“Data is already the new gold of the data economy – so why do we give our data away for free?” That was one of the main questions our host Sönke Mißfeld discussed with Ragnar Kruse, Founder of AI for Hamburg and AI Invest, Manan Patel, blockchain and cryptocurrencies expert and Dr. Klaus Holthausen, founder of TEAL AI at our first BLOCKCHANCE Online LIVE show. Following we will present to you the findings.
Economy driven by Big Data and Artificial Intelligence
Today we all give our data away for free – for the use of the free services of large internet companies. Our data lies at the core of the largest and most valuable companies in the world, which therefore naturally have an interest in collecting as much data as possible. Of course we also benefit from this: we are active in social networks, receive personalized advertising or get relevant suggestions on marketplaces.
Our data is currently mainly used for the creation of profiles for the precise targeting of possible customers and a resulting increase in advertising effectiveness. For this purpose, the large internet companies collect all data that can be read from the various devices in daily use: e.g. movement profiles, app usage or health data. Globally, 3.5 billion people use a smartphone every day, and the amount of data generated is gigantic. These data volumes are now analyzed by artificial intelligence to identify behavioral patterns. Based on these patterns, AI can make increasingly accurate predictions about human purchasing behavior.
Blockchain is the key to a democratic and transparent data ecosystem
If we want to gain back control of our data, we need to see a revolution in the way data is stored, used, accessed and controlled. Three main aspects we see in the future use of our data are:
- We should own it
- We should be able to monetize it
- We should establish a micromanagement system for it
Today’s structures bring a lot of risks. Data silos are holding enormous amounts of data which makes them a honeypot for hackers. The result of them possibly getting hacked is therefore/ as a consequence huge amounts of our personal information getting hacked (e.g. credit card data). The data is in custodianship of the big companies but they do not feel liable for the loss of our data!
The whole data market can be seen as a kind of a blackbox. We do not know how the data is used, who it is sold to. To avoid things like the manipulation of the 2016’s US presidential election by Cambridge Analytica – a data analysis company that targeted indecisive voters to show them election advertising for Donald Trump – we need a new data economy.
The New Data Economy and Data Marketplaces
But for all those problems there is a solution: the blockchain technology.
The data is stored transparently, securely and decentrally. On the basis of the blockchain, you could set up a micromanagement of the data – with full control, you could grant certain parties access to certain data. If you regain control over the storage and thus over the access to your own data, you can directly participate in revenue streams. For participating we not only need a change of mindset and a growing knowledge about the value of data on the user’s side but also a marketplace where the data is traded and valued.
There are different approaches for the valuation of data. As an example, today the advertising companies charge per impression, click, view or ad, normally per thousand. 1000 impressions would cost around 10 dollars. The data that is used to target you as potential customers comes from data management platforms that charge 1.50 dollars per 1000. So you could set the data price around 15 % of the ad price. Simplified calculation you could say that around 15-20% of the revenue from advertising of the big internet companies could be charged by the users.
Ragnar Kruse, who founded an adtech company asked a simple but elementary question?
“Why? Why not? My data is used, why am I not participating in the revenue?”
But the user does not participate in the revenue streams yet. Undoubtedly, the dataset of one person is not very valuable, people tend to overestimate the value of their data. That is where the other approach applies: AMMs or Automated Market Makers. Basically, it is an algorithm that sets a price based on supply and demand and therefore automates the marketplace.
How will Amazon, Google and Facebook react to the implementation of a blockchain based data economy?
User data is the core of the business models of Amazon, Facebook and Google – it is rather unlikely that they will just give the sovereignty of the data away. So do we need a political revolution or will the user demand a change at some point?
There might be three possible outcomes of this situation:
- The internet companies simply embed the technology themselves which is very likely to happen. For example Facebook plans their own cryptocurrency: Libra and Amazon could easily emerge from being a marketplace for goods to being a marketplace for data.
- The government or other public institutions constitutes new laws and regulations which ban centralized data structures.
- Consumers demand a change and adopt blockchain technology. That is the possibility we strive for. But it mostly depends on the blockchain developers. Most consumers do not and will never understand the functionality of blockchain. To get them to use blockchain services and applications, they need to be easy to use and have a good user experience. It is essential to reduce the complexity of blockchain.
If we want consumers to demand the change we not only have to reduce the complexity of blockchain but also need to introduce a new culture, Dr. Klaus Holthausen explained:
“The industry leading corporation which comes after Amazon must be built on culture of data ownership for the users – but we have to learn this, it is completely new.”
Schumpeter says about market revolution that if there is a change in markets organization there is a revolution. Blockchain could bring this organizational change: for example a blockchain based Youtube, where every video is provided with a smart contract and you would use the content as a currency. You could build a self organized market place.
Also, Blockchain and AI are emerging. Our expert Manan Patel expects a rapid implementation of Blockchain and AI in the data economy:
“We can’t expect the majority of tech people working on it. But once it gets widespread we for example will see the corona app running on blockchain. We are not at an early stage but the future is there and we are moving there rapidly.”
Will public institutions shape the new data economy or do we have to rely on a few blockchain visionaries?
The future role of the governments and public institutions remains unclear. There are many different competing political interests. The European Commission tried to modulate a third system of data usage: a protected one. Different from the Chinese system where you have a holistic citizen and all data is tracked by the big chinese internet companies like Alibaba and Tencent and then given to the government which uses the data to maintain total control over the people by persecuting political dividends and spreading propaganda. It also differs from the American system where the government on one hand protects Facebook, Google and Amazon against the european data regulations like GDPR and only sets data protection laws if it is about national security (e.g. the dispute about TikTok).
Europe would need not only a data protection law but also its own approach to build a social network or data marketplace to construct a systemic counter-draft to the American and Chinese systems. A system where the user owns the data and misuse of data is prevented.
It is easier to proactively build a system built on the values of a democratic, decentralized and fair data economy than finding a regulatory framework that actually shifts the data ownership from the economy back to the people. Regulations are emerging from the social sciences but technology develops faster than science and therefore also as law.
Our Vision for the Future of Data
We all have to work on the vision of having a democratic and self-determination data economy. Until then the European Commission gave law enforcement a powerful legitimation: the GDPR. If the law enforcement would strictly prosecute all violations of GDPR and would impose the highest penalties of up to 4% of worldwides revenue, there would be more control over the internet companies and as a consequence they would be forced to adjust their processes.
We need a culture of data ownership, a regulatory framework to protect data, an infrastructure for the safe storage and trade of data and most importantly the awareness of the people that they need to gain back control of their data.
See the full discussion here on YouTube: