By Lawrence Lundy-Bryan, Head of Research
A real use case for blockchains: a global data commons
This week I am continuing our series of excerpts from our Convergence Ecosystem vision paper, which can be read here. The previous installments can be found here:
- VC for The Decentralised Future: Introducing the Convergence Ecosystem
- The End of Scale: Blockchains, Community, & Crypto Governance
- Building a New Data Infrastructure with Blockchains and the Internet of Things
Today, I want to talk about a use case that only blockchain technology can deliver. They are few and far between and usually revolve around applications that demand censorship-resistance. Indeed, a public data commons demands just that.
The Convergence Ecosystem will lead to a global data commons. It’s not inevitable, but blockchains and distributed ledgers are disruptive technologies that change the structure of the data value chain. Yes, I know that word is overused, but in this case it is true. The point of value capture in the value chain will change. Instead of web companies capturing value and profit by controlling data, data could be stored on decentralised data file systems and blockchains making it accessible to all, not just a select few platforms that collected it.
In the Convergence Ecosystem, a few different technologies are all interconnected forming an authentication, validation and security layer: blockchains and distributed ledgers, decentralised consensus protocols, self-sovereign identity & reputation, and decentralised storage and data integrity. We believe the development in these four areas are contributing to the development of a data commons. These decentralised technologies are critical to the creation of a true global public utility. A public utility must be citizen owned and not be able to controlled by a single entity either Government or corporation. The transparency, usage provenance, tamper-evidence and censorship resistance features of blockchain technology are perfect for a global public utility.
Public blockchains are the ideal foundation for a data commons
Public blockchains are in many ways worse than existing databases. They are slower, have less storage, use more energy, and are less private. Sure, sharding, proof-of-stake or other proof-of-x, and privacy-protecting tools like multi-party computation and zk-snarks are attempting to address some of these issues. But the key thing to remember is that the original Bitcoin blockchain was designed specifically as a peer-to-peer digital cash systems; it is perfectly designed for that use case. The design choices were made to improve one feature: censorship resistance. Public blockchains aren’t owned or managed by one Government or company that can choose who views or uses it. This is what crypto people mean when they say blockchains cut out the middleman (although the so-called middleman will almost certainly integrate at another point in the value chain so it’s more appropriate to say blockchains will change where the middlemen make their money). Governments have traditionally had the ability to censor information and communication; but today Silicon Valley tech monopolies do on a global scale. Twitter, Facebook and Google have all come under fire recently because of their decisions to limit freedom of speech. If you control a network you pick and choose who uses it. This is too much power for a single entity.
We now have the tools to ensure no single entity controls data. With all communications, money, and health becoming digital; data infrastructure will be too valuable to be controlled by one nation or company. In fact, for individuals and society more broadly, global data infrastructure, just like the Internet, should be a public good. Never has so much data been available for collection and analysis. And everyone wants it. As sensors are embedded in everyday objects, and we move to a world of ubiquitous computing, everybody is fighting for who ‘owns’ the data. This is yesterday’s war. [ctt template=”3″ link=”cT2l2″ via=”no” ]Public blockchains offer an open-source, decentralised, shared database that anyone can view and interact with based on programmable rules. [/ctt]
We are seeing the emergence of this new data infrastructure. We aren’t there yet, we still need to process more transactions at faster speeds and use less energy in doing so. Data needs to be private, stored in an accessible way, and shared across different blockchain flavours. We also need a way for individuals, organisations and machines to buy and sell data in a marketplace. The storage and access to data is important, but it will be the data marketplaces that finally provide a business model for data creators. There will finally be a way for people and machines to make the most of the data they collect. A marketplace provides an economic incentive for the more efficient allocation of data. Individuals can sell it instead of giving it away for free; organisations can monetize it instead of letting it sit idle on databases; and machines can buy and sell data automatically to increase their utility. In my view, a peer-to-peer marketplace for data is the second most important idea to come from the blockchain industry after peer-to-peer electronic cash.
A data commons give control back to users and limits monopoly control of the most valuable resource in the digital economy
2018 will see the beginnings of this global data sharing and monetisation network. Data creators will begin to earn money from uploads, likes and retweets. This is a far more profound change than it may seem. Disruption has typically come from startups offering seemingly inferior products that serve a niche which is underserved by the incumbent. Blockchain-based networks won’t just disrupt particular companies; they go much further, they disrupt a digital norm: the existing assumption that we should be giving away personal data for free. Digital monopolies including Facebook, Google and Amazon, get data from users for free. Every like, search and purchase feeds the learning system to further improve the algorithms; in turn bringing more customers and engagement. In value chain terms, data is supply, and AI algorithms are demand. Digital monopolies are searching everywhere for more and more data to feed their algorithms. Facebook buying WhatsApp and Instagram. Google with self-driving cars and Google Home. And Amazon with Alexa Echos and Dots.
Blockchains and decentralised public infrastructure change the game. Blockchains reduce the value of hoards of private data. It makes proprietary datasets much less valuable because as more and more machines, individuals and organisations use a public data infrastructure, a global data commons becomes more attractive to data sellers. As this data commons grows with more datasets, it will attract more data buyers, creating powerful network effects. In other words, data becomes more of a commodity; and it is no longer the source of value in and of itself. Firms that control supply — data — no longer dominate markets. The point of value capture in the value chain will change from data to brand and trust.
As data becomes less valuable, the customer relationship becomes ever more important. Startups and incumbents alike will compete for customers’ data based on trust. The global data commons will mean individuals will choose where their data is sold or rented. This global data commons will at first attract individuals that care about privacy and self-sovereign data. Machines will soon follow as machine operators and owners look for new revenue streams. Some organisations, especially the public sector, will be attracted by the non-corporate controlled nature of the decentralised infrastructure as well as the cost and liability reductions in not storing consumer data. Smaller organisations and startups will sign-up to access standardised data that would otherwise take too long or cost too much to acquire. Today, data is siloed with no business model for creators to monetise it. Blockchain technology and other decentralised infrastructure are emerging as a new data infrastructure to support machines, individuals and organisations to get paid for the data they generate. Blockchain-based data infrastructure, including data exchanges, will commoditise data and help realise the vision of a data commons and the first real global public utility.
Download the full Convergence paper. Outlier Ventures is investing in this vision. Get in touch if you are are #buidling.