Over the past couple of years, calls for the regulation of Big Tech have become mainstream. The likes of Facebook, Amazon and Google have been attacked on all fronts. Privacy, political influence, cyber-security, monopolistic behaviour… something needs to change, and that change needs to be BIG. One solution that’s been repeatedly put forward to solve many of these issues is to make tech giants pay users for the data they harvest from their incredibly profitable platforms.
As a stand-alone, the idea may appear ridiculous. How is it fair to ask this of these companies? How might we even go about assessing the value of the data people share? And who, exactly, would be doing the paying? These are all valid questions, worthy of invalidating the data-payment proposal. I however believe that technological advances in blockchain technology might offer an elegant solution to the issues mentioned above.
My theory is as follows: adding and aggregating key data about ourselves on a cryptographic ledger would allow us to sell and track our data, solving in one go a wide array of issues plaguing the digital world.
How it would work
The core concept behind many blockchain-backed ideas is that people who participate in the creation of a project’s value should be rewarded for it. This idea is no different. I’ll gloss over some technical details, but here are the key steps to achieving the envisioned data independence.
People install a piece of software on their device which ensures that user-generated data is stored locally, and protected there. We’re talking about things like date of birth, income, banking data, browsing history, family status, interests, GPS tracking, credit score…
That data is then securely sourced to a data wallet. Each object or data point is encrypted as a non-fungible token (NFT) with a specific key, with the user wielding the unique master key.
Companies can then demand to have specific objects transferred to them in order to offer better services or to give access to a free product (much in the same way that cookies are accepted or rejected). The user decides what to lock or unlock via the wallet’s interface. This incentivises companies to offer micro-payments (or a great free product) for said data and to better explain why it is needed.
Scale being key to feed algorithms, data from individuals is worth very little. As such, this solution would allow its users to aggregate their data with that of other users for higher bargaining power and thus higher rewards. If that sounds like unionising with extra steps, trust your instincts.
This process ensures that users are able to track who owns their data, and who said data has been sold to over time. Writing a data pack into an NFT means that its creator can even be paid a given percentage when said pack changes hand, however far down the line. And should that line somehow end with actors endangering national security, I’m sure the government would also be more than happy to know about it.
It also incentivises users to keep their data up to date, correct and relevant, as it will then be worth more to advertisers and tech companies. This ensures that fewer mistakes are made because of bad data. These mistakes cost companies billions every year, so large entities also have a reason to support such an idea.
Furthermore, using blockchain technology means that data doesn’t have to be centralised in one place, leaving it vulnerable to hacking. It is also cryptographically protected and subject to hashing features. This ensures that we’re less likely to see hacks or leaks, of which we’ve seen far too many over the past few years.
What issues this solution solves
COVID-19 has led us to switch to a nearly fully digital life overnight. Data supremacy from a few players was already an issue before this world-altering event, but I fear that the past 18 months have created imbalances that will take years to rectify. If we do not find a way to solve some of the key issues below, millions of people’s lives will worsen.
I’m not saying that the creation of a data wallet, as discussed in this article will magically make everything right. Far from it. But it might be enough to get a much-needed conversation going about the harm data might inflict on our society when those who wield it are left unchecked.
This is where it all begins (though not where it ends). Many people wish to keep their private affairs… private, to avoid unnecessarily being targeted by advertisers. A middle-aged man searching for Alcoholic Anonymous meetings in his area shouldn’t be subjected to non-alcoholic adverts day in, day out. A young woman in her twenties shouldn’t have to endure a barrage of beauty product recommendations, as this might cause her to develop unrealistic physical expectations. And I shouldn’t receive anti-depressants adverts because I bought Doge at $0.6 and sold it at 0.4$...
These are just three examples among the millions of small indignities we must suffer daily because algorithms have gotten to know us and our peers so well. By only giving access to what we’re OK with sharing, and being able to track and sever the path our data travels at a moment’s notice, we might be able to regain some small amount of privacy. We’d also be warning tech giants that any sale to dodgy third parties would result in an immediate retraction of consent.
The pandemic has further shown how unequal western societies are (and don’t get me started on other parts of the world). While the privileged few got incredibly wealthier, millions lost their jobs. And no one got as rich as the data barons. This isn’t surprising: superstar companies like Amazon, Apple, Facebook and Google earn enormous profits while employing a surprisingly small workforce relative to their scale.
By giving people enough bargaining power to demand a small amount from data aggregators, we’d create a system in which we’re able to partake in the profit created through said data. This would have three direct effects; firstly, we might eat into the profits of the richest companies, thus ensuring less economic inequality is created. Secondly, VCs would think twice before investing millions into companies that harm society. Thirdly, these companies’ objectives would become better aligned with society’s wellbeing.
You might argue that the likes of Facebook or Google would never pay for data. Their products are free, after all. We willfully use their services and generate data that wouldn’t otherwise exist. What we get in return is the service itself, for which we’ve not paid a cent. Shouldn’t that be reason enough to surrender our ASL and browsing history? Yes, but only if we assume that these companies aren’t oligopolies we rely on to survive in the digital world.
Let’s state the obvious: the Information Technology industry tends to produce cartels and monopolies. Early winners in their niche can use their strength to beat back competition, amassing yet more strength… and ultimately hurting the public interest. It happened with the railroad trusts, Standard Oil and AT&T, and it is beginning to happen with the big winners in today’s data-rich, market-oriented economy.
This is why the argument that we could just stop using Facebook, Amazon and Google doesn’t work so well: it’s like saying we could do away with running water because there’s a river nearby. It’s true, but not… fair? These companies have been killing worthwhile competitors for more than a decade, ensuring that we’re FORCED to go through them. A blockchain-based data wallet would help change this state of affair.
