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Scalpers beware: Blockchain tested as solution to illegal ticket sales

(Vansmusic)

The online event ticketing market (including movies, sports, music concerts and comedy shows) was valued at approximately US$46 billion in 2017 and is expected to reach over US$67 billion by 2025. But that online marketplace is also rife with problems; the Ontario government cracked down on scalpers and ticket bots last year, but legitimate fans still face issues getting tickets to the shows they want.

Some entrepreneurs are looking to blockchain as the answer to curbing illegal ticket purchasing activity.

“A number of blockchain companies are looking for problems, I found one that is just so glaringly obvious that we can fix,” Shiv Madan, CEO of Blockparty said to Yahoo Finance Canada.

Blockparty is a live event ticketing platform that operates using blockchain technology, offering an alternative to Eventbrite and Ticketmaster. Its system is said to solve many of the industry’s biggest concerns such as scalpers as well as ticket bots and buggy check-in procedures.

Blockparty sells private tickets, mainly to music festivals and tech conferences currently, and the company is also building a secondary ticket resale platform where a ticket can be tracked from the primary market to the secondary market. The company has been ticketing events since March 2018.

The challenge of running an event ticketing platform was, according to Madan, figuring how to enable a much better fan experience which “starts by knowing that the tickets you buy are real and that the prices are fair,” he says. Madan thought up the idea of Blockparty back in 2014 following a stint running a music festival.

“I had a festival and we had a lot of problems with ticket resale, filling up the stadium, making sure prices weren’t gouged on StubHub, and making sure that everyone was coming in with a real ticket,” explains Madan. “We also had problems with tracking promoters. We would hire 100 promoters and then give them 20-some tickets each, but we would never be able to collect the revenue–we didn’t know how many tickets were sold–there were just so many problems that I started looking for solutions and this was around 2014,” he says. “Then in 2015 we came up with the idea of blockchain and ticketing after I read up on blockchain, and then we put it together in 2017 after I found a really good developer.”

Blockparty’s protocol tracks a ticket from when it’s issued through to the secondary market gate, explains Madan. You enter the event by unlocking your ticket via the Blockparty app, which fully encrypts your digital identity. This data is taken from phone, touch or facial recognition scans, which is subsequently encrypted, itemized and then put on the blockchain.

“When we take that encrypted key of your digital identity, we associate it with the QR code of the ticket…with a blockchain ledger we can now track transfers per ticket and the new owner of the ticket,” says Madan.

Where blockchain fits

“Blockchain has the ability to verify the validity of tickets instantaneously and transfer the ticket to anyone transparently after it’s issued on the blockchain,” says analyst Andrew Macdonald. “Blockchain inherently prevents double spending, and in the case of ticketing that would be fraudulent tickets.”

Macdonald sees a purpose for blockchain, but he argues that while there are blockchain solutions trying to solve online ticketing efficiency and authorship, “many companies also have a token and the only use for their token is to pay for tickets, so basically as a user you need to buy whatever their currency is and exchange your money for the sole use of buying a ticket on their platform.”

Blockparty’s Shiv Madan believes the added cryptocurrency comes with incentive, which makes things more interesting. Blockparty has a token that’s “helped accelerate” the business, according to Madan.

“Fundamentally blockchain is really not that exciting. It’s an accounting system, a better accounting system. So if there’s three people transacting and we all agree that the transaction has happened, rather than through just one individual, we’re equally verifying the transaction happened. It’s an equally distributed system of proof,” he adds.

“What’s driving crypto though is that there is a crytpocurrency on top of that [blockchain], an application which pays you a certain reward for having participated in the verification of that transaction. That’s essentially what makes it exciting: there’s a financial reward associated with it.”

As for Macdonald, he considered doing a ticketing startup to solve this very issue, but “it would be harder to raise money and doesn’t make sense for a venture capitalist to fund a ticketing startup on the blockchain because Ticketmaster could just issue their tickets on a blockchain,” Macdonald says. While he says Ticketmaster will have high integration costs, he suggests that “over time their fraud rate would decline and it would be cheaper to maintain than current data base solutions.”

Madan further argues that using blockchain to manage online ticketing is “fundamentally a better system” and that competition like Eventbrite “cannot stop someone from selling an Eventbrite ticket on StubHub.”

At Blockparty the only option is to access the ticket via the Blockparty app.

“It is digitally verified and it’s added to the blockchain,” states Madan. “Our protocol tracks a ticket from issue through to the secondary market gate.” You enter the event by unlocking your ticket via the Blockparty App, which has fully encrypted your digital identity.

Jonathan Rivers, CTO of the software development company 3Pillar Global, sees it differently.

“Blockchain does nothing about the origin or delivery of the tickets themselves, reinforcing the inherent problems with non-trusted marketplaces running on blockchain,” says Rivers.

Rivers doesn’t think blockchain technology is completely useless, but says “it doesn’t make sense in a lot of scenarios.”

“Blockchain still isn’t entirely secure, it’s just encrypted. That means someone with enough time and computer power could still crack that encryption,” says Rivers. “Using blockchain doesn’t change human behaviour. Many bots simply exploit the fallibility of humans, and the ease with which users give up their passwords and personal information.

“On top of that blockchain technology would likely slow down the process of buying and selling tickets.”

Blockparty isn’t the only company trying to use blockchain to counter the illegal ticket market. Other outlets like Tracer, which recently launched its own “smart ticket,” are taking action to deter scalpers from receiving resale profits — by tracking the entire ticket journey. Tracer, also using blockchain technology, tracks the movement of the ticket verifying transactions along the way and allows both artists and promoters to have control over the rules regulating each ticket.

Blockchain, securing data and ownership

“Blockchain is good for basically three things: payment, incentive structure and data dispersion,” says Chris Tse, CEO of Cardstack. Tse wants Cardstack to be the “WordPress of the decentralized age.” He started the company without any knowledge of the cryptocurrency space.

“I started Cardstack in 2014 to take on the digital super powers. A lot of your information is filtered into these different apps: Facebook, Twitter, some friends here, some there, and all these super powers control the data. I imagined a world where we could build some open source software that taps into another world by a more unified view of your digital life,” explains Tse.

For Tse, “the selling of cryptocurrency for adoption should be a second order effect,” and he says the excitement of blockchain (and its use) is “connected to cloud utility and cloud computing systems which connect human incentives to the distribution model.”

Still, Rivers says using blockchain to secure ticket sales sounds good, but really only establishes a record of ownership. “It wouldn’t prevent particularly ingenious scalpers from continuing to reap profits off resold tickets,” he says.

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