Blockchain: Our future governance technology?

Virifides’ founder Steve Leng and blockchain expert Andy Martin recently had a conversation about Blockchain; past, present, and future, and how the lessons learnt can help build greater value for all from the emerging digital economy.

Starting with Blockchain as a governance technology, Andy explains what this means, and how this results in the need for all enterprises to share their data to fully benefit from the opportunities with Web3 and the digitisation of value chains

Note: The discussion has been edited for length and clarity.

Steve: Andy, you highlight in your LinkedIn blogs that blockchain is really some kind of governance technology and less on the more obvious points about its technical strengths and broad application to industry challenges. Why do you think of blockchain as a governance technology above all else?

Andy: Well, I think what we are doing is building a new internet where blockchain is the “state machine”. It’s keeping track of who owns what and who has done what to assets of value. . As we build this new internet (web3), there is a huge amount of new data as we instrument the world around us. This data will drive a new generation of AI apps. It is critical therefore not to reinvent the current Facebook model, where you give away your data for free. We want to make a link between who owns the data and who monetises the data. This relationship is based on the ability of Blockchain technology to govern this activity successfully in a decentralised economy.

It is important to say that we are not talking about applying a new kind of governance to the existing economy and the way it works today. We are talking about a new economy which creates value out of new data and the insights gained from mining shared and aggregated data in new innovative ways. Data from instrumented networks of products and activities have often never existed before. At a macro level, we are actually creating a new social contract which says if you have data, bring it into a win-win environment that incentivises others to share their data.

Steve: As you were talking, I was thinking about the application and instrumentation of data in the world of trading partners and their supporting ecosystems. In terms of supply chain businesses, do you own the data because you own the product? Or do you still have to delegate data responsibility and some ownership because of the need for third parties today?

Andy: I’ve had a lot of experience in the B2B space, and many people think “if only we could share this data, imagine the problems we could solve!”. The thing is, that data is often seen as the company’s differentiating asset, so why on earth would they choose to share their data and collaborate? Why would they let their competitors onto the network?

However, let’s explore a subtle variation in the meaning of sharing data. Let’s say, for example, that we are collecting all IoT-related data (temperature of shipment van, its whereabouts, etc). This has the potential to be utilised by ML algorithms. It is therefore not the raw data that is shared but the learnings and analytics produced as an output.

What this means is, if I collaborate with other parties in the value chain, this data will have aggregate value. Innovators are then being brought into this marketplace which sits over this data exchange where they are getting real-time insights – it’s a trickle feed of monetisation that can be tokenised so participants can ‘see’ the real value for their involvement

Steve: I can see the importance of that distinction from my own experience. Sharing data has always had a ‘price tag’ attached to it, along with a healthy business scepticism about the true value of getting involved. You only have to think of the failures of the much-hyped trading exchanges of the 2000s to understand why people would question revisiting that opportunity. Not that it has stopped many others still trying to build a platform business on the message of “give me your data, and I’ll give you some value back”.

But we’re talking about something different here.

Steve: My biggest reservation with blockchain has always been that there are so many ‘moving parts’ needed for it to work, sustainably. What I mean by this is that I think it’s clear we can create successful Blockchain pilots and even get players from different parts of the value chain to actively participate but sustaining and growing that network has proved extremely challenging.

Andy: My view is that the problem that we are trying to solve is less about optimising the world as it is and more about how we get the most out of the emerging digital economy.

I’m not trying to use this technology to disintermediate what’s working today.

For example, I am happy for the Land Registry to manage the title to my home, and for my bank to manage my traditional payments. These are systems we are used to. However, in this new economy data only has value if it is shared by members across the value chain.

So, we have to find a solution where the owner does not lose control of that data – i.e.Governance. They monetise data in a way that it incentivises them, allowing innovators to create a whole new marketplace of applications. This is where you start to think about solving problems that we really can’t fix with our industrial-age thinking, such as creating personalised solutions and dealing with the energy crisis.

