What is a Decentralized, Privacy-Preserving Data Marketplace, and Why is it Important for You?
In our previous post, we introduced the motivation for building Wibson. In this post, we’ll define what we mean by decentralized, privacy-preserving data marketplace, and why it’s relevant for you.
What is a data marketplace?
A data marketplace is an online platform where people come together to exchange data.
Every market requires two fundamental ingredients. First are the rules that guide market transactions; and second is the infrastructure that enables those transactions to take place.
Currently, there are a number of centralized marketplaces that focus specifically on personal data. Companies like Acxiom and Experian — to name two out of the dozens that operate in the United States — trade information that includes everything from education level and political leanings to ethnicity and income.
In general, data is traded without consumers’ knowledge or consent. Related to this point, traditional data markets have significant issues with data quality and control, since data is being collected without consumers’ cooperation. Acxiom, for example, admitted that up to 30% of a person’s profile information may be inaccurate at any given time.
Most importantly, data brokers and technology companies are able to generate huge profits by aggregating and trading >your< data. Yet individuals — the true owners of that data — receive no value from these transactions or the subsequent use of their personal information.
To be more precise in our definition of a Data Marketplace (DM), it’s an online platform designed specifically to support the efficient trade of data. A well-functioning Data Marketplace includes:
- Infrastructure where sellers offer data in exchange for something of value from buyers.
- Data evaluation and valuation mechanisms.
- Incentives for all market participants to act honestly, including an enforcement system to monitor for and act against dishonest behavior.
- Incentives for all players to ensure data quality, including an enforcement mechanism to guard against low-quality data.
The other critical component of a data marketplace is the participants. If a marketplace trades personal data, the sellers should be the rightful owners of that data, namely, the individuals. If a company is selling an individual’s data without their knowledge or consent, there is something fundamentally wrong with the system.
Introducing a Decentralized Data Marketplace
The Internet drove a wave of marketplace innovation by moving offline markets online and providing a technical foundation for marketplaces to evolve quickly. In a few short decades, we’ve seen an evolution from simple auction platforms (e.g. eBay) to the sophisticated real-time pricing and matching infrastructure used today in the sharing economy (e.g. apps such as Lyft, Uber, and AirBnB).
Recent developments in blockchain technologies have enabled marketplaces to further evolve by shifting from centralized to decentralized structures. We’re now seeing an increasing number of decentralized markets which facilitate the ability for participants to engage directly with each other in peer-to-peer transactions.
The benefits of decentralized marketplaces revolve around disintermediation. For example, in a decentralized personal data marketplace, the middlemen, such as Acxiom and Experian, become unnecessary.
Decentralized marketplaces are especially well-suited for personal data, since each individual’s data logically belongs to the individual who created it. Removing middlemen from the equation means that individuals will now have improved opportunities to profit from transactions involving their personal data. A decentralized data marketplace, if deployed under the right principles, also means that individuals will be able to regain control over their personal information.
With all of this in mind, we define a Decentralized Data Marketplace (dDM) as a Data Marketplace in which:
- There is no central authority to actively regulate market participants.
- There is no central data repository; users who generate data maintain full control of their data at all times.
- In place of a central funds repository, participants maintain control of their own funds in a distributed manner.
The end game: a Decentralized, Privacy-Preserving Data Marketplace
Decentralized marketplaces have the potential to unleash huge amounts of wealth. However, they also introduce significant new challenges. One pervasive problem will be trust and anonymity. For example, why should a data buyer purchase data from an anonymous data seller? How can data sellers guarantee that they will not lose control over their personal data once they sell it for a specific purpose or use?
Many centralized marketplaces have overcome trust problems by creating reputation systems. However, in the case of decentralized systems, there are no centralized authorities to guarantee or enforce rules.
To address these concerns, we believe that a decentralized data marketplace needs to rely on a set of core principles that provide the foundation for what we call a Decentralized, Privacy-Preserving Data Marketplace.
A Decentralized, Privacy-Preserving Data Marketplace (dPDM) is a Decentralized Data Marketplace, which allows users to sell private information, while providing them the following guarantees:
- Anonymity: Seller and buyer identities are never revealed without consent. In particular, the data seller’s identity is never revealed to the data buyer without the seller’s explicit consent.
- Forward privacy: The data seller’s data privacy is guaranteed even after the data transaction has occurred.
- Transparency: the data seller always has visibility over how his/her data is used by the buyer.
- Control: The data seller can modify data usage rights at any time.
Just as the Internet enabled the growth of markets in the digital economy, decentralized, privacy-preserving data marketplaces will serve as the underlying protocols for the new data-driven economy.
At Wibson, we are committed to make it happen.
In the following posts we will provide more details about how the Wibson marketplace operates, the underlying Wibson protocol and upcoming network deploy.