Before we give away the recipe, here’s what’s making us thirsty.
The Fatal Conceit
Since the web’s inception, consumers have been conducting their digital lives on faulty architecture. Platform identities have been assigned to us by the host platform through the vehicle of username (usually our email) and password (of our choice). There’s a false sense of ownership when we join a platform: “It’s my email address, and I chose the password”, we muse. One may be inclined to feel in control… But he is not.
Pursuant data created on the platform (think ‘likes’ on Facebook, ‘tweets’ on Twitter, or purchases on your credit card) are then associated with these platform identities. The identity and pursuant data are forever conjoined and stored in a database that is owned and controlled by the platform. Access to the data — whether overt file dump, or ad inventory monetization — is wholly mediated by the platform. As the mediator (ie; the gatekeeper of the database), the platform is able to capture 100% of the value when conducting data transactions.
Meanwhile, us feckless users blissfully post pics of our kids, or write political screeds, without having to worry about arcane details like digital identity and data storage. And this is the deal we made with the data devil.
It’s this simple architectural underpinning that set the stage for one of the greatest heists in history. Since the dawn of digital connectivity, we’ve been steadily creating and recording massive amounts of valuable data. It’s value, across all economic verticals today in the US alone, is estimated to be north of $1 Trillion. Combined 2017 revenue for Google and Facebook totaled approximately $150bn. These two data leviathans represent just a fraction of the overall value of data in our economy. Outside of advertising, think of how critical a role data plays in credit and insurance underwriting, disease treatment and drug-manufacturing and many other applications. The value is extraordinary, and yet the creators of the data (consumers) are persona non grata when the spoils of data transactions are being distributed to participants. A great framework to think about consumer data creation and exploitation is through the lens of the Tragedy of the commons economic theory. We dedicated an entire post to that over here.
But fear not. There’s a stiff cocktail being mixed with 3 key ingredients, and it stands to shake up the personal data and digital identity world forever. This grim past is paving the way for a bright data future.
3 Key Ingredients
Ingredient 1: Consumer demand
- “91% of Americans “agree” or “strongly agree” that people have lost control over how personal information is collected and used by all kinds of entities.” (Pew)
- 615mm devices world-wide are using adblock (Pagefair), with a 30% annual increase in blocker installations
- Americans are sharing fitbit data with their life insurance provider, in exchange for lower premiums on their life insurance policy (Hancock Insurance)
These may seem like 3 discreet notions to the untrained eye, but in fact they are inter-connected and tell a very interesting story about the arc of personal data:
- Cognitive Awareness: 9 of 10 consumers report feeling like they’ve lost control of their data in the current Kafkaesque digital environment
- Practical Action: Consumers, in droves, are installing software to help mitigate the creepy surveillance conducted by myriad publishers and intermediaries
- Proactive Monetization: Consumers are willing to transact their data when offered enough economic gain
This simple 3-step arc shows that the consumer is aware their data is being ripped off, that they are trying to stop it from being ripped off, and that they are willing to transact their own data when they can control and benefit from it.
We’re observing amazing developments in consumer demand, but not a surprise for those of us who’ve been working in the personal data economy.
Ingredient 2: Blockchain and decentralized technology
Pre-blockchain technology, storing data in centralized, platform-owned, AWS-rented servers and databases was simply table stakes. It’s what everyone did. With the meteoric rise of Byzantine fault tolerant consensus networks (blockchains), we’re able to break with the gatekeeper model and build systems on truly decentralized architecture. Centralized chokepoints are going extinct as blockchain technology matures at an astounding pace.
In the past, consumers had to trust that we (or any other centralized platform) were going to treat them fairly, reward them for sharing data and and not censor them in anyway. With decentralized architecture, the consumer no longer needs to trust a platform. System functions, value transfers and state changes are conducted and verified via network-based consensus, and code is open-sourced and auditable.
Whatever your political inclinations, the banning and content controls happening at massive personal data gulags Twitter and Facebook exemplify the unadulterated power concentrated with centralized platforms.
Blockchain technology is pulling power away from centralized platforms, and pushing it out to the edge — to the sovereign individual.
Ingredient 3: Government Regulation and Legislation
As much as we decry the digital dominance of Google, Facebook, Twitter and the Marketing Industrial Complex they represent, they are still private companies and reasonably subject to competition and market forces.
Government, on the other hand, is not. Government has a monopoly hold on the strings of power and enforcement, and they are using it.
GDPR is indiscriminately smacking non-compliant companies like an angry mother reaching into the back-seat of a car to swat her misbehaving children. Its reach does not abide sovereign boundaries either. Immediately following GDPR’s enforcement debut in May of 2018 in Europe, both Google and Facebook (US-based companies) were hit with violation-accusations totaling more than $9bn. GDPR fines can be levied as high as 4% of annual revenue. This has legitimate teeth.
GDPR has US-based cousins that are worth keeping an eye on as well. CCPA, California’s GDPR-style-only-way-more-stringent statewide legislation has been passed and is due to go live in 2020. Never to be outdone, NY state is working on the Shield Act, which similarly looks to stifle companies and platforms that are playing fast and loose with consumer personal data. A bug (feature?) of our messy democracy in the US is that state-level legislation can be used as a cudgel to force preemptive federal action. Most participants with any stake appear to want triangulation at a federal level to avoid serious disruption.
While undoubtedly heavy-handed and likely to have unforeseen consequences, one net effect of this immense government-induced pressure on centralized platforms is that they will be forced into ceding more control of data to individual consumers.
We (Datacoup) have been around for a while, waving the flag of consumer data control. As a company, we’ve seen and lived through the Snowden Revelations, the rise of Ad-blockers, data lockers, API proliferation, Equifax, JP Morgan and Sony hacks, Facebook — Cambridge Analytica, Super-Cookies, Net neutrality, the Obama Privacy Bill of Rights, and every other possible watershed moment around personal data and identity.
But until now, the perfect coalescence of ingredients to usher in the personal data revolution has evaded us:
1-part: Consumer Demand
1-part: Decentralized Technology
1-part: Legislative Pressure
It has arrived. We’re about to witness a massive shift in economic power from Centralized platforms to sovereign individuals. Calling it a shift may actually be short-changing its potential. A sovereign individual empowered with a new economic asset has expansionary economic implications that we can barely even fathom.
Buckle up, it’s about to get interesting!