What Blockchain Means for the Sharing Economy

What Blockchain Means for the Sharing Economy

Look at the modus operandi of today’s internet giants — such as Google, Facebook, Twitter, Uber, or Airbnb — and you’ll notice they have one thing in common: They rely on the contributions of users as a means to generate value within their own platforms. Over the past 20 years, the economy has progressively moved away from the traditional model of centralized organizations, where large operators, often with a dominant position, were responsible for providing a service to a group of passive consumers. Today we are moving toward a new model of increasingly decentralized organizations, where large operators are responsible for aggregating the resources of multiple people to provide a service to a much more active group of consumers. This shift marks the advent of a new generation of “dematerialized” organizations that do not require physical offices, assets, or even employees.

The problem with this model is that, in most cases, the value produced by the crowd is not equally redistributed among all those who have contributed to the value production; all of the profits are captured by the large intermediaries who operate the platforms. Recently, a new technology has emerged that could change this imbalance. Blockchain facilitates the exchange of value in a secure and decentralized manner, without the need for an intermediary.

How Blockchain Works
Here are five basic principles underlying the technology.

Alan Zibluk Markethive Founding Member

Google’s DeepMind has a plan for protecting private health data—from itself

Google’s DeepMind has a plan for protecting private health data—from itself

  

As part of its projects with Britain’s National Health Service, Google’s artificial intelligence unit DeepMind announced last week it’s developing a new way to protect confidential health data—from itself. Its problem: How to assure hospitals, and the public at large, that patient confidentiality isn’t compromised as it processes the sensitive medical health records entrusted to it.

DeepMind’s proposed solution is to create an indelible data log that can’t be tampered with. It would show when a piece of data was used, and for what purpose. Importantly, DeepMind itself wouldn’t be able to modify logs to use the data nefariously. The solution bears resemblance to the “distributed ledger technologies” or “private blockchains” that the financial world has been trying to create in recent years. While loathe to call it “blockchain”—DeepMind prefers the term “verifiable append-only ledger” to describe its health data system—it is interested in one property that the technology can confer upon its users: trust.

While the banks want blockchains to slash back-office costs while staying compliant, DeepMind needs blockchains to shore up public trust. Last year, DeepMind’s work with the UK’s health service was dragged into the public by a New Scientist investigation. The publication found that 1.6 million patient names, addresses, and other information from three London hospitals had been shared with Google’s artificial intelligence subsidiary. It triggered an investigation by the UK’s privacy regulator that is ongoing. DeepMind and the hospitals say they followed the rules.

Huge data sets are what make artificial intelligence work. For DeepMind, access to a trove of national heath data could give it a significant advantage in the race to develop AI techniques for healthcare (although it says the Streams app that it’s devising with the three London hospitals doesn’t involve AI). Nonetheless, DeepMind needs to assure the hospitals—and the public—that it’s handling sensitive medical data safely. “We hope that by building tools like this in the open, we’ll improve the level of trust that patients have with respect to this data access,” DeepMind co-founder Mustafa Suleyman says.

But for all its talk of transparency, letting patients access their own data logs isn’t part of DeepMind’s plan. Suleyman says it might happen one day, but that his firm’s obligation is to the hospitals. DeepMind is the data processor to the hospitals, which are the data controllers. “Our job is to help them do a better job of their own governance. In the long term, you can see the potential patient benefit … but it’s a bit early,” Suleyman says. This is a crucial distinction because under European data protection laws controllers bear heavier responsibilities (pdf).

So who owns what, when it comes to DeepMind’s health blockchain? The underlying data belongs to the hospitals, while the software belongs to DeepMind, says Suleyman. The data logs, created when the software processes the patient data, also remain under the hospitals’ control, DeepMind says. And what happens if there’s an error in logging the data since the records can’t be changed? The hospitals will have to figure that out, says Suleyman. “We provide that [data] set to the controller, namely the hospital. They already have a whole host of processes to deal with various degrees of error that may or may not have been made,” he says.

