The Unfulfilled Promise of Blockchain

Since its advent over a decade ago, blockchain technology has made grand promises of decentralization, disintermediation and radical transparency. Underpinning such visionary rhetoric, however, lies a sobering reality: Much of the wealth of data generated on public blockchains remains sealed off from average users.

As blockchain adoption accelerates across finance, supply chains, governance and more, we as an industry must reflect on whether we have truly delivered on the technology’s core values.

Jim Myers is CTO and co-founder of Flipside Crypto.

The promise and the reality

Public blockchains were conceived as open ecosystems where participants could interact without centralized gatekeepers. Transactions occurring on these transparent ledgers unveil ground truths about economic activity, user behavior, adoption curves and other dynamics.

Yet while the ethos of blockchain is openness and accessibility, the current asymmetry in information access can be glaring. On-chain data analytics — the lifeblood of informed decision-making — remains predominantly siloed in private platforms, behind paywalls, illegible to the average reader and largely beyond reach of regular users.

There are numerous examples of how existing analytics platforms offer powerful, consequential insights into on-chain data. In February 2021, the U.S. Department of Justice (DOJ) announced that it had recovered over $1 billion worth of bitcoin (BTC) related to the Silk Road, a dark web marketplace shut down in 2013, thanks to on-chain data from Chainalysis.

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Additionally, metrics tracked by platforms like Skopenow could have helped foresee the FTX implosion before it impacted hundreds of thousands of crypto holders. While it’s impressive, it still falls short of blockchain’s promise of making data openly accessible. These are premium services that aren’t available to the average person.

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What open data looks like

This isn’t to say that existing analytics platforms should not offer paid offerings and premium subscription plans. Even mission-driven businesses exist to make money, and when it comes to data services there will always be a subset of customers who have more sophisticated, resource-intensive demands.

To that end, a platform can allow free users to manually query data and create public dashboards that the rest of the Web3 community can view and benefit from. And for serious commercial users, these platforms could offer paid subscription tiers that provide a more powerful suite of tools, such as programmatic access to data, priority API queries and the ability to connect to third-party tools like Tableau and Power BI.

Additionally, analytics platforms can create programs that reward community members who leverage their free data to benefit their broader user base. These platforms can harness the collective intelligence of thousands of analysts who act as bridges between the complex world of on-chain data and the wider public, incentivizing high-quality contributions through collective ownership and exploration.

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While this may be an ideal, mutually beneficial arrangement, there are even simpler ways to sustainably provide free data to users. Platforms could incentivize users to perform micro-tasks such as data validation, anomaly detection and content curation in exchange for access to premium data or analytics tools — or simply provide time-banked or ad-supported access.

All of which is to say, there needs to be an attempt to better marry commercial interest with the public good of allowing open on-chain data. Without a comprehensive perspective, researchers cannot accurately map patterns, entrepreneurs cannot identify the most pressing needs and legislators cannot write intelligent policy.

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Innovation suffers as no single analyst can match the collective intelligence of global crowds. The credibility of the crypto industry at large suffers each time flawed assumptions and analyses remain unchallenged. Without critical, verifiable data that can be easily digested, the public perception of crypto being only for money laundering will remain, despite the evidence that cash is still king for criminals.

Open data, open minds

The solution to misinformation and opacity is straightforward in principle — the community must come together and treat on-chain data as the public good it was always meant to be. This means on-chain analytics platforms should strive to make their core data more accessible to all rather than arbitrarily gated.

After all, transparency does not simply relate to how value moves on blockchains but who can access information about that movement.

Collaboration with blockchain networks can provide alternative revenue streams for analytics platforms. Value-added services can still be reasonably monetized for intensive commercial use-cases. But the baseline on-chain data, the fundamental transactions occurring across blockchain networks? Open and accessible by default.

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Unfettered access to on-chain data confers collective benefits that extend far beyond fairness. It would allow global talent to pressure-test assumptions, clarify misconceptions and enrich systemic understanding. Such transparency and critical analysis may attract skeptical institutional players towards crypto’s vision for the future.

Data democracy, if you can keep it

We have plenty of real-world examples of the benefits of open data. Particularly with blockchain. When COVID-19 disrupted global supply chains, the value of blockchain solutions became clear. Companies that had implemented blockchain technology proved resilient. Companies enhanced transparency and traceability in their supply chains while also cutting down on administrative expenses.

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Fundamentally, those in the industry don’t need to be preached to about blockchain’s inherent transparency. The problem is that the value offer isn’t fully understood by everyone else. But to truly tap into its benefits, we need open data access to allow everyone else to directly evaluate blockchain’s real-world efficacy instead of trusting the word of a NFT PFP on Twitter.

If crypto is to serve as the gateway to web3 we envision, then onchain data must be freely visible through that gateway to all. The choice is clear, as is the monumental opportunity at hand. The question that remains is whether the industry’s actions will live up to its promises.

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