The further digitization of our society on the basis of central neuralgic databases entails a great risk of failure and exploitation. Trustworthiness and financial incentives often have an opposite effect here — socially speaking. A decentralized alternative to large technical and centralized databases of corporations could lie in the area of blockchain and NFTs.
Facebook & Co.
In the fall of 2021, a blackout occurred that scared many people — not a power outage, but just as frightening for many people. For a total of almost 7 hours, the services of Facebook, Instagram and WhatsApp were unavailable worldwide. A disaster of biblical proportions. This incident was indicative of a vulnerability of an entire system — far beyond Facebook & Co. The background of the failure was a changed configuration in a central table (file) that is responsible for the data traffic between the customers and the Facebook servers. A central table as it is “standard” today. Modern society runs on databases operated by TTPs (Trusted Third Parties). We find them in all areas of life — and Facebook, Instagram & WhatsApp are of course part of it.
- Savings Banks
- Pension fund
- Tax office
For modern society to function at its current scale, and for YOU to function in it — to travel, to earn money, to vote, to get a cab, to eat, to stay out of jail — thousands of databases are needed to track you. That’s not evil, it’s a function. It’s almost the only way we can do it efficiently. In this context, though, the party (TTP) is the one who, in practice, also decides your rights. Starting with simply canceling your hotel booking, to whether you can transfer more than 10,000 EUR in one day, or whether you are allowed to cast your vote in the Bundestag elections. We take it for granted because it has taken a back seat in our lives. Now you may ask yourself — OK, so what? You might even have been able to do without WhatsApp for a good 7 hours. But there’s one small and one bigger problem with modern TTPs that might interest you.
The first and smaller problem is that they tend to be anti-competitive, stifling innovation and better customer value. Why? Computers lead to economies of scale in data and infrastructure, so companies tend to grow. Sounds good, right? As they grow, they build a huge installed base of data and data infrastructure that is the primary competitive barrier to entry in any modern enterprise. Antitrust regulators and many citizens understand that companies like Facebook, Amazon, Goolge & Co. are problematic — but find it hard to grab or regulate. However, competition is massively impaired when these companies suck up all data like a black hole — out of lack of alternative for users — and the same company offers end products with this data. Now no one would say that Google & Co. are not innovative and do not offer good products — quite the opposite. So how does this fit together? It seems paradoxical, but perhaps this question — and the problem — can be clarified by looking at it from a different angle.
Fictitious example: In a city, there is only one market hall where all citizens (can) obtain their groceries — any attempt to open an alternative market hall fails primarily due to the acceptance of the citizens, who appreciate the convenience of customized offers in the market hall — based on their individual eating and buying habits. The market hall’s volume also makes it extremely affordable. In summary: Good, cheap and individual.
Thus, the market hall is the market and provider of all food. Analog:Thus Google IS the market.
Competition excluded — market entry impossible.
- Google (Alphabet as a corporation) is the market (for data and knowledge).
- Facebook (WhatsApp & Instagram) is the market (for online contacts).
- Amazon is the market (for online shopping)
The bigger problem with this state of TTPs and increasing centralization, is that they are creating more and more easy strangleholds. Another example: imagine cabs 10 years ago. A completely decentralized industry that knew virtually nothing about its customers. An anonymous call to a cab dispatch center sent a random driver to a location. The Uber company was a revolution. The entire process and all the data in one app — convenient for both sides, but also centralized. Dystopia: A future dictator could use such a construct to keep certain customers away from cab rides. Doesn’t exist? A brief look back at the darkest past in German history. Between 1940–1945, the Netherlands had the highest number of Jewish victims in all of Europe. The reason: a highly modern (central) civil register — set up with the best interests. This central information — by also storing religious affiliation — became a deadly threat in the wrong hands.
Those who would give up their basic freedom to buy a little temporary security deserve neither freedom nor security.
From the problem to the solution
Short cut — the crypto industry has brought forth many innovative products and topics that have not yet made it to the mass media. Besides Bitcoin, however, there are reports every now and then about so-called NFTs (non-fungible tokens) that have found their way into the media because people are spending enormous amounts of money on NFT art. What does this have to do with databases, Google or dictators? Nothing, for starters.
First. The digital artworks (like the picture of a bored monkey for $134,000) are decentralized and thus constitutionally protected free speech. However, art — in general — is also just a subset of intangible goods in a society.
In jurisprudence, intangible property refers to an incorporeal object in the sense of an intangible intellectual good, for example a work of art or a technical invention.
As the crypto industry progresses, however, these NFTs will eventually supplant art and begin to eat entire brands. Eating culture. They will begin to create decentralized alternatives to centralized organizations. NFTs will be used by businesses and decentralized organizations to organize their communities. Unlike the centralized databases of today, these are just public, they are composable, they are uncensorable. This means that they can very concretely address the problems of TTPs today — without a central antitrust authority. What intangibles could this technology bring to a society? Everything:
- Movie tickets
- Vacation rentals
- Hotel reservations
Anything that has value to a society. Everything that needs a price for that value. From today’s perspective, this may sound like science fiction and it may not be clear to everyone why movie tickets should be issued as NFT (on a blockchain). It seems remotely clear, perhaps, what possible consequences could be prevented by doing so. But there are also many fundamental tendencies that will initiate this step and even make it indispensable.
A digital world needs a reliable digital infrastructure on which the values that make up this society (analog and digital) can be stored, transmitted and traded. The basic problem is a digital world based on centralized TTPs. It is a promising future where society can break free from the yoke of centralized systems and create a free digital world — NFT art shows a method to create real trust in the digital environment with solid infrastructure. It should be the right of society to reach a stage where TTPs exist but are no longer vulnerable points. The downtime of Facebook & Co. give an idea of what a downtime of really vulnerable nodes could mean for society. Decentralization is the key word here. The trend is unmistakable, but it is by no means already a defined end goal — it is society’s struggle for a free, democratic and resilient future that has only just begun.