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Fixing Digital Economy with Web 3.0 Data Space

2024-11-11 15:49

This article is the first in a trilogy: "1. Economic Impact of Data Space", "2. Why Businesses Need W3DS", and (TBD) "3. How to Roll Out W3DS".

The modern economy faces several major challenges, largely due to the structure of Web 2.0 platforms and their monopolistic nature. These platforms create barriers to entry, hoard user data, and charge high fees for basic services, all while stifling innovation. In truth, these platforms have merely hacked economy, much like Standard Oil did a century ago, by creating monopolies.

We will examine the key economic issues at play and explore how the introduction of Web 3.0 Data Space (W3DS) could resolve most of the Web 2.0 issues, paving the way for fair competition and more inclusive economy. Finally, we will look at whether the economy can become democratic and just, free from the Web 2.0 platform monopolies, and how this will differ from the Standard Oil case.

The Core Problems in Today’s Digital Economy

Everyone has their own list of favorite issues troubling the modern economy. So do we. Even if it doesn’t seem like a complete list to you, fixing just these problems would make us all much happier. By the time you finish reading this document, the solution will be clear.

Vendor Lock-In and Monopolies

Web 2.0 platforms like Uber, Facebook, SAP and Amazon dominate their markets by monopolizing user/company data. This forces users and businesses into "closed ecosystems" with few alternatives. These platforms set high prices and control information flow, stifling both competition and innovation.

High Barriers to Entry

Launching a new platform or service today requires massive resources, with the cost of attracting users often 10 to 100 times higher than the cost of developing the platform itself (e.g. the author of the article launched a leading storytelling platform izi.TRAVEL for cities and museums with a ratio dev/marketing as 2/20 millions euro). As a result, smaller startups struggle to compete with established giants, limiting themselves in creativity and innovation. For example, Facebook's interface hasn’t improved much in a decade because, well… there’s no need.

High Data Processing Costs for Businesses (Including Data Silos)

Many companies are trapped in expensive contracts with platforms that charge hefty commissions for services or market access. For instance, hotels can pay up to 20% in fees to platforms like Booking.com. On top of this, large corporations often juggle 500 to 1,500 different information systems (from accounting and warehouse management to HR), leading to hundreds of "data silos" – multiple versions of the same data. This creates errors and forces companies to dedicate significant manual effort to find and fix mistakes, often requiring manual data transfers. E.g. just recall the last time you received an invoice: most probably it was a PDF attached to email.

Reputation Problems

When hiring contractors to fix your roof, you're almost guaranteed to be on the road to troubles, simply because you have no way to know how well the company handled previous jobs. Their future clients will also remain unaware of how they deceived you. As a result, in markets like small-scale construction, the companies that thrive are often those that consistently deceive their customers. This is just one example of how markets fail without effective and reliable reputation mechanisms.

Lack of Transparency in Statistics

If you try to gather reliable and refined information on a national or global scale, you’ll find it difficult. Sure, every business has access to its internal data, but compiling it into statistically significant quantities is nearly impossible. Hiring auditors for millions of businesses would be impractical – not to mention, no company would willingly allow such access. Without reliable statistics, we’re essentially navigating the economy blindly, as demonstrated by the 2008 crisis. We take it for granted, but this is not ok. It goes hand-in-hand with famous “information asymmetry”.

Ineffective HR & Education

Despite the growth of platforms, finding a job remains a major challenge for many. It frustrates individuals and costs businesses around €0.5 trillion annually. This is worsened by an educational crisis, where thousands of platforms have fragmented and depressed the traditional educational market without providing a clear, transparent alternative. For the average person, it’s nearly impossible to determine which of these platforms is worth their time and investment, as there’s no feedback mechanism or reputation system to track their clients' success.

Inequality in Value Chains

In any value chain, large players immediately claim the bulk of the revenue. This is especially evident in agriculture, where farmers are forced to sell their products at prices dictated by major purchasing companies without a chance to shortcut logistics and serve the local shops directly.
We could go on, but even this brief list highlights how far the modern economy is from being ideal.

Therefore, many people believe that the current economic system is broken.

In truth, it’s not broken – it's just afflicted by a disease, called Web 2.0, and there is a cure. A simple one.

Data Sovereignty is the Solution

Modern economy often feels like something tangible – machines, factories, people. However, the problems we’ve discussed aren’t rooted in physical things but in the unfair control – or lack of control – over data.

