighting Network. Colored Coins uses proof-of-ownership (PoO) as a consensus. It supports
off-chain application logic but not sidechains. The Lighting Network has some benefits: instant
payments, no confirmation times, smart contracts security off-chain, and scalability of millions
to billions of events per second. The Lighting Network achieves low cost by transacting off-
blockchain and by leveraging instant micropayments. Instant micropayments are suitable for
real-time bidding (RTB). Cross-chain atomic swaps can occur off-chain instantly with various
consensus rules. The Lightning Network comes the closest to meeting the scalability
requirements of online advertising.

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VI. Results

We raise the vital question of whether any of the blockchain-based solutions available for online
advertisers offer a viable solution for the five critical challenges presented in Section 4. None of
the solutions have the market adoption to suggest significant buyer confidence. No commonly
agreed standard or dominant design has yet been formed.

a) Results of Online Advertising Vertical Blockchain Solutions Analysis

In addition to blockchain platforms, we analyzed vertical solutions designed especially for online
advertising against the requirements presented in Section 4. The results are presented in Table 1.

Data was gathered from public sources. There are uncertainties in the data, as many of the
solutions are in the very early phases of development, or market adaptation is low. Three of the
solutions were Ethereum-based, and therefore inherit the basic properties of Ethereum. Power
consumption data was not available in any of the solutions; it was as if it had no relevance. In
respect to the requirements presented in Section 4, it is too early to say which of the solutions, if
any, are the most promising. None of the existing solutions have even moderate market
adaptation. Therefore, making an evidence-based judgment is not possible with regard to
whether any of the solutions will eventually work or not. Alternatives to existing solutions can
come from selecting another blockchain platform. We will present a summary of the blockchain
platforms in Section B below.

b) Results of Blockchain Platform Analysis

To find solutions that meet the requirements presented in Section 4 and to address the challenges
of ad fraud, we analyzed the main blockchain platforms. The results are presented in Table 2.

All of the analyzed blockchain platforms had a somewhat different proof method. In addition, all
platforms have capabilities to perform transactions and enrich data off-chain. We did not find
any evidence of sidechain support for Counterparty and Colored Coins from public sources, even
though they operate as sidechains themselves. Off-chain processing is needed for scalability, but
at the potential cost of losing the authentic security of blockchain. As they are off-chain, they are
software, making them interesting targets to exploit. All of the analyzed platforms relied on open
source and had a community developing the entire platform, or at least parts of it. The best-suited
platforms that have the potential to meet the requirements of online advertising were BitShares
and Colored Coins. Colored Coins is based on Lightning Network technology, which promises
scalability to billions of transactions daily. The fit for online advertising is not 100%, some
compromises regarding the requirements must be made. Another finding is that the platforms
relying on pure PoW do not scale to online advertising without a significant part of the
application logic being off-chain. Once the main part of the application logic is off-chain, it
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contradicts the initial benefits of the blockchain. Solutions utilizing Colored Coins could have
the potential to scale to the requirements of online advertising. None of the investigated vertical
solutions for online advertising are currently based on Colored Coins.

c) Validity of the Results

The presented requirements address the widely known challenges of online advertising and ad
fraud. Even though blockchain as a technology is known, no scientific articles have been written
about its scalability or other key features necessary for online advertising. The results regarding
blockchain platforms are novel, and therefore they can be taken to a more detailed level once a
blockchain platform is processing transactions at massive scale and actual transparent data on the
performance of the solution is provided. The blockchain is known for its notorious power
consumption, as miners are processing mathematical tasks with no other meaning than ensuring
valid transaction. As more nodes join the chain, the situation worsens.

Blockchain-based solutions for online advertising have not been investigated in scientific articles
before to the best of our knowledge. The presented data relies on commercial information
sources and can contain promises without actual evidence on the delivery of those promises.
Nevertheless, it is the only available information source on the matter, suggesting that more
transparency, development, and research is needed in this field to get performance and quality
data from operational implementations. The suggestions and discussions for future development
and research in Section 7 are based on the industrial and technical knowledge of the researchers
and can be considered a guideline for meeting the requirements in future system designs.

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VII. Discussion

In terms of the requirements presented in Section 4, after a comprehensive review of blockchain

platforms and blockchain-based solution for online advertising, we suggest ideas for
consideration in future system designs.

a) Scalability
To achieve the required scalability, approaches such as PoW or PoS are not feasible options,
since both act as a cause of delay even in relatively low-scale environments. A proof concept
capable of realistically meeting far higher demand for scale is mandatory. An initial approach
along these lines has already been proposed [24]. However, each node can create parallel chains
at speeds defined by its transaction rate. Unfortunately, guaranteeing nodes cannot modify blocks
at such rates. It is an open challenge that needs to be carefully considered. In the referred
proposal, the authors suggest using timestamps as a reference of the instant creation of the block
in such a way that the block n in the chain has to be created before block n + 1, but later than
block n−1. This is an interesting approach; however, it needs to be carefully evaluated in the
context of different problems (e.g., transactions generated in parallel, and the desynchronization
of computer clocks). Moreover, in-depth analyzing should be performed to conclude whether it
would be sufficient to offer security guarantees equivalent to PoW, which, while not affected by
security issues [74], can be considered the best standard proof. Scalability in current solutions is
achieved by placing the transaction-intensive part off-chain. In our opinion, this is a compromise
that jeopardizes the core benefits of blockchain and is not an acceptable way of solving the
scalability requirement of online advertising.

