Decentralized Self-Sovereign Data Explained
In this blogpost inspired by her presentation at the IFC-hosted session on Distributed Data Ecosystems: Heterodox Approaches to Data Portability at the recent Singapore FinTech Festival, Irene CL Ng explains what decentralized self-sovereign data is all about.
Let's start with a basic understanding of the economic property of data. It is a “non rivalrous” good. This means one party using it does not deny another party from using it as well. So every institution with data of data subjects can potentially have their data being used by both themselves and the data subject concurrently, if they so wish.
Let's assume that a technology in the form of a cloud data server, at the cost of a few cents a month, can now be provisioned for a person or a micro SME to be a decentralized legal entity on the Internet, and to hold any content or data to which they have rights with their own set of APIs. This technology has in fact been created from more than $10m worth of research funding across eight UK universities.
What this means is data that currently sits on the servers of any organization can now also be made self sovereign; it can sit with data subjects or micro SMEs on their own servers. Same data, same entitlements to use it.
I will repeat for emphasis: It is now technically and legally possible for two identical copies of the same set of data - one centralized and one decentralized – to sit on two different servers with two sets of APIs, with the same entitlements and licensing rights to share and transfer the data.
Which would create better functioning markets? For us, the answer is both.
The centralized organization server has source data that is heavily regulated, terribly siloed, badly portable and facing one of the largest market failures in the digital economy. But organizations can now have the same data in a decentralized form in their own customer servers; self-sovereign data they can now use across territories and yet be fully verified by the source server.
Which organization would actually allow that? The answer may surprise you.
The same institutions that may not be so keen to share data through open APIs with third parties are now more willing to decentralize data to data subjects because they are able to obtain better engagement and create loyalty. In addition, they are paid for every transaction of the data, thereby creating a market for the data that they can verify (we call this a data asset) and have painfully invested into over many years.
Since data cannot create a market unless individuals have the right to contract on it, IP (intellectual property) rights are necessary. But these rights have a great market effect in terms of the distribution speed and scalability of a data asset. It takes only 3 minutes for a new demand-side merchant/partner to sign up to a data terminal to receive verified data. No legal or tech integration is necessary with the source. Across borders. Because the contract is with the individual. So the producer provides the source of truth, individuals transport it, the merchant pays. With the speed and scalability that self-sovereign data brings, the revenue multiplier for the source organization is significant. This creates an incentive for data sources to create and scale their own data ecosystem.
In a web3 environment, decentralized self-sovereign data can move meaningfully between services, carried by data subjects themselves to any service provider. Indeed, the data servers themselves can be hosted by country-level custodians. The data is always up to date because there is incentive compatibility and there can be efficient bargaining on the price of the data.
Much like how money devolved to bank accounts created markets with payment systems, we expect self-sovereign data to create large markets, achieving data at the speed of money as any consumer app can have a data wallet to decentralize data and build their ecosystems across borders.
This infrastructure is currently scaling up in Malaysia and will be entering Vietnam, US and Germany in the first quarter of 2023. The stewardship and governance of data flow contracts is under the oversight of a foundation set up by the original universities that conducted the research. We also welcome public and private sector involvement; do get in touch to find out more.