The Data Economy in Web 3: A Landscape

Web 2 is dominated by complex predictions that large corporations like Google and Facebook create to sell advertisements. It seems like everyone has a story about how a shadowy, unknown company has aggregated location-based data and information about past purchases to target individuals for things about which they may have only thought. Web 3 promises to remedy this by allowing users to own their data. Why is it important for users to own their data? What problem does this solve, and is it the most effective solution?

Modern Internet Surveillance

In the world of Web 2, we have built our Internet infrastructure on users’ information, captured in the form of data. Browsers and websites capture users’ information as data to learn about their user base to improve their products. 

Facebook, Google, Amazon, and Apple rely on their users’ categorical data to make prediction products. Prediction products are the algorithms and advertisement technology that implement assumptions about individuals’ interests, political views, and habits based on the collected data.

Once Google’s algorithm understands your location and the route you take to work every day, it can guess how long it will take you to arrive. Better yet, if you’re in a city and don’t use a car – Google maps can predict how long it will take you to walk to the nearest bike share or scooter, or how long it will take you on your own bike. Those assumptions are a prediction product. 

Prediction products are annoying (often creepy) when they try to sell us things like our parents’ favorite brand of toothpaste. But they can be helpful in other circumstances, such as tracking health and fitness data.

Underneath all the advertisements and the data science of predicting desires lies the underlying infrastructure of the web: browsers, APIs, and websites. They rely on data too, but a different kind – metadata.

Metadata is information about the data. Metadata consists of information like when and how often a person logs onto a website, what they look at, for how long, and from what browser, among other variables. Search engines use optimization tactics, where web developers tailor their content metadata to trigger search engines’ algorithms. Developers rely on this information to spot bugs and improve user experiences. 

Rapidly Evolving Data Economy

The current structure of the data economy looks like developers creating web applications and websites that people use. Users’ information is then collected in the form of data by a company, where they then aggregate that data to develop prediction products. Then the organization sells those prediction products back to the application or website through third parties as ad space.

From this data economy, lawyers and regulators wrote the General Data Protection Regulations (GDPR) that established precedents of users controlling data that capture information about them. The California Consumer Protection Act (CCPA) helped cement these practices. The GDPR says that users can opt-out of having their data collected and sold and the right to have all of their information deleted from the company’s storage. These policies are emerging in part from researchers reporting users feeling a loss of control over their data.

In the spirit of protecting people’s privacy, providing transparency, and cutting out the middleman, more projects building on Web 3 include the ability for users to own their own data.

When token holders custody their own assets, they must become their own bank by using a software or hardware wallet to use keys to access their tokens that the blockchain stores. When a token holder becomes their own bank, they are the sole person responsible for protecting their assets and securely storing them.

The same principles apply to users once they can own their data. On Web 2, large corporations collect, securely store, aggregate, and sell that data for profit (although the question of how secure that data was held can be up for debate). In Web 3, if users own their own data, they inherit more responsibility in filling that role. 

Individual users will become the ones solely responsible for securely storing that data, and chiefly, allowing developers access to that data. 

Everyday users are not prepared for this position. While recent reporting encourages the idea that users want more privacy, they are underprepared for the position where they must store and allow developers access to that information. 

Developers require their users’ information on how to improve their applications in both Web 2 and Web 3. Through Figment’s DataHub service, we collect and index information from blockchains around the space, in part to help bridge information gaps across the ecosystem. But there are specific concerns when addressing users’ data from using dApps on L2. Users’ can store their data on various decentralized, third-party services, such as Sia/Skynet, IPFS, or Airweave. Then the next hurdle is how will they allow developers access to their data about how they use applications hosted on Oasis or NEAR?

There are technical solutions to allow anonymous and secure access and transfer of information across platforms, like using a mixnet for transferring and zk-Snarks (technology that allows someone to verify information’s accuracy without having to view it) for making sure that the information is correct. 

The final question remains on how users are incentivized to allow developers access to their information – another solvable question not unfamiliar to anyone who’s participated in the space. Developers can incentivize their users to share data with them to improve applications by paying them a number of tokens.

Slowly, the crypto-space is developing the building blocks to make a decentralized data economy viable, whether we planned it or not. 

But is this economy something that we want to continue?

Future Outlook of the Data Economy

Ownership stems from a place of feeling that the data is out of users’ control. Data ownership is one solution to help remedy that. But it is not the only solution. Users should own their creative content, such as videos and blog posts, allowing creators to receive compensation and credit for their work. These are tangible products that people can view and share.

The digital divide is still significant. Based on that, users often don’t have a good idea of what the data economy looks like; it is difficult to conclude that they want to participate in the system directly.

By allowing users to own their data, store it, and receive compensation for sharing it does not elevate the reasons why the data economy exists in the first place. It is a solution only in the sense that it helps make the process more transparent and accessible for those who have the skills to participate. 

DeFi principles are referred to as “money legos,” where token holders have a suite of tools to pick from. In Web 3, users have a suite of middleware to help users manage, aggregate, and sell their own data. 

Or we can build something different.

We’ve staked the last 40 years of technological growth on data collected from consumers to build things from apps and search engines to efficient grocery stores. The track record of consumer protection policy has been an uneasy one. Where there are cases of successful public policy, such as the GDPR and the CCPA, there is a new wave of state regulation targeting consumer protections that Big Tech is writing.

Right now, in Web 2, it’s a lot easier to put a box at the end of the terms and conditions or next to the “accept some cookies” that says “do not sell my data.” Instead of reinventing the wheel, there can be alternatives in Web 3 where users can own their data without developers needing to use it to improve their applications. How else can we build applications in Web 3 without creating a Data Economy 3? 

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