Web3, the New Data Economy and the Road Ahead
Bruce Pon, Founder of Ocean Protocol, on Ocean’s latest release, the intricacies of DeFi, and data sovereignty
In the ninth episode of Voices of the Data Economy, we had a candid conversation with Bruce Pon, Founder of Ocean Protocol. During this discussion, he explains the different layers of the Web3 data economy, the various facets of a data marketplace, and the recent release of Ocean V3, featuring datatokens. Here are edited excerpts from the podcast.
What is the Web3 Data Economy?
Bruce simplifies Web3 for us: Web3 denotes the fact that you are working on technologies that are decentralized. In the world of Web3 — smart contracts, the code, the tokens — they all run on substrates that can’t be stopped by people or central intermediaries.
As a group, people can determine the direction of the platform and the infrastructure. But it’s a very hard coordination problem and there needs to be a democratic process in order to make changes on that. This makes Web3 resilient and robust for putting many of the concepts of value on top because by using that, as a substrate. You can start to give people, companies, individuals, back control of things that they value, whether it’s their identity, intellectual property, their money, land titles, whatever is the value that we, as humans have, can now live on that substrate.
We as individuals can control data using a private key, an ethereum address, a Bitcoin address — these types of things. This is what signifies Web3 as opposed to something like Web 2, which is the rise of the Internet platforms — it was where you have a central database, where your private information is vacuumed up, where governments are the sole authority for issuing identity, or privileges, etc. You have large multinational companies that have almost more power than governments in some ways, and having this rich database that you actually kind of have to trust that they’re handling.
“We’re seeing that there are these hacks of governments, Internet companies, banks that hold the customer data — be it with identity or money. The difference between Web 2 and Web 3, philosophically is that instead of trusting somebody else, you hold your things of value with important records. You put it on the substrate and control that. You have to question what is the right structure for holding value and managing governments, managing your society, depending on the state of the technology and the state of the people,” he says.
Data Sovereignty, DeFi and Government control of data
If a government wants something, they can still take it, but the power of Web 3 is that — it has to be something very specific. Instead of going to a bank and seizing the bank and all their assets, now they’d have to go to each one of us individually, knock on the doors and ask for those private keys. This constraints the power. The overreach of government is pervasive, regardless of which government and with Web3 technologies that overreached are now constrained back to perhaps a more natural agreement that citizens would agree to.
We asked Bruce what is the term he would give for decentralized finance, the new way of controlling your data:
“I call it a ‘new data economy’, rivaling other sectors like land and property, or the corporation and all these innovations of humanity. I think data itself will become an economy as big as these. I can break it down into two parts: First is can I truly control my data? And then when I do share it, is it safe? Do I feel comfortable? Can I maintain a certain amount of privacy? That’s one set, just control. The second set is: What is my data worth?”
We haven’t had enough trading on data. Or if we have had trades, it’s held by a very small group of people who know what the data is worth. So we don’t really have a price. These are the two things that we need to unlock the data economy:
- To have the tools available to unlock the data while giving each individual control and the comfort to share.
- We need to find a way to price the data so that once you’ve priced something, then you can start layering on the various tools like securitization, collateralization, lending, insurance etc on data. These are the two pillars.
Ocean V3 and The New Data Economy
Bruce talks about how Ocean spent the first few years thinking about the first problem that existed. How do you share data securely? It basically comes down to access control and Ocean uses blockchain and all the capabilities within blockchain for access control. If you trigger a smart contract correctly, then it will give you access to this resource. That’s what Ocean does, it solves that first problem. That was our first release V1 and V2.
“Ocean V1 was just about access control, V2 was this concept of computer data, where we acknowledge that data is heavy. It never wants to move. It wants to stay exactly where it’s sitting because that’s the safest place it is. And then you bring an algorithm, to compute to process that data, and then the algorithm just leaves with the data with the results and not the data. And Ocean V3 is solving the second problem, which is the financialization of it and it is the concept of data tokens, where every dataset is encapsulated in a token — both the value of the token and the access.”
It’s this kind of Heisenberg Uncertainty Principle: you can use this data token both for accessing data, but it also represents the value. This interesting approach has now spawned in the Ocean market. “We released Ocean V3 recently, but it’s now spawned a very vibrant ecosystem of people who are scouting for data, who are assessing the value of data as well as people who are essentially doing prediction markets, another word could be speculating on the value of that data. And it’s exciting, we have already 500 datasets, there’s 2 million Ocean locked up in the Ocean Market.”
The interesting part is that the community is figuring out how to price data.
“We’re seeing that when a new dataset comes out — within one or two hours, the price stabilizes, normally taking no more than six hours now. Because of this datatoken concept on the Ocean Market, you can now price data, and the market will tell you it’s real value. This is a huge innovation because the more datasets we get onto the market, the better it will be for analysing this data and more sophisticated the players will become in pricing that data faster and faster. That’s how markets form. So that solves the second problem we now have using Web 3 technologies, like automated market makers, ERC-20 tokens, the ethereum network, we have the ability to price data and give access control securely. I think that’s revolutionary.”
Main players in the Data market: Publishers, consumers, and the ‘stakers’
You could call the data marketplace a three-sided market. If you look at a traditional company like Airbnb: you have Airbnb as the platform provider, and then you have the people who put up the capacity such as the rooms, the other people who are the consumers, the visitors. In Ocean Market, you have a third player. You’ll have the publisher, the consumer, the AI researcher. The publisher is an individual company. On top of that, you’re going to have the staker. This is the person who participates in a prediction market and helps give that data asset a price signal and can speculate on the value and make gains or losses, depending on whether or not their bet is correct how good their analysis tools are. So in Ocean Market, you have three players, you have the publishers, the consumers and the stakers.
“ I’ve had a lot of conversations with companies who have reached out to us who are interested in Ocean Market. The response has been great, surprisingly great. We’ve realized with the design of the market, you don’t actually don’t need incentives from the project just to publish your dataset. If you are a data hunter and you find a valuable dataset — you publish or help that publisher publish it. Then you stake on it and you’re the winner. You’re either the first or the second staker on that data.”
Final Thoughts
“I think that we as humans are really bad at understanding the concept of exponential, whether it’s for investing or technological progress. We’re on an exponential curve and now with crypto and blockchain, we brought finance onto an exponential curve. We’re bringing data onto an exponential curve at the pace of innovation,” says Bruce.
He concludes by quoting Ocean Co-Founder Trent McConaghy. “ He told me very early on when we were kind of throwing ideas around in 2013 or 2014. Trent said ‘One thing I’ve learned is that anything that touches Moore’s Law starts to assume the characteristics of Moore’s law, which is exponential growth.’ That’s what we’re doing, we’re putting a data economy on an exponential curve.”
Here is a list of the selected time stamps on the different topic discussed during the podcast:
1:18 — 4:57 The journey of Bruce Pon (Founder, Ocean Protocol) from banker to data banker
4:57 — 8:00 What is Web3?
8:30 — 11:57 Is data sovereignty real sovereignty? What are the myths?
12:00 — 14:30 Vision for Data Financialization. What comprises a new data economy?
14:30 — 27:20 How is Ocean helping in decentralization: data marketplace, data tokens and data use cases
27:20 — 46:00 Can everyone trade on a Data Marketplace? How to start?
46:00 — onwards The Data Economy Challenge, innovative use cases and the unresolved problems in the Data Economy
