Web3 is Transforming the Data Economy

Web3 is Transforming the Data Economy

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                                                               Credit: iambuff/iStock

The concept of a community “dataverse” where individuals or corporations freely share data is almost exclusive to sci-fi but is very obviously missing in the real world. While the early internet may have given us Wikipedia and IMBD, this is not even remotely close to a structured, real-time, global database of collective intelligence. This begs the question, why isn’t there a multi billion dollar company built around this exact paradigm today?

In short, this is not how tech behemoths have built their kingdoms to date. In fact, on the contrary, their fortunes have been made by building the largest gated, internal dataverses possible.

In addition, one could argue we lack the economic incentive to support it, the organizational framework to manage it and the protocols to build it.

Enter Self-Sovereign Data- The Next Killer Application

A dataverse, providing unrestricted access to information for all, can only emerge from a mature data economy where information can be fluidly valued, purchased and utilized seamlessly.

To date, the data economy has sadly looked more like a barter system where each transaction is opaque and slow. Rather than being distributed across a network, most data is instead concentrated in a few monopolies. However, the rapid adoption of blockchain and its distributed ledger technologies has made it clear that’s about to change.

Web3 promises to be the decentralized internet built on the back of blockchain technology, fundamentally shifting ownership and power back to users and away from big tech(e.g., Facebook, Google, Amazon etc). It’s a world where people own the platforms they use, earn money commensurate to the value they create and are sovereign over their data rather than exploited by it. Users who are sovereign over their data will maintain the ability to choose who can access their data, thereby giving rise to a rich data economy.

This evolution all begins with users claiming rights over their data from large platforms. This also extends to the ways corporations will monetize and utilize newly available data. Data will inevitably emerge a major category of assets. It has the potential to influence the next wave of builders and users over to Web3. And represents the major application of blockchain much in the way that decentralized finance was in its infancy.

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How Web3 unlocks the Data Economy

There are three ways Web3 will transform how we build a vibrant data economy:

  1. Ownership:
    Data, similar to most digital assets, is incredibly hard to value given its intangible and replicable nature. Fortunately, digital scarcity is a core principle of blockchain. By tokenizing access to data we are able to track ownership and lineage; thus creating open markets to determine fair price. Basic to any free economy is a widely accepted mechanism for valuing assets and tracking ownership, so why aren’t we doing this with data?
  2. Organization:
    One of the most significant achievements of Web3 has been the restructuring in how communities self-organize. Building on pioneered open source software, Web3 groups are able to rapidly enlist communities to contribute in smaller increments. This process is driven by tokens which serve as payment as well as shares of ownership that directly align incentives without the necessity for legal employment or contracts. These organizations could be immensely successful at creating shared data protocols that incentivize the organizers, developers, and users necessary for success.
  3. Shared State :
    One of the primary technical issues with data is that it is siloed. Siloed data tends to diverge in organization, quality and standards. The internet is the ultimate example of this as it represents a networked array of data silos which leave information trapped within each application. A superior model for this would be a communal database with tight paradigms for access control that we could all draw from and contribute to. However, this would require a large buy-in, strategically aligned incentives and a massively distributed database. While there may be practical problems around scaling, it is a data pattern that could change the industry.

An internet-native data layer

Until Satoshi Nakamoto authored the Bitcoin whitepaper, the concept of payments and currency were not native to the internet. Rather companies like Stripe or Square built infrastructure to bridge the gap between banks and the internet. Financial applications were still subject to the underlying infrastructure which was slow, costly, less secure and wrapped in a complex layer of regulation.

Enter Ethereum.

Eth introduced programmable smart contracts via its own token. This Layer 1 blockchain created a modern, composable financial infrastructure capable of disrupting most major fintech giants. This unlocked an explosion of Decentralized Finance applications which offered much more attractive financial options, thus spurring rapid mainstream adoption.

While an internet-native currency and economy is imperative to a new data economy, it isn’t a complete solution in and of itself.

You can also read : What are Blockchain Layers?

So what then are the building blocks of an internet-native data layer?

Data can be built on top of a structure similar to DeFi.There are a some key elements that compose this data layer:

  1. Self-Sovereign IDs: A shared universal system enabling identification of individuals, organizations and devices that is independently owned by its users and not a third-party .
  2. Data Wallets: User interfaces for the management and security of personal data assets.
  3. Protocols for Tokenization & Data Exchanges: Agreeable ways of allowing custom access to data through tokens and a marketplace for those tokens to enable free trade.
  4. Secure Data Enclaves: Neutral compute areas that enable a party to send an algorithm to be run on a particular set of data and in order to get results without ever disclosing the underlying data.
  5. Data Oracles: The blockchain equivalent of data APIs for developers to request/access data on the blockchain from external sources.
  6. Data Unions (DAOs): Decentralized Autonomous Organization governing a contributory data network.

Will The Dataverse Surpass Web2 Monopolies Ever?

Network effects are difficult to break, yet imperative to scale. And getting users to adopt Web3-based e-commerce, social media and service platforms won’t be easy. However, I believe that progress will compound rapidly once consumers begin to understand the meaning and power behind real ownership in the networks they use. There are no shortage of entrepreneurs and developers seeking to capture some of the $4 trillion in equity market capitalization directly tied up in companies built upon captive data.

The Dataverse, or next gen Data economy, is no doubt an audacious goal. However, similar to how Web3 has grown, the Dataverse will not be the product of a centralized company; rather it will emerge from an ecosystem of complementary projects led by bold innovators.

Credit : Medium

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