The ability to collect, store, program, and use data has brought connectivity, ubiquity, and intelligence to every modern application. The ability to represent and exchange money in a digital form is now adding the exchange of value to the stack. The ability to program money and data to obey a set of predefined rules feels like the next natural step.
A responsible data economy is based on two elements: confidentiality is one. Properly aligned incentives among final users are equally fundamental.
This post seeks to outline more on the future of programmable data and money and how the network can be used to enable users to earn a data market yield.
Breaking the data paradox with an incentive-based model
Fresh data has become a valuable tool for many companies — it can inform critical product decisions, improve personalization, enable user growth, and create better analytics. Alternatively, users don’t derive the maximum value from their data, in part because they aren’t offered easy, clear, and transparent ways to do so. The two sides of the negotiation, users and companies, differently price the data, leaving a gap in the equation.
This gap is the result of misaligned incentives: companies design products that collect data, while marketplaces and aggregators distribute it to third parties. The user — the data producer and owner — is left outside the value-capture cycle. This is problematic because this cycle influences the decisions that companies take at different stages of their growth. In the earlier phases, they are incentivized to attract their ecosystem of users/developers/etc. through cooperation. The tradeoff between value extraction and cooperation progressively skews toward value extraction when the company grows. Decentralization, crypto, and smart contracts can break this dynamic.
To truly develop a new model, we need to go beyond protocol-layer incentive schemes. If crypto networks’ ultimate revolution is to encourage coordination and compensate network participants, information exchange is obviously the lifeblood of this cooperation. Hence, incentivizing users to engage in (fairly compensated) data exchange, in addition to incentivizing protocol use, seems like an obvious component to achieve the vision of a decentralized and cooperative web (How many times did you hear…”why do we need a decentralized Facebook?”).
Programmability and Privacy
Blockchain creates protocol level incentives. Smart contracts create computers that can make commitments, introducing strong guarantees that code will continue to operate as designed without relying on humans or organizations. The Oasis Network also provides data encapsulation, that allows users to establish selective and consent-based computation on their information, and data privacy, which allows users to maintain ownership and confidentiality of the data even when the right to compute is granted to a 3rd-party.
Once data is encapsulated and controlled by users, programmatic access can be managed via smart contracts: each time an application needs to access users’ data, the smart contract enforces the specified policies and the blockchain records the transaction. Keeping the data private implies that data buyers can’t re-use the information multiple times after the initial acquisition. Each request triggers the execution of the smart contract, resulting in a programmatic, per-consumption, model.
Programmatically attaching money to the flow of data creates the possibility to establish a direct and repeated relationship between the data producer/owner and the data consumer/buyer, making it possible for companies to ‘continuously’ cooperate with users.
Data Market Yield
The above model changes the data collection practice. Instead of finding creative ways to collect data and then hide the policy behind long T&Cs, applications can create incentive-based models that encourage data-based cooperation between users and applications. Users remain the owners of the capsules that contain their data and give temporary access to computation models that are allowed to perform specific tasks only. Data requestors lock an asset that serves as a payment for the corresponding usage of the data and the transaction is settled, automatically, without any negotiation to be done or legal contract to be established. The resulting consumption-based model allows data to generate a yield: ‘control your data, invest it, and earn a payout’.
How it works today
How it works on a privacy-preserving platform such as Oasis Network
Where we go from here
At Oasis Labs, we built APIs to abstract the complexity of blockchain. We partnered with some of the main players in DeFi to integrate their protocols and services on the Oasis Network. We are supporting and incentivizing companies and developers that align to the vision; Through our Dev Accelerator program and the Parcel SDK developed by Oasis Labs, the Oasis Foundation is focused on encouraging developers to start incorporating privacy as an incentive for the final user.
Controlling the data and earning a yield should be considered normal. Creating the capability is the first step. Raising awareness and showcasing the incentives is the following one. My next posts will be dedicated to discuss more about the partners we onboarded and why we decided to work with them. As always, blockchain is a collective effort and I would love to hear from you if you have feedback or suggestions.
This post was originally published here