• BitTorrent

Without peer: how BitTorrent became such a success

International tax compliance issues are at the forefront of all digital companies' strategy evidenced by BitTorrent selecting Taxamo to comply with EU VAT.

Aug 6, 2015

The cover of Time magazine is a good gauge of cultural relevance: so when Shawn Fanning adorned its cover in October 2000 people sat up and took notice. Most did so as it was probably the first time they had ever seen Fanning’s face, prompting the question: why was he on the cover of Time?

International tax compliance

Fanning is one of the godfathers of peer-to-peer file sharing. In 1999 he – along with his brother, John, and Sean Parker – co-founded Napster, the pioneering audio file sharing site that shook the music world to its core. The tremors felt back then were the precursors to the creation of the digital world – of file sharing and digital downloads – that we live in today. A world of digital consumption via numerous media.

After, Napster came BitTorrent: the undisputed king of peer-to-peer file sharing.

BitTorrent arrived at a time (2000) when internet speeds and bandwidth across the globe enabled the regular world wide web user to ‘torrent’ files for downloading content.

The BitTorrent Protocol was invented by founder Bram Cohen in 2001. In 2005 Cohen was included in the TIME 100: Time magazine’s list of the most influential people in the world. Napster’s Fanning got the cover and Cohen got on one of the most prestigious lists around: peer-to-peer file sharing had arrived.

So, what are the reasons behind BitTorrent’s success? Here’s an explanation from Cohen himself.

“In a nutshell: it works,” Cohen stated in a response to a Quora question.

“BitTorrent allows peers to start uploading very soon after they begin downloading, and it doesn’t waste any bandwidth having peers download things they aren’t interested in … and is available freely. By far the biggest technical advantage though is that it’s very good at using all available upload capacity on peers, where previous protocols let a lot of that capacity go to waste for purely logistical reasons.”

One BitTorrent spiel gives critical insight into the company’s modus operandi: “The Internet promised us this much. And we promise to make good on it. We believe in an Internet of options, not rules.”

BitTorrent the maturing company

A growing number of individuals and organizations now use BitTorrent to distribute their own or licensed material.

At the beginning, however, BitTorrent became a perceived byword for piracy. But as BitTorrent stated themselves back in 2013, if you are using the BitTorrent protocol for piracy then you’re using it in the wrong way. When someone is caught speeding on the motorway it’s the person driving, not the car, that is breaking the law. That car can’t break the law without human intervention.

According to BitTorrent, independent adopters report that without using the BitTorrent technology they could not afford to distribute their files. The reasons for this are its dramatically reduced demands on the author’s private networking hardware and bandwidth.

However, as BitTorrent matures it’s also broadening its user base.

In September 2014 Radiohead’s Thom Yorke released a solo digital album via BitTorrent Bundle. The album was released direct to fans as the first ever paygated Bundle project.

I am trying something new, don’t know how it will go. but here it is:) https://t.co/1noGMiZ5sC — Thom Yorke (@thomyorke) September 26, 2014

BitTorrent is now trusted by companies such as the BBC for the distribution of digital content such as a special edition Doctor Who set, marking a decade of the new show.

When asked by the Guardian as to why BBC Worldwide chose BitTorrent, Nick Coulter, BBC Worldwide head of digital western Europe, said: “The technology is very interesting and used in lots of different ways, but for us what’s particularly appealing is that the BitTorrent clients have a huge global reach, and that’s something we don’t necessarily have. We don’t have routes to market in every single market in the world, so it seemed like something worth exploring.”

BitTorrent is also used by Facebook, the social media behemoth using the protocol to distribute updates to their servers.

The technology behind BitTorrent has led to Microsoft distributing Windows 10 in a similar fashion. The new method for distributing Windows 10 allows users to access pre-downloaded updates from another PC on their network, potentially cutting download times significantly.

So, just what is – and who are – BitTorrent?

BitTorrent is a peer-to-peer protocol that allows you to download large files over the internet in a quick and efficient manner. The peer-to-peer aspect means the user downloads files and uploads them to other people downloading the same file.

The BitTorrent protocol is often used for the distribution of these large files as it is a cheap, fast, efficient way to distribute them.

Then there’s the BitTorrent company that uses the protocol to enable these downloads but also to enable artists to raise revenue. One such avenue to revenue is the BitTorrent Bundle.

International tax compliance

Here are some statistics around BitTorrent and BitTorrent Bundle:

  • More than 170 million people use BitTorrent products every month.
  • BitTorrent protocols move as much as 40% of the world’s Internet traffic on a daily basis.
  • In 2008, the Canadian Broadcasting Corporation (CBC) became the first public broadcaster in North America to make a full show (Canada’s Next Great Prime Minister) available for download using BitTorrent.
  • BitTorrent facilitated 60 million digital downloads in 2013.
  • In 2014, 10 million+ fans tuned into social justice documentaries on BitTorrent Bundle.
  • ‘The Act of Killing’, a documentary by Joshua Oppenheimer exposing mass executions of accused communists in Indonesia, was the most downloaded film on Bundle in 2014.

Sell your art, Not your soul. pic.twitter.com/lpgKhEvwH2 — BitTorrent Inc. (@BitTorrent) October 17, 2014

Why Taxamo? For international tax compliance, of course

BitTorrent selected Taxamo’s SaaS-based EU VAT solution to process compliance with new EU VAT rules on the sale of e-services and digital goods.

New EU VAT rules require businesses with B2C sales of digital goods and services in Europe, to identify where their end customer is located by collecting two pieces of non-conflicting evidence and then applying the correct VAT rate.

“We were looking for a top performing, scalable tax solution and we found Taxamo,” said BitTorrent CFO Dipak Joshi, “We’re all about options at BitTorrent and Taxamo gives us the flexibility and efficiency we need to deliver our technology to customers all over the world. It’s this compatibility that makes Taxamo the ideal solution.”

Taxamo’s real-time solution offers e-commerce businesses a fully integrated API that enables a quick and cost-effective way to manage global digital tax obligations.

BitTorrent will use our suite of APIs and comprehensive reporting dashboard to comply with all EU regulatory requirements, including identifying EU and non-EU transactions, collecting & storing customer location evidence, validating B2B transactions, calculating ongoing VAT liability and creating quarterly EU VAT MOSS returns.

Our solution also provides currency conversation based on European Central Bank (ECB) rates, up-to-date VAT matrix management and support for both dynamic and universal pricing.

Taxamo recently announced plans to expand its market-leading digital taxation solution. We know solve international tax compliance issues and support jurisdictions that already have, or intend to, implement taxation based on the place of consumption of digital services, including US Sales Tax.

“We’re confident that our solution is the most comprehensive EU VAT solution out there. It’s rewarding to have that validated by BitTorrent who did their homework, looked at the alternatives and decided on Taxamo.” – John McCarthy, Taxamo CEO.

This latest announcement adds to Taxamo’s growing list of global clients which already includes WooThemes, Penguin (Random House) and Justinmind.

Taxamo content is created for guidance only, please consult your local tax advisor.