Take YouTube, for instance. Its massive market value doesn’t come from revolutionary technology, but from the vast amount of video content it hosts. BMW loses huge amounts of money because its data is scattered across 1,000 poorly-disconnected information systems, requiring significant human resources to coordinate it. People struggle to find jobs because their data is spread across countless fragmented HR systems and educational platforms that can’t communicate with each other and with employers, leaving candidates unable to reliably prove their qualifications or reputation. A small construction company can take advantage of a homeowner and still profit from it, simply because “no one else will know.” Tomorrow, those same builders can re-open under a new company name and find the next victim.
Thus, we assert that all these economic problems can be solved with a single silver bullet: returning ownership of data to the people and companies. This would transform economy into what it was meant to be – driven by fair competition, with equal access to essential information for all players, where everyone is accountable, receives a fair share, and no one is left out.
In the next chapter, we’ll dive into how this “return of data” can actually work.

W3DS Provides Tools to Address These Challenges

Web 3.0 Data Space does exactly what was described above: it returns ownership of data to the people, organizations, and machines (IoT) that own it, taking it back from platforms. We’ve detailed how W3DS works in this article, so here we’ll briefly outline the mechanisms W3DS offers the modern economy. In the next section, we’ll explain how these mechanisms will impact the economy and address all issues we listed above.

Data Sovereignty

In W3DS individuals, companies, and machines will have full ownership of their data, stored in a single original copy on their eVault, eliminating data silos. Only the owner will determine who has access to the data (using any platform or service) and how it is used.

Advanced Security and ID Management

W3DS manages user IDs (identifiers and keys), advanced security which is a foundation for many other features like IPR control, eReputation and others, described below.

Platform Competition (No Vendor Lock-In)

W3DS guarantees equal, owner-controlled access to data across all platforms, fostering competition. For example, different accountants within a company can use their preferred systems or apps, without being restricted to a single corporate platform (like SAP), while working on the same invoice.

Lower Barriers for New Services

W3DS allows platforms and services to easily access users, companies, and IoT devices’ eVaults within its ecosystem via commercially or non-commercially available W3 Adapters. By managing data access and security, long-term data storage, user IDs and authentication W3DS significantly (10-100x times) reduces the cost of launching new platforms and services. This will result in a surge of multi-functional platforms offering innovative services at competitive prices, giving users more choice on how to process their precious data at reliable eVaults.

Complete Transparency

W3DS will revolutionize transparency by making all financial and operational data from public and private entities accessible for analysis. Businesses, researchers, governments, and even individual users will be able to access detailed data for analysis. For example, "How many BMW cars were purchased last year by educated women in Africa who were raised in single-parent households and are active in their local communities?" Where necessary, the data will be anonymized. This removes information asymmetry and allows for fairer participation in the economy.

Trust and eReputation

A key feature of W3DS is its clear, trustworthy eReputation of every participant – whether an individual, company, or machine – based on past actions and transaction. This builds confidence in business transactions, hiring, or social interaction minimizing the risk of fraud. It is corruption-protected and depends on the context of the evaluator. For instance, you could buy a used car knowing its full history and opinion of previous owners or hire a contractor based on verified reputation scores, relevant to your case. See this article for more details.

IPR & Provenance Control

The identification and authentication of all participants, along with the ability to use electronic signatures and timestamp services, enables (a) the verification of true information owners, (b) tracking of all usage events/statistics, and (c) monitoring of all transactions related to ownership transfers of digital assets within the W3DS system. For the first time, we can establish ownership rights in the digital world (if you recall NFT at this moment, it failed).

Persistent ID

The Persistent ID for individuals, organizations, and objects is a core component of W3DS. It will enable you to reclaim ownership of your home years later, even if you lose critical elements of your identity like your passport, fingerprints, eyes, or even DNA (for example, after hormone therapy). A Persistent ID system ensures that links to documents and photos remain accessible for decades. It also enables the collection of usage statistics for these documents across any platform or service. An interesting outcome of the Persistent ID is its role in preventing counterfeit parts in manufacturing. For instance, any system can easily detect fake turbine blades with the same serial number used in different Siemens turbines worldwide.

Universal Digital Payments

W3DS will introduce a universal digital currency system where peer-to-peer (P2P) transactions are securely processed via eVaults by any relevant service. This system ensures safe, efficient transfers without the need for traditional banking or currency exchange systems.
This is just a glimpse of how W3DS will reshape the digital world. Other features like fake news control and eVoting, while significant, are not discussed here due to space constraints.

