Blockchain Versions of Social Media Are Not Enough
One of the more interesting potential use cases of blockchain technology and tokens is the concept of tokenizing identity. Despite the vast amount of time we spend online, we do not have control of our digital identities. Every time we enter information about ourselves online, whether it be for a social media profile or a purchase, that personal data is then stored and controlled by the entity we gave it to.
I’ll admit, most of the time this tradeoff is worth it. I’m willing to give Amazon my credit card info, and trust them to keep it secure, in exchange for the convenience it provides. I’m willing to fill out a social media profile so I can stay connected to friends, follow trends and conversations in my industry, and stay up to date on the latest pop culture references and memes. But just because I, and millions of others, are willing to make that tradeoff today, doesn’t mean there isn’t a better way to operate in the future.
There are many benefits to moving to a world in which services are built on a blockchain and tokenized. The most important for those concerned about identity are security and control.
Let’s use social media, where we freely give lots of personal information about ourselves to a third party, as our primary case study in dissecting how a blockchain-based world could drastically change how we manage our online identities. As users, we exchange our demographic information, personal preferences, and a log of our activities (including likes, shares, and video views) for access to tools that help us stay connected to our networks and informed about what’s happening in the world. Social platforms exchange these tools for the ability to use our information to sell ads.
Taken together, the data we provide creates a fairly comprehensive image of who we are and includes information that is valuable to bad actors (birthdates, hometowns, family relationships, etc.). An individual’s record is not that interesting to a hacker, but a single database containing information about a critical mass of individuals, like those signed up on Facebook, Twitter, and other social media platforms, is an irresistible honeypot.
This is where the benefits of decentralization come into play.
If Facebook or any of these other social media organizations built their platform on a blockchain, not only would customer information be safer from hackers, there would be no economic incentive for hackers to break into their servers in the first place. The data would be stored on a decentralized ledger without a single point of failure. Furthermore, Facebook wouldn’t ever have access to personal info. At the risk of oversimplification, all the company needs to do is match public key with private key to verify a user’s identity and allow him to post, share, and comment. Thus, even if Facebook were hacked, all the hackers would get access to are a bunch of public keys which is useless without the private keys held by consumers. Thus, consumer data honeypots don’t exist in decentralized world.
If Facebook didn’t own the data, or even have access to it, wouldn’t that mean they couldn’t sell ads against user data? Yes, and that is why current social media companies will never fully embrace a decentralized solution. As I previously wrote, this new model has the potential to disrupt Facebook and others precisely because it would require a brand-new business model that isn’t based on advertising (more on that later).
The other benefit of a tokenized world (one which I find particularly interesting) is a user’s control of his online identity. Once users fully control their own data and identity, it unlocks a whole new set of possibilities. For one, users could leverage their identity and reputation across a number of services, not just social media. For example, let’s say you have a strong network of endorsements on LinkedIn, a 5-star reputation on AirBnB and a 4.9 star seller rating on eBay. These are strong indications of trustworthiness that should be usable across other services. Rather than starting from scratch every time you sign up to a new platform, wouldn’t it make more sense for both the user, the network and the platform to leverage those existing ratings? I’m sure there are plenty of great products and services that we haven’t even thought of yet that would be enabled once this capability is unleashed.
Unfortunately, I don’t believe greater security and individual control of data are enough of an incentive to convince users to switch from the current paradigm and drive mainstream adoption of blockchain based social network.
If it was, then the Cambridge Analytica scandal should have been a watershed moment when users started leaving Facebook in droves and began adopting a blockchain social network.
Not only did Facebook not lose users, the platform’s usage actually increased after the scandal. One could argue that not enough time has passed since news of the scandal broke and over the next year or two we will see a big shift in behavior as consumers come to value the privacy of their data. But I seriously doubt it.
I just don’t believe the vast majority of consumers care that much about the privacy and security of their data. Or at least they value other benefits more. Network effects are powerful. User experience is powerful. User behavior is ingrained and very difficult to change.
I also don’t believe the blockchain version of LinkedIn or Facebook will attract users simply because those platforms have greater security and data control. There needs to be something users can do with their data that isn’t possible in today’s current paradigm.
I believe there may be one incentive that is powerful enough for users to leave Facebook and sign up for a blockchain version — an economic incentive. Give people ability to profit from their data, and maybe users will switch.
One way this could potentially play out is not just allowing users to control their data but provide them tools to monetize their data. A blockchain based social network which allowed users to determine how their personal info is managed could enable advertisers to bypass Facebook and Google and advertise directly to consumers.
Imagine a world where advertisers paid you for your time and attention. Theoretically, you could set a price for what it would cost an advertiser to show you an ad. Not a fan of a certain brand, set the price for your attention high so they better make it worth your while to view that ad. Or perhaps you really like a brand and want to know the next time they have a sale. Thus, you set your price much lower.
But it doesn’t have to stop there. Maybe a brand pays you a small amount to view an ad but a slightly larger amount to take an action such as clicking on a link. Further still, they pay more for you to fill out some information about your size or preference of color. Finally, they give you a discount on your purchase if you buy now.
If advertisers did want to reach a large swath of customers, perhaps a new age ad network is created that allows users could opt in to get paid a monthly fee or get paid on a per advertisement basis.
Advertisers would love this for a few reasons. First, no longer would they be beholden to Facebook and Google to reach consumers, they could go direct and truly build personal relationships. Second, the marketplace model could indicate which consumers are more receptive to that particular brand in the first place leading to much higher conversion rates. No more guessing based on demographics. Advertisers could target based on signaling from consumers.
In the end, I do not believe users will leave any of the current social media platforms for their blockchain counterparts because of privacy, security, or control. However, if there was enough of an economic incentive, it just might be enough to convince users to switch.