DeFI AND DATA UNIONS: A FORCE FOR POSITIVE FINANCIAL IMPACT

Gemma Norris, Streamr

 

Decentralized finance, or DeFi, is one of the more recently trending cryptocurrency terms over the past year – promising a new frontier in ethical, blockchain-enabled, cyberfinance.

In principle, DeFi signifies a movement towards creating a digital ecosystem that’s available to everyone, and operates without a central authority. In practice, it’s an expansion on peer-to-peer virtual currencies such as bitcoin.

DeFi is gaining momentum at pace. Thanks to the recent ‘crypto boom’, the sum of crypto collateral locked into the DeFi economy peaked at a record-breaking $13.6bn. And yet, while bitcoin and cryptocurrency have made it into common parlance, DeFi remains on the outskirts of mainstream consciousness.

Its central appeal is similar to its virtual currency forebears: cutting out the middleman, and bypassing central financial intermediaries such as brokerages, exchanges, or banks. For example – when you make a purchase with a credit card, a bank sits between the customer and vendor, retaining control over the transaction.

With DeFi, those institutions are taken out of the picture, giving full financial asset control to the parties who use it, whether this is through peer-to-peer models or DeFi applications.

DeFi applications, or ‘dapps’, are typically built on top of Ethereum – the world’s second-largest, open-source, blockchain-based cryptocurrency platform. It’s permissionless and transparent, making DeFi transactions far cheaper and faster than traditional forms of finance.

Gemma Norris

By giving users more autonomy over their money, they are empowered to begin investing and trading much more easily, and, more importantly, gain back some control of their assets from centralized banking institutions and systems.

By ‘control’, we also mean control of our own data. Back in 2017, The Economist foresaw the value of the data economy when it published a story titled, “The world’s most valuable resource is no longer oil, but data.”

With the rise of what’s now dubbed ‘surveillance capitalism’, infamous scandals like Cambridge Analytica have brought tech’s heavy hitters like Google and Facebook under the scrutiny of governments, international bodies, and the public.

These centralized platforms are mining vast amounts of people’s data, often unethically, with consumers unaware of where their data is being sold, and to whom.

 

Introducing the Data Union

In the same vein as dapps, there are concepts coming to the fore that promise to challenge the orthodoxy of traditional banking and big tech’s data monopoly.

One such concept is the Data Union. On its own, an individual’s data holds little value. However, once grouped with multiple data sets from other people and sources into a Data Union, it becomes a valuable resource for companies wanting to gain key insights into user habits.

The Swiss open-source project Streamr offers a technical framework which makes the creation and implementation of Data Unions possible for any data generating app. Any individual (or business) can earn a passive income from their day-to-day online activity, and dictate how much private information is shared with third parties. In a New York Times op-ed, data pioneer Jaron Lanier projected that a four person household could fetch around $20,000 per year.

Although this estimate is generous, there is the potential here for anyone with a laptop, smartphone, television, IoT-enabled appliances and health wearables, to earn money with little time investment.

So how does it work? Put simply, using the Data Union framework, or ‘toolbox’, data can integrate with existing products and be shared through an app.

The information data is encrypted for privacy, before it passes through the Streamr Network, to a Data Union where it’s bundled with other people’s data. Via a process called crowd selling, this information is then sold to third parties through the Streamr Marketplace. Thus encouraging trade directly from data producers.

So, for example, data gathered using a plugin or app that tracks viewer streaming habits for movies or TV, matched with the demographic profile provided by the user, would be attractive to streaming services like Hulu and Netflix.

This poses a way of sharing people’s data that’s both ethical and transparent.

 

Decentralization for social good

The exciting prospect of DeFi and Data Unions is that, when combined, they can be drivers for positive change.

This has been demonstrated by a Data Union called Tracey that is working in partnership with the World Wide Fund for Nature (WWF).

Tracey incentivises Filipino fisherfolk to record their catch and trade data digitally, therefore tracking the first mile of seafood products in the supply chain. This data is valuable to the WWF, as the organisation wants to mitigate the rapid decline of the regions’ fish stocks, and catch yield data is also an attractive prospect to other parties in the supply chain such as retailers and final buyers.

Many Filipino fisherfolk do not have a bank account. Therefore, trading this data opens doors otherwise closed to them – such as access to finance and loans. It’s transforming their lives and that of their families, all the while enabling an independent ecosystem which gathers accurate traceability data.

Data Unions and DeFi are great equalizers – the advantage of a DeFi solution is that anyone can earn cryptocurrency through it because the finances are no longer dependent on their jurisdiction, but on which products they are using. From Filipino fisherfolk to a family of four in the UK – putting these together can have endless benefits.

 

The future is decentralized

The data economy needs fixing, however we’re now sitting on the brink of a crypto revolution. Tracey is an example of cryptocurrency delivering on its promise to make money and payments universally accessible – to anyone, no matter where they are in the world.

With the likes of DeFi and Data Unions gaining momentum by the month, it will soon be commonplace for consumers to participate in a new, ethical, data economy.

Down the line, we expect to see internet users becoming members of multiple Data Unions, earning a significant income from their regular online habits. Fair monetization of personal data is finally a democratically possible option, further loosening the grip of the big tech autocracy.

 

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