Ethereum and Defi: Open Data in the Era of Digital Oil

By March 6, 2020Ethereum
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Listening to movers and shakers in Silicon Valley talking about tackling tech monopolies through a new space where they can’t compete, open data, left many puzzled in regards to what they mean concretely.

The rise of defi is making it all quite a bit more clear, but let us first remind ourself of what Brad Burnham of Union Square Ventures told the Securities and Exchanges Commission (SEC) back in 2018. We quote/transcribe in full:

“We’re living in an area of very rapid consolidation around Google, Facebook, Amazon, and competing with those, what I would call data monopolies, is not really possible by offering a better service.

We actually saw this movie in the mid 90s when Microsoft consolidated the entire PC software industry. IBM tried to compete with Microsoft by offering a better operating system called OS2, and it failed miserably.

What ultimately undid Microsoft’s hegemony in the mid 90s was a shift in venue from the desktop to the web and a shift in business model from packaged software to open software.

It was really impossible for Microsoft to open source Windows given how much they had invested in their existing business model, their distribution channels.

So the only way that one can expect to compete with these dominant data monopolies is by changing the game, by changing the way the market works.

If we think of the internet as an open public communications medium that fundamentally altered the way the entire media industry works, blockchains are open public data stores.

The thing that Google, Apple, Facebook, Amazon, will not be able to do is open up their data sets. And so the argument we made to SEC is that this is the next wave of technology.

If we’re going to open the market for another wave of innovation, for another emergent bottom-up start-up innovation, the only possibility we have is to change the game. And this is the best chance we have.”

What he is saying in many ways is simple, and yet it is quite profound in its simplicity both for good and bad.

Let’s take the act of a bank loaning you $10,000. You know the bank did so, and perhaps whoever you tell does too, but you’re just one data point so your knowledge is useless.

The bank also knows it lent you this money, and it knows how many people like you there are, and for you specifically it knows how much you spent today too, at which restaurant, or at which location you withdrew cash, or how much you were paid this month, or what gift you bought this Christmas, if you outright bought the phone or pay it with installments, where you went on holiday, if you are a member of a political party, and pretty much everything you do in your economical life.

This is profiling, and though your specific data might be interesting, they’re useless on their own where it concerns the Huxley peoples rather than the Orwell sorts.

For the Huxlies, segmenting attributes based on commonalities increases the efficiency of desire services in a way that semi-anonymizes you at an individual level while kind of pleasantly imprisoning you at a group level.

So area A likes coffee, area B likes tea. Loan to businesses that want to sell coffee to area A, and just think any applicant that wants to sell tea in area A is wood stupid, while of course formally tell them their application is rejected because [any politically correct reason that has no relation to the actual reason].

We can’t see this area A data or area B, so we don’t know we’re lied to. What we know is they all profess universal rules like say you can get a mortgage only up to 4x the income. If some get more or less based on data we don’t have access, maybe we get a hint here or there, but no actual knowledge of it.

Huxley on Steroids

Banks are more trying to keep up, with digitization in banking at times translating to Windows XP as they probably are 100 years behind in digital time.

Google and Amazon, on the other hand, are different beasts. Google especially didn’t care much about moral judgments until recently, but their ever growing segmented personalization is basically creating parallel universes where unaccountable ‘gods’ decide what you see on search results or on Youtube or other services based on whether you are rich or poor, French or American; and with all these running apps on Android, even maybe things like whether you did run today and how much.

Only Google knows this data and so only Google can crunch it and provide potential services based on it, including things like what news to show you.

As everyone else can’t quite see what they are basing these decisions upon, what we perceive is an ‘objective’ search result or video recommendation or anything else.

When it might be not just subjective and not just discriminatory, intentionally or otherwise, and not only as you’d expect to the benefit of the service provider, but also fundamentally corrosive and perhaps even eugenic.

The Choice

Long have techies pointed out we live not in an Orwell world but in a Huxley one. Like the rat that gets a doze of dopamine for pleasure, rather than a doze of torture for masochism.

Man is fundamentally good and these companies are most likely acting on a principle of making man better.

Thus bots make video recommendations because it is a lot more convenient if a nice new video follows the one just watched, instead of sitting there trying to find a new one.

Thus you get more personalized news because you are interested in the things you are interested.

Or thus the bank funds the coffee company because it is quite more likely to have made the right decision in choosing where to serve.

Yet, maybe they want tea now. Maybe the bot’s repeat is brainwashing. Maybe the whole point of news is that I don’t know what is news and thus what I am interested in knowing.

Maybe unintentionally they have created a corrosive system of control which perhaps even could potentially explain the low GDP growth.

Maybe these gods are devils. Not knowingly, of course, but maybe even knowingly.

Open Up The Wall

When they say you control your own data in something like an ethereum blockchain, there is the somewhat literal aspect in as far as with effort you can hide the ownership of the address, but also in the more general sense in as far as you can be the entrepreneur or analyst or academic playing with this data.

Some kid in his basement can’t look at what Google is seeing. He, and perhaps she, can however look at what the ethereum network is seeing.

This smart kid does not necessarily know how much Barclays lent to who, but he can easily see what address took how much dai or did what on Compund, or has what cryptokitten, or bought how much virtual space on Decentraland, or even what miner is maybe about to go bankrupt.

Ownership of data thus here does not mean hiding data. The opposite. It means giving it to everyone. And so if everyone can control it, then no one can.

You can not compete with Facebook because you can not train your bot on Facebook’s data and based on that provide some service.

If however all have access to the data, it becomes more who is better at training their bot or providing a service on it or basically who is more innovative.

That might seem like a small difference and for plenty this is perhaps an arcane subject but it can also be fundamental to capitalism itself because to compete with Facebook or Google you first need to get two decades worth of data and systems.

Meaning you are trapped in a monopoly that has a say not only on what you eat, but what you think.

The bet so being that altho something like ethereum is two decades behind in some sense, its superiority in open competition should be sufficient to the point it can quickly overtake the current monopolies and perhaps even make them irrelevant.

Hence the new wave of bottom up innovation which is necessary, though hard. And which might seem quite different from the initial focus on open money or currency, but money too at the end of the day is just data.

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