In the case of block validation, solutions based on PoW, which can ultimately be reduced to a
competition to create the next block, rely on achieving consensus among the nodes in the
network to choose which of the possible blocks is the valid one. In our proposal this is not the
case, since each node would be able to generate its chain, avoiding the need for consensus
algorithms to be implemented. In other words, we are proposing an alternative paradigm, “trust
without consensus.” Blocks will be signed by the correspondent node to provide the non-
repudiation guarantee.

b) Quasi-Transparency
We propose creating a double cryptographic layer for resolving the anonymity challenge. The
first one will be like the one defined in standard blockchain protocols, where a node distributes
its public key to all other nodes in the network so that anyone can prove the block has been
generated by such a node. The second cryptographic layer will take care of encrypting the
sensitive information with a second private key of the node. Then, keys able to decipher this
information on the second layer will be delivered only to those players the node is willing to let

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access such sensitive information. Note that this second cryptographic layer can grow in
complexity, since there may be situations in which a company wants to provide access to
different players depending on the specific transactions.

c) Inability to Modify Blocks

One option to solve the inability to modify the blocks requirement is to limit the time of creation
of a block based on timestamps. However, we consider this just a promising scope for future
work, we acknowledge that many vital questions remain unanswered, and recognize that it is
likely that currently unknown challenges (and solutions) will emerge as the topic is investigated
in greater depth.

d) Non-Repudiability
To solve the non-repudiability challenge, we propose using the cryptographic solutions used in
existing blockchain protocols. These approaches use asymmetric public-private key schemes,
where the node creating a block signs it with its private key, assuming ownership of the block.
On the other hand, the node distributes its public key to the rest of the nodes in the network so
that anyone can verify the identity of the node creating the block.

e) Quality Information
While some of the required quality information may come from Internet users, at least for the
time being, there are too many open questions to propose a suitable approach. We propose an
incremental approach, where the ultimate goal is that Internet users primarily create all quality
information, in a decentralized manner as a by-product of the transactions. As a progression
toward this goal, which is still far from feasible considering the lack of theoretical concepts, we
propose initially having a collective of independent trusted entities leveraging auditable open
source solutions, which generate the required scoring. One example of this would be trading logs
that are widely contributed to a pool, and then analyzing them using an open-source platform.
The computation of scores would be performed in a separate blockchain. Initially, such an
approach could be focused on classifying websites. Quality assessment approaches also need to
be considered strictly within the scalability concerns we have highlighted.

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VIII. Conclusion

We conducted a review of existing blockchain platforms and blockchain-based solutions

addressing online advertising. Based on the requirements presented in Section 4, we conclude
that none of the solutions evaluated presented any evidence to fulfill the requirements. Barriers
to adoption in the broad context include token volatility, scalability, excessive power
consumption, trust, and the difficulty of producing reliable quality information.

We provide a rough outline of key considerations regarding the implementation of blockchain in

online advertising as an industry-wide adoption. Some barriers can be considered general
blockchain problems, and researchers from other fields are also solving them. The requirements
related to quality information are specific to online advertising. The focus needs to be directed to
this aspect alone, as otherwise various blockchain implementations from eager industry players
risk focusing on the transactional aspects or are misguided in their attempts to address issues
with an actual value derived from online advertising.

Future research should carry an in-depth description and qualitative analysis of the various
blockchain-based online advertising systems. In addition, more research is needed to understand
the financial aspect of online advertising and how it relates to blockchain; under which
conditions will advertisers and their agency representatives consider significant investments in
the token economy? The focus should at least initially be more on the technical challenges, and
less on the financial transaction aspect. The promise of blockchain is significant for online
advertising and could indeed provide the basis for revolutionizing the industry by basing it on
trust and authenticity. Even though there may be faster development on a smaller scale – for
example in the case of individual national online advertising markets – the industry could still be
a decade or more away from materializing this potential through a global-scale transformation.
The global solution must scale without adding a significant amount of resources, and without
compromising quasi-transparency, the inability to modify blocks, non-repudiability, quality of
information, and energy efficiency. The findings of our research point out that blockchain is not
yet ready to be widely implemented in online advertising. In addition to the technical issues that
need resolving, the main challenges of online advertising are not well understood by end-users or
even online advertising providers. There needs to be a significant awareness campaign to support
transformation toward a healthier online advertising ecosystem. In Europe, the General Data
Protection Regulation (GDPR) could be harnessed to bring a sense of urgency to change the
industry.

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