Now we can begin a preliminary analysis of how W3DS will impact the economy and the specific problems it will address.

The Future Economy with W3DS

Let’s look at the key economic effects enabled by the advanced mechanics of W3DS, as discussed in the previous section.

Widespread Competition

With no monopolies and equal access to data for all platforms, the market will become highly competitive. This will drive innovation and guarantee that users receive the best services possible. The market capitalization of platforms will reflect their true value, rather than monopoly gains. Trillions of euros in unjustly inflated platform valuations will return to the economy, with a significant multiplier effect due to increased competition and innovation.

Transparent and Flat “Ideal Markets”

With data accessible through eVaults (anonymized when necessary), information asymmetry will disappear, creating "flat markets" where everyone has equal access to data through the service of their choice. This will ensure fair competition, reduce fraud (via eReputation), and lower costs for both consumers and businesses. With equal access to resources each participant will earn their fair share of the economic pie, based on their capacities and the value they bring to users. The total impact is hard to estimate, but it likely represents a meaningful percentage of global GDP.

Cost Reduction for Companies

W3DS can significantly reduce business costs by lowering transaction fees and enhancing operational efficiency. For instance, in the hotel industry, booking platform commissions could decrease from 20% to as low as 1%, much like in the airline ticketing industry. Indeed, the airline sector, fortunately developed before the platform era, avoided platform monopolization by introducing its own pre-eVault system in 1980 – the Amadeus system. Additionally, companies like BMW could cut operational costs by up to 10% by eliminating data silos, relying on trusted suppliers, integrating Data Spaces with partners, and making significant HR improvements.

New Forms of Virtual Companies

W3DS will pave the way for "virtual companies" that bring together local talents and resources without the traditional overhead of physical offices or disjointed platforms. These virtual companies will use AI to match skills and services, creating new opportunities for gig workers. For instance, a platform could connect a seamstress, a courier, and a manager into a virtual clothing repair business without requiring office space or significant investments. This will make the gig economy safer for workers, and ultimately drive a revolution in HR, as outlined below. Check the article about “wish-list” technique which will help here a lot.

Advanced HR and Educational Services

In the new economy, people won’t need to search for jobs – jobs will find them. Individuals will simply list their skills and expertise, and thousands of AI systems will seamlessly match individuals, considering their unique skills and psychological profile, with the ideal team in a company of their dream, and even recommend targeted educational courses to fill any skill gaps.
Many people possess skills beyond what their current job demands. They may be interested in "selling" these additional skills or finding other ways to utilize them. Others may enjoy exploring new fields or are considering a career transition. Competing platforms will fully support this flexibility, offering training to help them expand their knowledge and skill sets.
Gradually, people will shift from being passive consumers to "prosumers," and eReputation will help guiding this evolution. The fear of job loss will diminish, as people will no longer be afraid of future changes or AI competition. Competing platforms will be able to predict which professions are at risk from AI or automation and retrain individuals in advance for new roles. The economic benefits of more effective human resource management are expected to exceed a trillion euros annually.

Trust-Driven Transactions

Trust will become a fundamental part of the economy through verified eReputation and transparent transactions. This will eliminate the need for extensive legal contracts and third-party guarantees, significantly lowering costs for businesses and individuals. This not only provides economic benefits but also reduces the overall stress of business transactions and lowers cost of capital and crime rates.

Reduced Need for Advertising

With trust and transparency at the heart of W3DS, businesses will no longer need to spend heavily on advertising. Instead, eReputation, based on cryptographically signed customer feedback + AI for perfect match with you specific needs, will naturally drive growth. For example, a hotel might opt out of its "brand franchising" agreement and reduce advertising expenses, as clients' AI assistants will primarily select hotels based on eReputation. Instead, the hotel could reinvest these funds into improving service quality to further enhance its eReputation. This shift would reduce dependence on traditional marketing, which currently costs around €1 trillion annually worldwide. It will also reduce the reliance on traditional marketing, which currently costs about €1 trillion/year, globally. While this may displace professionals in the advertising industry, the new economy will rapidly create opportunities to absorb these talents, as previously discussed.

