SA startup Custos uses bitcoin to disrupt digital piracy

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South African startup Custos Media Technologies has found an innovative use for bitcoin and blockchain technology, employing bitcoin bounties as a means of cracking down on piracy of various types of digital media.

Founded by staff at Stellenbosch University and based at the LaunchLab, Custos Media Technologies is currently focused on producers of videos and movies. The startup embeds bitcoin bounties as watermarks within videos, which can still be watched normally.

However, if the media passes out of the control of the intended recipient – usually a reviewer offered a pre-released version of the movie – there is a small bitcoin reward that can be collected by one downloader using a free tool.

Once someone has pocketed this bounty, Custos can see the transaction on the blockchain – a globally distributed ledger that records all bitcoin transactions – and informs the media owner, who can then take whatever action they see fit.

Co-founder G-J van Rooyen told Disrupt Africa the academics behind Custos had been working on bridging the gap between emerging tech and the needs of industry, and while looking at media distribution and anti-piracy had become interested in the possibilities of using bitcoin.

“We saw the potential for bitcoin to do much more than provide an alternative form of finance,” he said.

“Cryptocurrency provides a very attractive way of providing an incentive to media recipients to stay honest.”

The initial idea, van Rooyen said, had come about around eight years ago when he purchased an e-book online using his credit card. Upon receiving the e-book, his name, credit card number and its expiry date were footnoted on each page. He said he realised then that this e-book was his responsibility and he could not pirate it without suffering personal damage.

“It was the first time I had come across the idea of almost passing the responsibility to the media buyer to make sure they play by the rules,” he said, while clarifying that displaying credit card details was obviously not the right thing to do.

“But the idea was a very valid one.”

The Custos team eventually realised it could employ a similar mechanism with bitcoin and cryptocurrency to protect any form of media.

“It provides a strong incentive to bounty hunters to go and look for pirated content,” van Rooyen said.

The need is huge. One of Custos’ clients makes movies, and has previously suffered losses prior to box office after sending advance copies to reviewers. It happens to bigger companies too. Last year, Expendables 3 leaked in advance of release, costing the studio behind the film US$10 billion.

“Especially for smaller organisations it can be devastating, they might not be able to recoup their investment,” van Rooyen said.

Custos’ solution, he said, provides a more “nuanced” way of managing the problem of digital piracy, decentralising the issue using bitcoin bounties. He said the startup was also looking to alleviate the problem by turning downloaders and uploaders of pirated content against each other.

“We’re attacking the structure of the piracy community itself. That is likely to start disrupting the economy of piracy.”

Custos raised seed funding from Stellenbosch University early 2014 last year, and is now raising a second round that is already partially subscribed. It was one of 11 startups to pitch at the Cape Town leg of the Seedstars World competition last week.

“We’re really looking for the type of investors that can unlock markets that we need to get to,” van Rooyen said, adding that though the startup has had paying beta testers in South Africa the problem is less pronounced in the country than elsewhere.

“We need to get to the markets where piracy is a particular problem, such as the United States (US) and Europe.”

With that in mind, the team is off to the Anti-Piracy and Content Protection Summit in Los Angeles shortly to exhibit and try to attract clients. But van Rooyen said it will remain based in South Africa.

“We’re trying to keep it as lean and quick as possible, and run it from Stellenbosch,” he said.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent’s most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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