Facebook (FB) could unwittingly be the world’s best advertisement for blockchain.
Even as the social media giant tries to shore up its privacy regime after data securities issues exposed the data of about 3 million users, privacy and security are likely to dog it—along with every other Internet-based company.
The good news is there may be a silver lining: The constant drumbeat of high-profile hacks of companies like Facebook, Target (TGT), and Equifax could accelerate the tipping point when the public embraces the notion that the Internet we depend on is truly broken, and when alternatives like blockchain gain greater acceptance.
And the sooner that happens, the better.
The problem with the public Internet is that its architecture and our desire for privacy are utterly incompatible. With every high-profile hack, that becomes more obvious. The network of computers we call the Internet operates as a giant copy-and-paste machine—copying information from one computer and pasting it to another when transferring data.
When we share vital information such as our name, date of birth, address, and social security number, that sensitive data is passed to third-party companies that require it. This creates two additional problems: We have to repeatedly fill out forms every time we interact with a new organization, and the firms that make copies and store our information in centralized databases are easy targets for hackers.
With data proliferating rapidly, it seems unlikely that the problem will improve without a new approach: The Internet generates 2.5 quintillion bytes of data each day, and 90% of all the data in the world was created in the last two years alone. A new approach that could help is distributed ledger technology (DLT).
A distributed ledger, or a public blockchain such as Ethereum, acts very differently from the Internet. Rather than making copies from one computer and pasting them to another when transferring information, with the blockchain, there is a transfer of ownership of the original information.
The public-private architecture of a blockchain clearly defines and improves the privacy of data in a digital format online. Blockchain technology creates counterfeit-proof information on a network we can trust. Instead of sharing our date of birth again and again, we have one permanent record of this information on the blockchain and then give temporary permission to access the official record when needed.
In this system, public information such as tax records, government records, and local school budgets can remain public while the private data of citizens and corporations can be private and secure.
This approach turns our current digital economy on its head. Today, we give away our data to companies like Facebook for free, and they monetize that information without sharing their revenues. In a blockchain system, your data is your own and only you have the private keys and ability to access this information. Then, you can share and monetize that data as you wish.
For example, a bank might ask customers for access to their data to learn more about shopping and payment patterns, perhaps offering an incentive to share that information, such as loyalty program points or a lower credit card interest rate.
Today, questions of privacy often come down to a blanket request of agreeing or disagreeing to sharing data. In a blockchain environment, sharing our data will become more granular, specific, and secure.
A study by Doug Galen of the Stanford Graduate School of Business says the promise of blockchain is based on four attributes: its ability to enable transparency of data, to ensure that data is tamper-proof, to mitigate counterparty risk in transactions, and to create and manage digital identities.
It will take time to realize this promise, but with billions of dollars deployed to develop blockchain—for instance, at least $1.3 billion had been invested by venture capitalists in just the first few months of 2018—there’s much to look forward to even in the next two years.
We’re already seeing the first signs of what blockchain can do—from Estonia’s blockchain-enabled Keyless Signature Infrastructure to JPMorgan Chase (JPM) launching a new blockchain payment processing network with the Royal Bank of Canada and the Australia and New Zealand Banking Group.
Countless companies are working to make privacy on blockchain inviolable. Barbados-based Shyft is developing a blockchain-based network that it says will have “unbreachable data protection” and can restore consumer confidence in our financial system. Civic is developing a DLT-based personal identity verification protocol to better manage digital identities. And YouBase is working on making it easy and secure for individuals to access, control, and share valuable health and personal information.
With some of the finest minds in the tech world working on making our data safer on the blockchain, and with data breaches on the Internet expected to continue unabated, transformation may come a lot sooner than many people think.
I say the quicker, the better.
Shawn Owen is chief executive officer of SALT Lending.