What I am saying is that we are building a new economy. We’ve had the agriculture economy, we’ve had the industrial economy, and we’re only getting used to the digital economy. I think now we’re at the point where this economy is exponentially growing, as we instrument everything and create new data. We’re creating a new marketplace that sits on top of the world as it is.

Steve: Interesting. I recently had a conversation on how a marketplace or a structure like web3 could create truly decentralised commerce. As you mentioned, that doesn’t yet necessarily exist for blockchain, as there is no umbrella commerce framework in place. So then, what do you think the key “get-rights” are in building a blockchain network that leverages the value of this governance capability?

Andy: I’m going to be a little controversial here. Looking back, I think that the blockchain networks that have been built sit in two camps. They are either in the enterprise camp which is in the permission-based world or in the permissionless crypto-based world. Over the past 5 years, I don’t think either of those have been especially successful.

Why? Well if you look on the enterprise side, we’ve largely been trying to optimise the world as it is. We have a ton of legacy data, and nobody wants to share it just to complete individual steps in the value chain. It's very hard to build “internet-level” solutions with that. You then go to the crypto world and its problem is that it is so abstract that it is very difficult to see the utility in business cases, it needs access to real-world data.

To move forward, we have to combine these two camps and build on top of what already exists. For example, for compliance, we’ll have the open internet-level permissionless world where your address is your wallet (e.g., pseudo-anonymous identity) and have ML algorithms running, looking for suspicious compliance patterns. Then what you do is when you onboard, you integrate your permissionless wallet into the permissioned world where you have the verified set of credentials.

For example, there are a set of credentials that allow a person to legally drive, that is the compliance data. You’re sharing that data between the permissioned world and the open marketplace and you’re doing so on a zero-knowledge-proof basis to disclose the minimum amount of data. By putting the two worlds together you then get that token that drives the open marketplace, which is used both for great velocity of transactions on the marketplace but also links with having an incentive for sharing the data.

Steve: Changing gears, if you’ll excuse the pun, blockchain has been consistently marketed as a ‘trust mechanism’. Do you think that is the case? Does blockchain create a new level of trust?

Andy: Again, it’s about building a new economy based on shared and trusted data. I think this governance aspect is critical to this. The fact is that I know, as a data owner, that I am governing my data and controlling who gets to see it. I may only be showing learnings generated from my data or the actual data itself (in the case of a medical marketplace) but I am still in control.

The way I can trust that is because the decentralised community is governing the update of the transactions onto the ledger. Things like Google and Facebook have worked well for web2, but I don’t want to recreate those in web3. The visibility, transparency and overall benefit of this collaborative economy are shared fairly across the participants in the network.

We are harvesting data at the level of the internet, so it’s not just 5 companies sharing data in one supply chain, it is internet-level data, and you need that to drive the analytics to understand the world around you.

Steve: You’ve been part of the global blockchain journey for several years now, would you be able to conclude with some personal reflections from that experience?

Andy: One thing is that the enterprise world started out with the mindset that blockchain is good and crypto is bad. What that did is cut us off from the idea of openness and therefore forced us into reinventing the internet for each individual network.

However, if we want to re-invent the world, we need a universal marketplace where the value of data is recognised and can be “traded”.

For things like data, we shouldn’t be giving away data, as it is a differentiating asset. Equally, we can’t keep that data behind a firewall because it will only have value if it is combined with other data sets.

Then you can adopt a “token” system to cope with the high velocity of trading within the data exchange. As you make data available, you receive tokens that give you the right to vote.

This becomes the equity of the marketplace, the more tokens you hold, the more voting that you have. In turn, this enables larger players to vote to give the smaller player more tokens, so that they also participate in sharing data, thus adding value.

What is becoming clearer is that we’re building an economy that will be far bigger than the previous ones. The world is on the edge of a golden era.

Steve: You paint a compelling and inspiring vision for the way we can share, manage and monetise our data going forward. Yet it’s clear it will need intelligent governance; a combination of mind and machine, of experience and the thoughtful application of technology, to get there for the benefit of business and ourselves as individuals. A fascinating journey lies ahead!

Andy - thank you so much for your time.