Since its arrival over a decade ago, blockchain technology has been making grand promises of transparency and decentralization. Behind the rhetoric, however, the reality is different. According to an expert writing for CoinDesk, ordinary users have access to very little of the data wealth public blockchains generate.
There is glaring asymmetry in data access when you consider the ethos of blockchain technology – accessibility and openness. Blockchain data analytics, which underpins well-informed decisions, remain mainly concealed in private blockchain technology platforms, beyond the reach of ordinary users, and behind prohibitive paywalls.
Blockchain analytics platforms can reveal a wealth of data
There are countless examples of how analytics platforms can provide important and powerful insight into blockchain data. Thanks to the blockchain data platform Chainalysis, it emerged that US authorities had recovered Bitcoin worth over $1 billion, which was linked to Silk Road, the dark web marketplace that closed down in 2013.
The demise of FTX could have been foreseen
According to Skopenow, stakeholders could have foreseen FTX’s collapse before it hit hundreds of thousands of blockchain technology users and crypto holders. Skopenow writes that several red flags existed that venture capital and other investors could have noticed and saved the billions of dollars they poured into Sam Bankman-Fried’s business.
While SBF did indeed graduate from MIT, he majored in physics, which has no direct connection to finance or economics. He only worked for Jane Street for three years.
He relocated FTX’s research arm, Alameda, from California to Hong Kong in 2019, a crypto-friendlier and more loosely regulated jurisdiction for blockchain technology. A major red flag was that no external VC investors in FTX were members of the exchange’s board of directors. SBF had all the power and authority concentrated in a small group of coworkers, most of whom he shared a penthouse in a huge oceanside resort in the Bahamas with.
FTX’s seat in the Bahamas and its executives’ living arrangement meant that its operations could never be truly clean. It lacked objective external perspectives and checks and balances. Before investing in FTX, venture capitalists should have noticed the glaring lack of blockchain technology experience in the executive team, who were all living on a small island with very limited regulation, if any.
The essence of open data
If wealthy venture capitalists didn’t have access to data, what’s left for ordinary users? Ideally, blockchain technology platforms would allow people to query data manually and create public dashboards, which other users could view and benefit from. Enterprise clients of these platforms could pay for subscriptions, which would come with a high-capacity suite of tools, such as priority API queries, programmatic access to data, and connections to Power BI and other third-party tools.
Blockchain technology platforms can encourage users to carry out micro-tasks such as content curation, detecting anomalies, and data validation in exchange for access to premium analytics or data tools. Alternatively, they could provide ad-supported or time-banked access.
The middle ground between public good and commercial interest
None of this is possible without an effort to find the middle ground between commercial interest and the public good that would come from access to open blockchain technology data. Entrepreneurs cannot express the most pressing needs, researchers cannot accurately map patterns, and lawmakers cannot write intelligent policies without comprehensive insight.
Collective intelligence is unmatched by individual analysts, so the lack of access to open data stifles innovation. With each failure to challenge flawed analyses, the credibility of the crypto industry suffers. Without verifiable, critical, easy-to-process blockchain technology data, the misconception that crypto only serves money laundering purposes will linger on, even though evidence shows cash is still king for criminal activity.
The solution to opacity and misinformation
The blockchain community must come forward and treat blockchain technology data as a public good. Blockchain analytics platforms should try to make their core data widely available instead of gating it arbitrarily. Transparency involves how blockchain technology moves data and the entities with access to that data.
Cooperation with blockchain technology networks can give analytics platforms access to alternative revenue streams. Operators can still monetize value-added services for commercial use cases, but basic blockchain data should be accessible and open by default.
Real-world examples of open data benefits
The value of blockchain technology solutions became obvious when the pandemic disrupted global supply chains. Firms that were using blockchain technology remained resilient. They were able to reduce administrative costs while enhancing transparency and traceability.
Essentially, crypto industry stakeholders are well aware of the transparency inherent to blockchain technology. However, it’s not clear to other people.
The risks of blockchain transparency
Others would say there is transparency, which does not help people but does even more damage. There is the view that Web3 is becoming a surveillance tool, precisely the kind it was meant to free people from. Transparency can reveal sensitive financial data for Web3 and blockchain technology users. A number of blockchain technology and marketing tools now let sales and marketing teams use accessible blockchain data for targeted ads and user insights. They analyze not only behavioral data but also financial data.
Web3 will only go mainstream if the issue of openness is resolved. Data appropriation has become a fact. Open data is being used to make blockchain technology data analysis easier and monetize it for anyone who wants to understand Web3 users’ behavioral patterns.
With the considerable number of blockchain wallets and transactions, the vast volume of blockchain technology data is a goldmine for those skilled enough to understand it. Critics of blockchain transparency find it has opened the gates for profiling practices.
Can only the “right” kind of data be revealed? Yes, but it will definitely take engagement and effort.