Communities Economics

The traditional economy runs on contracts, invoices, and payments, but many everyday tasks are carried out within families or among friends – where no invoices are issued. In these exchanges, we use a "currency of trust": I help you today, you help me tomorrow. W3DS mechanisms, such as eReputation or some sort of “Merit Points”, will enable this simple form of barter to evolve into more sophisticated systems, much like money replaced traditional bartering. We expect this type of Community Economics to take a substantial share of the real economy, particularly through the growth of local commons.

Reduced Need for Regulations

In W3DS, transparency allows any platform to audit and verify processes, making traditional regulatory frameworks largely obsolete. Commercial security services can take over the role of ensuring compliance, streamlining operations, and reducing the need for state or association-led regulations. The BIO label on milk currently requires significant effort to verify that farmers avoid harmful chemicals. However, with data directly accessible from tractors, sprayers, and farmers' eVaults, BIO compliance could be reliably verified by the milk factory (and later by the local store) at much lower costs, using any preferred service.

Intellectual Property Rights and Provenance

An economy cannot function without property rights. While we’ve mastered managing physical assets like houses and cars, we still struggle to protect the work of photographers and journalists from theft. In the W3DS world, establishing the ownership of a photograph, document, or song would take just one minute, and it would be possible to trace exactly where, when, and on which platform that content was used. This system allows the owner to set clear usage rules (for instance, "free for NFP and individuals, paid for companies with 100+ employees") and ensures that all platforms comply. If they don't, security services would detect violations and ruin those who don't.

The economic impact of creating enforceable property rights in the digital world could potentially boost GDP by several percentage points.

Easier and Cheaper Financial Services

We anticipate major shifts in financial markets:

1) W3DS will enable more secure, almost cost-free money transfers directly between individuals, organizations, and machines, without the need for bank accounts. It easily addresses KYC as the user’s eVault will keep transactions, invoices, contracts, communication and the whole lifestyle of the user, together with their eReputation.

2) Since W3DS infrastructure will handle data, security, registers, and users identities, banks, insurance companies, and other services will be able to rely on W3DS for security data and identity management, significantly reducing their costs.

3) Competing platforms and services will outpace traditional banks and financial institutions by directly connecting money holders with those who need funds or financial derivatives.

This transformation could affect up to one-third of the financial market, with an estimated impact of around €0.5 trillion per year.

How Web 3.0 Will Shape a Transparent and Inclusive Economy

The move to Web 3.0 Data Space represents a fundamental transformation in how the economy functions.
For the first time, data will truly serve society.
By addressing critical challenges like vendor lock-in and data silos, lack of transparency, HR inefficiencies, reliable reputation, and high transaction costs, W3DS promises a future where innovation flourishes, trust is embedded in every interaction, and everyone – regardless of background – has access to the global economy. The era of monopolies and restricted access is ending, paving the way for a more inclusive, dynamic, and efficient economic model.

Eye-Opener P.S.

After reading this article and getting excited about these future possibilities, you might be left with one question: how exactly can we cure economy of this octopus called “Web 2.0 platforms” and transit to W3DS? A hundred years ago, the U.S. freed itself from the octopus named Standard Oil by splitting it into 48 companies. Does that mean we should split Facebook into 48 separate, unconnected entities? Of course not, as that would destroy the very essence of Facebook – connecting people! Instead, we need to decouple people’s data from Facebook and other platforms. This would give rise to hundreds of different social networks and services, allowing each user to choose the one they prefer, while still enabling everyone to communicate and participate in groups, regardless of which version of "Facebook" they use.

Is this even possible? Absolutely!

We already have a great example: email. When you send an email to a friend, you don’t worry about which email client they’re using – whether it’s MS Outlook, Apple Mail, or Mozilla Thunderbird. Your email reaches your friend’s mail server (what we’d call an eVault in W3DS), and they decide how they want to access it. This is completely different from the world of messengers, where you need to remember which app the recipient uses. Yet no email client or web browser is worth tens of billions of euros, unlike messaging platforms. And who ultimately pays for that valuation? We do – whether through money, by viewing ads, giving up our data, or often all three.

If the email example doesn’t convince you, compare the hotel market (where platforms take up to 20%) with the airline ticket market (where platforms take just 1%) and ask yourself: “Why such a huge difference between two very similar markets?” As these examples show, the world of Web 3.0 Data Space is possible.

But how can we actually get Facebook to relinquish our data? This is achievable, and we will explore several specific roll-out scenarios in an upcoming article.
Thus, we argue that the modern economy can become inclusive, just, and democratic in nature by simply returning control of data to individuals, companies, and even things (IoT).
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