The news is full of stories of security breaches on large, established business and social media websites. How do you stop them?
Speakers at this week’s Hack.Summit say the decentralized and anonymous nature of blockchain makes it an obvious solution.
“We have a lot of large technology providers like Facebook, Amazon, Google that give us a hugely valuable service in exchange for giving up all of our information to that service provider,” said co-founder and CEO MacLane Wilkison. “They are able to monetize all our transaction information, our identity information, our browsing data, [and] our social media data in exchange for providing us this service. And as a society, we’ve paid the price for that in a lot of these large-scale data breaches.”
NuCypher is a proxy re-encryption network that helps protect a user’s identity. In a proxy network, a third party can make changes to a cypher-text created for one individual so that another person can then read and understand it.
Wilkison said that following the data breaches in recent years at Yahoo!, Equifax, JPMorgan Chase and LinkedIn and the controversy surrounding Cambridge Analytica for political purposes, people are more wary of trading privacy for convenience.
Blockchain technology may protect users’ privacy by allowing them to mask their identities during transactions. This is important as many different industries are considering using blockchain to improve their online service. That includes protecting consumers even as manufacturers and service providers work to build stronger levels of engagement with them.
Another factor for businesses considering blockchain: cutting out the middle men. CEO Josh Fraser said decentralized networks enable businesses to hold on to more of their revenue. That may give them more incentive to create new products and services. He said there is a powerful link between incentives and innovation.
Fraser pointed out that even Uber and Airbnb take sizable percentages from every transaction. “They provide a lot of services for that fee,” he said, “but what we’ve seen is that when we’re able to cut out that middleman, the fees go with it.”
Fraser said that decentralization may also create more open markets. For example, a number of countries have outlawed Uber and Airbnb. “In Argentina, it’s so extreme that with the credit card companies to prevent people from being able to purchase services [from Uber]. If we could create a peer to peer marketplace which is built on cryptocurrency, we don’t have to face that limitation,” Fraser said.
Redistributing incentive to those creating value is another advantage. Uber wouldn’t be where it is today without its first 100 drivers, Fraser said, but when the company goes public with its stock “those drivers won’t see a penny. Blockchain gives us a new revolutionary business model to incentivize early participants in a network and give them a stake in the network we’re creating.”
To be sure, decentralized marketplaces don’t come without their risks and shortcomings.
Fraudulent actors are inevitable in any marketplace, Frasier said, and processes will need to be established to determine if participants are trustworthy. This trust, Frasier believes, shouldn’t come from a centralized authority but rather “through a set of open, fair and transparent rules,” he said.
“Bitcoin (BTC) has taught us the importance of incentives,” he added. “Incentives are the best ways to predict an outcome, so we can create processes and incentives to drive that behavior in a more decentralized way.”
Blockchain companies are “building something that is too important and too meaningful for the world for any one entity or company or person to control and own,” Fraser said. “At the same time, we know that we need to be guardians of this technology and that we’re not going to get everything right in the first try.”