Blockchain Startups Take on Ticket Touting, But Will They Gain Traction?

If the fakes don't get you, the bots will.

That's about the current state of the ticketing industry – one that, as most consumers know, has dealt with major problems of fraud and counterfeiting as online services have made them more accessible.

In one of the latest cases, pop singer Ed Sheeran went so far as to recall 10,000 tickets after touts appeared on Viagogo selling alleged fakes for up to £1,000 apiece. That's not even to mention the use of software bots, which have come under the microscope as so-called "scalpers" scoop up as many tickets as possible and resell them on secondary markets, often for exorbitant prices.

Regulation hasn't been enough to stem the damage.

In the UK, bot users could be looking at prison sentences, and in Queensland, Australia, it is illegal to resell certain tickets for more than 10% of their face value. Yet, these problems persist.

"The ticket resale market is a failure and ripe for reinvention," said Adam Webb, campaign manager, FanFair Alliance, a UK-based anti-touting group campaigning for better consumer protection rules.

These resale markets don't operate efficiently and are lucrative for everyone except the consumer, he said. FanFair estimates that the secondary ticketing market in the UK alone is worth £1 billion ($1.3 billion).

Block markets

Solutions, however, may be on the way.

Blockchain startups like London's Aventus and Dublin's TicketChain believe a blockchain-based solution can significantly limit the black market run by ticket scalpers and fraudsters.

By creating unique digital code that can be both private and transparently tracked, the idea is that ticket markets could be less opaque.

"We eliminate this [black market] by anonymizing the resale market," said Annika Monari, co-founder of Aventus, adding:

"We make it so that buyers and sellers don’t know who they’re selling to and that’s one of the key components of using the blockchain. This allocation process happens in such a way that’s not controlled by any one entity."

Event organizers have toyed with different ideas such as linking an identifier such as your phone to the ticket, but this can be easily overcome if the incentive to sell the ticket is high enough. "The problem with that is that, if you look at a £20,000 UFC ticket to Conor McGregor, a £50 smartphone is very easy to sell," said Monari.

Similarly, a ticket owner could sell the key that was supposed to secure their ticket in the first place.

Monari continued:

"You really need to associate with the ticket something that can't be sold and that is obviously an identity. We have an association of a voice or an image of someone’s face or the credit card so that people can’t just sell them on the street completely offline."

Tied to identity

How this information interacts with the blockchain is the next trick.

The ID information is hashed and logged on the Aventus blockchain protocol, which uses the ethereum blockchain. "If you want to resell the ticket or bid on a ticket that's on the secondary market, you have to upload your identity," said Monari.

Through the Aventus protocol, a ticket owner can resell a ticket to another user, who will then apply their identity to the ticket, which is verified upon entering the event.

"When an event organizer sets up their event, they can specify which ticket categories they would let be re-sellable," added Alan Vey, director and co-founder of Aventus. The event organizer can set a minimum or maximum resale price that it will allow and can take a cut of the profits made on that resale.

TicketChain meanwhile is an Irish startup that won the Deloitte blockchain hackathon in Dublin last year.

Since then, the startup has built out a similar platform for issuing tickets on the blockchain, though its ethereum-based solution makes use of smart contracts for transactions and to eliminate paper tickets.

"As every ticket is represented as a token on the blockchain, there's no way of actually transferring that ticket outside the system," said Kevin Murray, the firm's co-founder. "By facilitating these transfers of tickets from the issuer to the consumer and then also peer to peer, there's no way of actually selling the ticket outside that system because it doesn’t exist."

Sole issuer

This is different than the standard process today, where contracts for events are often structured in a way that there is no single issuer for tickets. A certain percentage of tickets will be allocated to the likes of Ticketmaster, and the rest spread out among other smaller players.

For a solution like TicketChain to truly work, it needs to be the sole issuer.

"We would hope to the be sole issuer for particular events," said co-founder Zach Diebold. "We know that’s not always the case."

He added:

"The way tickets are set up now, it's difficult to obtain tickets to all events but any we can get would certainly help the problem."

"If you want to have those security properties around all of your tickets, then you need to put all of your tickets on the Aventus protocol," agreed Aventus's Vey.

FanFair's Adam Webb said his organization does not advocate for any one technical solution, but is in favor of "pro-consumer legislation and pro-consumer technologies."

David and Goliath

Still, giants like Ticketmaster and even relative newcomers like Eventbrite have established such dominance and popularity that companies like Aventus and TicketChain may have an uphill battle in trying to get promotors and venues to use their protocols.

Aventus hit a roadblock recently when it postponed its token sale, which was scheduled for mid-July in the hopes of raising $15 million, after the fall in ether prices.

However, the company has inked a deal with Blue Horizon Entertainment, a newly formed events group, to deploy the protocol.

"Controlling the ticketing, from creation to redemption, is very compelling, so you get to know your customer," said Diane Bowers, co-founder of Blue Horizon on its arrangement with Aventus. "Basically, eliminating fraud was compelling, as was the potential for redistributing additional income in the secondary market."

Bowers added that Blue Horizon is planning to manage an event in London in late 2017 with between 10,000 and 15,000 attendees as a test run for the protocol:

"Our commitment to [Aventus] is to have some test cases where we can help them perfect the technology and help them build the reputation in North America."

In Ireland, TicketChain's founders will begin a pilot with the students' union of their alma mater, Trinity College Dublin, to operate ticketing for some of its events, as well as running tickets for a local boxing academy.

Each pilot, running from September to March, will handle about 6,500 transactions each. "Plans from there onwards are to target more established artists," said Murray.

The various test runs will be a true litmus for whether the blockchain is a viable solution for the blight of ticketing scalping, though FanFair's Webb expects regulators may soon intervene.

Webb said:

"To make this market work in the interests of audiences and artists, we are now at the point where we need legislators to intervene to enforce existing consumer legislation, and to create the commercial environment where more innovative technologies, including blockchain, can gain traction."

Raffle tickets image via Shutterstock