As mentioned earlier, it would reduce the amount of free money these companies receive from early backers, meaning more companies will have a chance to compete. It would also encourage a wide variety of actors to make data more transportable, something that is key to reversing some existing monopolistic behaviour.
Social Media’s business model
Data-based business models are actually pretty terrible when you think about it: many rely on the whims of advertisers and small business to make a profit. Yes, they generate billions right now, but so did radio, newspapers and TV, all of which are dead or dying. What happens to the data barons when yet another big thing comes around?
It’s already begun, too, though on a small scale for now: app developers will soon have to ask users for permission to track their mobile device activity for advertising purposes. Currently, few people take the trouble to opt-out. But when Apple switches to opt-in tracking, the industry expects almost no one will voluntarily consent to give their data to advertisers. That blows a serious hole in the business models of many ad tech vendors, who could see their ad revenue from Apple products drop as much as 50%.
By being more transparent, or offering a small monetary reward, these social and tech companies could not only survive but thrive in the long term, as many people would be happy to regularly come back to give their data against new functionalities or 5 more dollars.
Why it won’t fully work
Privacy, democracy, security, relevancy, privacy, monopoly, inequality… that’s a lot of topics to address in one swoop, which is why cryptographically encoding data to sell it to companies is a solution I believe in. Is it too good to be true, though? Sadly, it might very well be, though solutions are always right around the corners for those stubborn enough to look for them.
Too many players
Much of the current discourse has rightly pointed fingers at Facebook, Twitter, YouTube, Google and TikTok, which collect users’ information directly. There’s however an entire world of data-gathering companies out there. Amazon, Spotify, Netflix, Lyft, StubHub, Rent the Runway, Tinder, Airbnb… To work well, a data wallet would need to have the backing of all these companies, and many, many more.
You know the companies mentioned above, but do you also know Acxiom, CoreLogic, Enformion, Equifax, Experian, Intelius and Epsilon? Of course not. Such companies survive by providing data for other entities to use, as an incredibly wide variety of data is needed to create any semblance of real value. If the solution prescribed in this article is to be implemented, they would surely go under. One alternative exists, though: defining exactly what a personal data is in order to better regulate it, as is the case under the European data Protection law. Other types of data (like satellite imaging, for example), would then not be impacted.
In 2017, Acxiom provided up to 3,000 attributes on 700 million people. In 2018, the number was 10,000, on 2.5 billion consumers. With the amount of data created growing exponentially, can we ever hope to reproduce such scale with data wallets? Perhaps not.
Individuals will just never be able to match the raw power of data companies. However, an argument could be made that reducing our collective data footprint might still be for the best for society as a whole; a search for ever-more data might very well end the same was as the search for ever-more oil…
Additionally, as mentioned earlier, the aggregation of data among data wallet users could enable them to reach a scale large enough to be taken seriously.
Even when well aggregated, monetary incentives at the individual level would be small. The annual revenue per user for Facebook globally is about $25. In the US and Canada, it’s about $130. If we extrapolate to all platforms, the current value of a person’s data for digital ads is about $240 a year (according to Wibson, a start-up specialising in data privacy).
The financial incentives for the use of a data wallet are likely to be much more meagre, and It would be hard to convince millions of people to install yet another app for such a small reward. I however believe that the other benefits such as heightened privacy might just make it worth it. Additionally, we’re only talking about ad revenue here. Who knows how much more this could become when the likes of Amazon, Netflix and Tinder become desperate.
I would know: adding and removing items from the Ethereum blockchain can be very costly, both financially and environmentally, as users need to pay for the computing energy required to process and validate transactions. If the “gas fee” to transform one’s browsing history for the month into an NFT continues to be 20$ and a tree, the work to get there will have hardly been worth it.
It is also far from obvious that anyone blockchain technology will be able to cope with the sheer scale of what’s being discussed here: dozens of terabytes per second, in all directions, which need to be recorded on every node within the network.
This, in my view, is the biggest challenge the data wallet idea faces. What’s more, I don’t know how to overcome it. Yet.
Big Tech won’t surrender their power so easily. We must be prepared to offer alternatives in case the data wallet idea doesn’t pan out. As you’ll see, none of these alternatives are as elegant a solution. But they might very well be easier to implement in the short run until we can find technical fixes for some of the challenges highlighted above.
Instead of making large tech companies pay their users, they could demand that their users pay them so that their data is not sold to the highest bidder. This idea was recently floated by Twitter (only 0.8% of the digital add market), and would work well for free services. This is however just the tip of the iceberg, as personal data is also being processed by countless other companies who do not rely on advertising. I believe such steps would kill the platforms implementing them.
Another option entails having the government regulate the industry as it would a commodity. That would mean ensuring that the product or service sold does not harm society more than it benefits it. Most companies in the world would not pass that litmus test, so I hardly think it’s worth considering. Plus, I like to think that modern problems require modern solutions.
The idea of “robo-taxes” has also been floated to force companies that overwhelmingly use AI algorithms and robots to contribute to the society that birthed them. I love taxes. I love this idea. There’s just no way that we can develop a policy framework fast enough to keep up with the pace of innovation. That legislation would be obsolete in 6 months.
Just because these solutions don’t seem to be as efficient as others, there is still value in looking into implementing them. Any of the 3 coming to friction would greatly improve the current state of the digital economy.
Nothing in life is free.
The internet was supposed to introduce a new paradigm that would herald an age of growth for all societies. This has not materialised, in part because large corporations corrupted the digital world’s once noble ambitions.
It is time to give the data barons a taste of their own medicine. By process of elimination, I believe a data wallet is the answer.
Good luck out there.