DeepMind says the system will be used sometime this year. It will be built on a foundation devised by Ben Laurie, its head of security and privacy. While at DeepMind’s parent company, Google, Laurie created a similar system to ensure security certificates issued by websites haven’t been tampered with, called the Certificate Transparency scheme.

For watchers of financial blockchains, DeepMind’s entry to it's space indicates progress for the technology powering these private blockchains. “It’s interesting, whatever it is,” says Simon Taylor, a co-founder of fintech consultancy 11:FS. “And in my opinion, a sign of where the market will move.” Not every business sector will need the sort of global, public, agreement on a ledger’s entries that cryptocurrencies like bitcoin require, he points out. Wall Street now has well-qualified company in the attempt to graft blockchain technology to existing industries.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Congress Takes Blockchain 101

Congress Takes Blockchain 101

The heads of the Congressional Blockchain Caucus want their colleagues to know the technology has many uses besides currency.

 

Congressman David Schweikert is determined to enlighten his colleagues in Washington about the blockchain. The opportunities the technology creates for society are vast, he says, and right now education is key to keeping the government from “screwing it up.”

Schweikert, a Republican from Arizona, co-chairs the recently launched Congressional Blockchain Caucus. He and fellow co-chair, Democratic Representative Jared Polis of Colorado, say they created it in response to increasing interest and curiosity on Capitol Hill about blockchain technology. “Members of Congress are starting to get visits from people that are doing things with the blockchain and talking about it,” says Polis. “They are interested in learning more, and we hope to provide the forum to do that.”

Blockchain technology is difficult to explain, and misconceptions among policymakers are almost inevitable. One important concept Schweikert says more people need to understand is that a blockchain is not necessarily Bitcoin, and there are plenty of applications of blockchains beyond transferring digital currency. Digital currencies, and especially Bitcoin, the most popular blockchain by far, make some policymakers and government officials wary. But focusing on currency keeps people from seeing the potential the blockchain has to reinvent how we control and manage valuable information, Schweikert argues.

A blockchain is a decentralized, online record-keeping system, or ledger, maintained by a network of computers that verify and record transactions using established cryptographic techniques. Bitcoin’s system, which is open-source, depends on people all around the world called miners. They use specialized computers to verify and record transactions and receive Bitcoin currency in reward. Several other digital currencies work in a similar fashion.

Digital currency is not the main reason so many institutions have begun experimenting with blockchains in recent years, though. Blockchains can also be used to securely and permanently store other information besides currency transaction records. For instance, banks and other financial companies see this as a way to manage information vital to the transfer of ownership of financial assets more efficiently than they do now. Some experiments have involved the Bitcoin blockchain, some use the newer blockchain software platform called Ethereum, and others have used private or semi-private blockchains. 

The government should adopt blockchain technology too, say the Congressmen. A decentralized ledger is better than a conventional database “whenever we need better consumer control of information and security” like in health records, tax returns, voting records, and identity management, says Polis. Several federal agencies and state governments are already experimenting with blockchain applications. The Department of Homeland Security, for example, is running a test to track data from its border surveillance devices in a distributed ledger.

The growing demand in the private and public sector for blockchain services has spawned a plethora of startups and enticed hundreds of millions of dollars of venture capital. But the nascent industry is handicapped by an uncertain regulatory landscape at both the state and federal level, says Perianne Boring, founder and president of the Chamber of Digital Commerce, a Washington, D.C.-based trade association.

How should governments use blockchain technology?

Services for transferring money fall under the jurisdiction of several federal regulators, and face a patchwork of state licensing laws. New blockchain-based business models are challenging traditional notions of money transmission, she says, and many companies are unsure where they fit in the complicated legal landscape.

Boring has argued that financial technology companies would benefit from a regulatory safe zone, or “sandbox”—like those that are already in place in the U.K. and Singapore—where they could test products without the risk of “inadvertent regulatory violations.” We don’t need any new legislation from Congress yet, though—that could stifle innovation, even more, she says. “What Congress should be doing is educating themselves on the issues.”

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member