Facebook is under fire for allowing a Trump-affiliated firm, Cambridge Analytica, to access the private information of 50 million users. Facebook did not inform those users that their personal data was being harvested in an attempt to help Donald Trump win the 2016 election.
This raises many disturbing questions about Facebook. For starters, why does one platform have so much control over the personal data of billions of people?
But this is part of a much larger story. Not long ago, a handful of internet companies threatened to overturn the old order. Facebook challenged traditional media. Platforms like Uber, Netflix and Airbnb disrupted taxis, movie theaters and hotels. Now, these once-rebellious upstarts have become extremely powerful, and they know way too much about us.
People are getting tired of it. This helps explain why you keep hearing the word “blockchain.” Blockchain technology, among other things, could potentially make platforms like Facebook obsolete. Many people know blockchain as the decentralized record of bitcoin (a virtual currency) transactions. It is the technology that allows digital money to circulate around the globe, without the help of banks or governments. In other words, blockchain cuts out the middleman, and this technology can be applied to many different industries.
Imagine if you, not Facebook, controlled your own data. Or if you could rent out your apartment easily and securely, without paying a cent to Airbnb. If readers could buy digital books directly from authors and filmmakers could know how many times their movies were viewed. Musicians would be able to keep better track of when their songs were played, and get paid accordingly. Taxi drivers would transact directly with passengers without Uber knowing everyone’s location.
In their new book, “The Truth Machine,” Michael Casey and Paul Vigna describe how companies like Uber, Airbnb and Facebook have become examples of entrenched monopoly power. Blockchain technologies “aim to do away with these intermediaries altogether, letting people forge their own trust to build social networks and business arrangements on their own terms.”
In the case of Bitcoin, the blockchain is not stored on a central server, but is continuously updated by computers all over the world. Blockchain transactions are verified by many participants, known as miners, who receive Bitcoins as a reward for their work.
The blockchain is also public, and can be viewed by anyone at any time. That means that the blockchain cannot be altered without people noticing. Think of it kind of like Wikipedia, but for financial transactions.
Bitcoin was invented to be free of centralized control — in an attempt to create a currency that was independent of the banking system. Bitcoin allows people to accumulate assets without worrying that a central bank will devalue their currency, or that their money will be confiscated by authorities.
And yes, because Bitcoin can be sent without using your real name, it can be used for criminal activity. But blockchain transactions are pseudonymous, not anonymous. You can see every Bitcoin transaction, but not the individuals making them. Because all Bitcoin transactions are recorded on the blockchain, they are still more traceable than cash.
The creation of Bitcoin inspired innovations like Ethereum, a computing network that also uses blockchain technology. People can use Ethereum to create smart contracts that are executed by algorithms, rather than human beings. These contracts are recorded on the blockchain, making them both public and immutable. Complete strangers can automatically exchange digital currency once the terms of a contract are met, eliminating the need of a trusted intermediary.
Blockchain technology records and time-stamps every transaction, making them visible for the world to see. The ability to trace the flow of digital assets could be game-changing for artists. Right now, filmmakers don’t know how many times their movies are watched online, perhaps because that data is held by a company like Netflix. This opacity would be much more difficult in a blockchain world.
Blockchain also enhances data privacy. This may seem like a contradiction: How can something be both private and transparent? As Don and Alex Tapscott explain in their book, “Blockchain Revolution,” people decide how much information to attach to their identity.
Because this information is stored on the blockchain, which exists everywhere, there are no “honey pots” of personal data to hack into. No single company like Facebook has access to your private information, and they can’t hand that information over to a third party without your permission. Nor could companies sell your data without you receiving a penny in return. “Because you own your data, you can monetize it,” the Tapscotts explain. “You share in the wealth of big data.”
This may all sound too good to be true. Skepticism is warranted, as the blockchain hype is certainly excessive. In one amusing case, Long Island Iced Tea’s shares soared by over 200% after adding the word “blockchain” to their name.
But the froth over blockchain reveals a real frustration with the current internet, which was supposed to be a decentralizing force. You see this frustration in the backlash against Facebook, in musicians’ grief over YouTube and Spotify eating away at their income, and in the scandals over companies like Uber employing user data to track journalists.
Blockchain will not solve the world’s problems, but perhaps it can deliver on some of the goals that our current internet has failed to achieve. Internet companies were supposed to put more power into the hands of individuals, but it hasn’t always worked out that way. People are ready to disrupt the disrupters.