What is the Web3 Data Economy and Why Is It Important?
Data is a Valuable Resource
We live in a digital age where most of our lives are broadcasted online.
If you’re on holiday in Spain, it’s on Instagram. If you’ve graduated, that information is on Facebook or LinkedIn. Your thoughts, interests and interactions are clearly demonstrated on Twitter. The Google searches and sites you visit are tracked by a little thing called cookies.
The Internet as we know it today hosts some of the most personal data that, when pieced together, form the fabric of who you are: where you’re from, where you’re going, what you like and what you don’t. This information is mainly property of some central authorities in the form of big Internet companies that provide free platforms and services in exchange for our personal data, which they repurpose in providing personalized viewing experiences and advertisements to generate revenue.
Data has proven to be a valuable resource––after all, many successful businesses are built upon it. In 2020, YouTube reaped almost $7 Billion from just ad revenue––and that’s just one of the many companies that have tapped into the immense value of data.
<Quarter-to-quarter advertising revenues of YouTube>
The value of data, however, doesn’t just lie in advertising. Gartner has predicted that by 2022, information will be a critical asset to 90% of enterprises’ corporate strategies. Data is increasingly acknowledged as a valuable resource, and this presents yet another issue: Organisations are incentivised to collect as much data as possible, but become stopped out by limits on how they can use it. This causes two effects:
An increased risk of privacy breaches: Because so much of our data is held by a handful of organisations, breaches become easier. All a hacker needs to do to get hold on loads of personal data is to breach a major platform like Facebook, demonstrated by the 2019 breach that exposed 530 million users’ full names, phone numbers, and some email addresses.
A deluge of data that results in mass wastage: We created and replicated a new high of 64.2 zettabytes of data in 2020––but only 2% of this was retained into 2021. Seagate’s 2020 “Rethink Data” study further found that 68% of data available to enterprises went unused, with the top reasons being difficulty faced in making the collected data usable, managing its storage, and ensuring the security and availability of these data.
It’s important to remember that the potential of data isn’t just monetary––cancer research, education programs, and even state policies, to name a few––rest on the back of sufficient, quality data. How can we waste less and do more with the data we’ve amassed beyond advertising business models while ensuring security and privacy?
Web3 Data Economy: Unlocking Infinite Possibilities
Web3 emphasises ownership, privacy, transparency, composability and trustlessness.
Take peer-to-peer business models like DeFi and NFTs for example: DeFi, or decentralized finance, removes the need to trust central authorities like banks and brokerage firms for users to conduct financial transactions securely; while NFTs demonstrate ownership by tokenising unique assets using content addressed hashes, and leveraging the provenance and security of blockchains.
Despite the fact that Web3 is still at its infancy stage, it is showing progress and promise. Web3’s priorities of ownership, privacy, transparency, composability and trustlessness allow us to produce, consume, store, retrieve and interact with data in new ways. The Web3 data economy is defined by these characteristics:
1. Allowing permissionless participation
Anyone can consume data services or become a data service provider under Web3 data economy protocols. For example, if someone has some free space on their hard drive, he or she can rent it out to store another person’s data. Similarly, one can outsource his or her data computing demand to another person on the data economic network who has spare computing power.
2. Facilitating the full cycle Web3 data services at scale
Scaling is important when it comes to data services. Under the Web3 data economy, full-cycle services including data storage, retrieval, computing and indexing must be scalable to accommodate large, enterprise-level sets of data. By creating a new option in data services available to users and enterprises, Web3 helps to make the market more competitive and thereby cost-efficient. It also creates new business opportunities for disruptive new players in a data services industry previously dominated by a few big cloud service providers.
3. Providing verifiable and transparent data services.
Web3 data services can make interactions with data verifiable and transparent. Because it operates on a blockchain, transactions with data will be replicated and recorded across multiple locations on the network. This means that all network participants will be able to trace and flag any compromises to the data transactions recorded, ensuring their immutability and thereby virtually eliminating the risk of fraud.
4. Ensuring privacy, security, and ownership.
By ensuring privacy, security, and ownership, the Web3 data economy can encourage increased data activity among users and enterprises by removing the fear of being compromised; thereby encouraging the creation and harnessing of more valuable data. Users can share their data without doubt of breaches, creators can produce without fear of losing ownership and generate revenue for themselves; and enterprises can store and retrieve their data without fear of compromise.
Filecoin: More Than Just Storage
Filecoin is a great example of how the potential of the Web3 data economy can be harnessed. It is a blockchain-based cooperative digital storage and data retrieval economic network with a utility token (FIL), and creates a new method by which valuable data can be stored and accessed in a cost-effective, secure and trustless manner. By turning cloud storage into a marketplace under the Web3 data economy protocols, Filecoin perfectly exemplifies the new business opportunities and unlocked potential of the Web3 data economy. It embodies Web3’s core characteristics by:
1. Allowing permissionless participation: Anybody can store their data or become a storage provider. If someone has some free space on their hard drive and meets the requirements of the protocol, they can rent it out to store another participant’s data in order to mine FIL. When the latter wants to access their data, they can utilise a retrieval service to extract its contents safely. These storage providers and retrievers are incentivised to store and retrieve data securely in order to mine Filecoin successfully.
2. It allows for storage capacity at scale: Storage capacity on Filecoin is growing. At this time, we’ve found it sits at 14.6 EiB––that’s enough to store 150,291,553 2-hour 4K movies. Participants can retain huge amounts of information for cost-effective prices, and this discourages the loss of valuable data.
3. It provides for Verifiable Storage: The Filecoin protocol adds a layer of governance to the marketplace as the system verifies that the transaction is truly completed according to its requirements, before releasing payment to storage providers. This increases efficiency, trust and the assurance of the security of data uploaded.
4. It guarantees Privacy and Security: Participants who choose to store their data with a storage provider on the marketplace can be assured that decryption keys remain unique to them. Ownership of data is guaranteed in this way.
An economic network like Filecoin clearly demonstrates the potential of the data economy. It turns previously centralised and expensive data storage systems to a permissionless, cost-effective service that allows data ownership, privacy and composability. For a more comprehensive understanding of the Filecoin network economics and how Filecoin storage services work, read our article here.
As demonstrated by Filecoin, data services in Web3 can be permissionless yet secure; cost-effective yet composable. Filecoin is just one of the many examples in which Web3 can transform the ways we interact with data. Many business models to navigate the fresh opportunities the Web3 Data Economy can offer have yet to be explored.
Web3 is not just an idea: We can help economic networks participate in the Web3 Data Economy by making it understandable and executable. For more information, contact us at firstname.lastname@example.org.