“GOVERNING” THE DIGITAL ECONOMY
One evening in September 2011, an entrepreneur named Peter Sims received a text message from a friend, Julia Allison, wondering if he happened to be in an Uber SUV near 33rd Street and Fifth Avenue in New York. It happened that this was exactly where he was, and Sims assumed the friend must have seen him from another car.
In fact, Allison wasn’t even in the same state. She was at a party in Chicago, celebrating the launch of Uber in the Windy City. She’d watched as the Uber team performed one of its favorite party tricks: showing people what it called its “God’s view,” a live map revealing the locations of its cars and their passengers, by name. Uber was not only tracking its cars’ movements, it was tracking people’s movements. When Allison explained how she knew so much about his whereabouts, Sims flipped out and wrote a biting blog post about the experience.
Uber has become notorious for sexual harassment among its staff and has taken drastic action to try to resolve the problem, which was a significant factor in the forced resignation of its co-founder, CEO Travis Kalanick. But this privacy issue is just as important. Not only does the company control sensitive information about the journeys people take, but senior company officials, at least in the early days of the company, showed a willingness to abuse that power. In November 2014, Uber launched an investigation into the actions of its New York general manager, Josh Mohrer, after BuzzFeed journalist Johana Bhuiyan reported that he had used the God’s view feature to monitor her movements. The outcry over this and other privacy concerns led to a settlement with New York Attorney General Eric Schneiderman in which Uber agreed to encrypt riders’ names and geolocation data.
It’s certainly not hard to see that Uber and its main competitor, Lyft, have quickly enmeshed themselves in our daily lives. When the name of your company becomes a verb—Xerox, Google, Uber—you know you’ve arrived. But for all the branding associated with democratizing transportation, and with allowing drivers and passengers to come together and “ride-share,” Uber is really a centralization play. It’s not about disintermediation at all. This for-profit company is the gatekeeper for every deal that gets struck between every driver and every passenger, and for that it takes 25 percent each time. And it is far from the only for-profit company that makes money the new-fashioned way: by controlling data. How Uber, and also Facebook, Google, and all the other twenty-first-century tech titans, treat that data has become a critical issue.
The Internet, in case you weren’t aware, is owned. There are a handful of dominant companies that essentially control everything: Google, Amazon, Facebook, Apple (GAFA, some call them). We trust them to intermediate our e-mail and social media exchanges with each other, to manage our Internet searches, to store our data, etc. To varying degrees they do what seems to be a good job, but there is a huge cost in terms of the power we hand to these organizations. We, the general public, their unpaid product developers, literally create value for these companies, creating content and handing over our valuable data. We get services in return, yes, but the imbalance in the relationship is highly problematic. That’s most evident in our system of democracy.
As became widely known after America’s 2016 elections, Facebook and Google control what news you see. Consider how Facebook’s secret algorithm chooses the news to suit your ideological bent, creating echo chambers of like-minded angry or delighted readers who are ripe to consume and share dubious information that confirms their pre-existing political biases. It’s why during the 2016 U.S. presidential campaign, a group of teens in Macedonia could produce fake news articles, which made claims like that the pope had endorsed Donald Trump, which generated more likes, shares, and advertising dollars than real news items produced by fully funded and researched news outlets.
And it’s not just that, for example, Facebook and Google have become such large social hubs. It’s that these digital leviathans have unprecedented control over much of the most important socially influential data that flies across the Web. The “freemium” model, in which we view these companies’ services as “free content,” is a myth. While we might not be paying U.S. dollars to Google, Facebook, and co., we are handing over a much more valuable currency: our personal data. Control over that currency has turned these players, quite simply, into monopolies, the new incumbent powers of the digital age. Others have said this, of course. We revisit it to illustrate how this concentration of control over Internet information exposes the core problem of the centralized architecture of the Web and the unresolved trust issue that gives rise to it.
A Hacker’s Dream
In the wake of the 2016 legal battle between Apple and the FBI over the latter’s demand that the smartphone maker give the law enforcement agency access to customers’ encrypted data, consumers would seem to be between a rock and a hard place. If we want to live in the digital economy, it seems, either we let private companies control the data with all the capacity for abuse that entails or we let governments control those private companies and expose ourselves to the kind of intrusions that Edward Snowden revealed at the NSA. But the choice need not be so stark. We hope to demonstrate that the solution may lie in a third way, one that involves reimagining the very structure of how online data is organized.
The ideas behind Bitcoin and blockchain technology give us a new starting point from which to address this problem. That’s because the question of who controls our data should stem first from a more fundamental question about who or what institutions we must trust in order to engage in commerce, obtain services, or participate in modern society. We see compelling arguments for a complete restructuring of the world’s data security paradigm. And it starts with thinking about how Internet users can start to directly trust each other, so as to avoid having to pour so much information into the centralized hubs that currently sit in the middle of their online relationships. Solving data security may first require a deliberate move from what we call the centralized trust model to one of decentralized trust.
In an age when technology is supposed to be lowering the cost of entry, the outdated centralized trust-management system has proven expensive and restrictive (think about the 2 billion people in the world who are unbanked). It has also failed—spectacularly. Even though the world spent an estimated $75 billion on cybersecurity in 2015, according to estimates by Gartner, total annual losses from online fraud theft were running at $400 billion that year, said Inga Beale, CEO of British insurance market Lloyd’s of London. If you’re alarmed by that figure—and you ought to be—try this one on for size: $2.1 trillion. That’s the estimated fraud loss Juniper Research came up with after extrapolating from current trends into the even more digitally interconnected world projected for 2019. To put that figure in perspective, at current economic growth rates, it would represent more than 2.5 percent of total world GDP. To be clear, these numbers don’t only represent the total amount stolen by hackers; they also include the cost of legal actions, security upgrades, and so forth—the business losses that are generated by countless attacks every year. Even so, the data suggest that black-hat hackers are among the most financially successful innovators of the Internet era.
This colossal failure to protect global commerce is directly attributable to a mismatch between the centralized way in which we process