WEB3 promises transparency, but should you still worry about data privacy?
We live in a Big Brother world today, where companies seemingly know every detail of what we're doing online. They collect massive amounts of data to provide value. However, your data privacy may be compromised if they tend to over-data storage and collection or use information in ways you didn't agree to.
Regulatory authorities and data privacy guardians globally push for additional layers of data protection laws for end users. These come in the form of specific data privacy rights that allow you to control somehow what you share and what brands can do with your information.
It's a work in progress. About 81% of adults in the United States believe they have little or almost no control over what data is collected from them. The majority also expressed concern and thought that the risks outweigh the benefits when companies and governments collect personal data.
With the evolution of data privacy regulations on the internet, Web3 promises transparency where users will own their data, be appropriately compensated for it, and be aware of what others are doing with their information. While this sounds promising, a shift from data oligopoly to data democracy also comes with risks.
What is WEB3 and why should the ordinary Joe Care
You might have heard of Web 3.0 or Web3 because you have friends bragging about how they are making tons of money in Bitcoin, Ethereum, or other altcoins. Perhaps you encountered digital apes or other non-fungible tokens while browsing your smartphone. Web3 is not just a buzzword. It is here, and it might shape the future. And it is still confusing for most people.
In a recent survey by a global insights firm, only 13% of consumers think they know what Web3 is, and about 54% have never heard about it. Eighty-one percent of those who have listened to Web3 believe it will make them happy and positively affect their well-being. On the other hand, respondents also expressed worries that Web3 might give way to more scams and cybercrime, make their existing devices obsolete, and that it may need to be more heavily regulated compared to the internet, we have today.
Web 1.0 vs. Web 2.0 vs. Web 3.0
Web3 empowers users in a decentralized form of the internet. It's not about big tech firms controlling everything but open, permissionless networks. It is true to the original concept of the proponents of the World Wide Web, where one will not need permission from anyone to post and where there is no need for central control.
The first iteration of the internet gave us static websites with limited functionality. Meanwhile, Web 1.0 was about open-source protocols that allowed computers to be connected but only allowed a few people to create content. The majority of users only consume content.
Web 2.0 evolved to become an internet for creators. People became bloggers, vloggers, and social media citizens from being passive viewers. Web 2.0 made content king and encouraged participation and interaction with user-generated content.
While Web 1.0 is mainly read-only and Web 2.0 is read-write, Web3 will be read-write-own. Without the big tech giants and other entities in the middle, ownership is the name of the game. Those who build, operate, and use Web3 technologies will own a portion of the platform. For example, with Bitcoin and Ethereum transactions, a particular amount is spent on network security fees. Other networks could be token-based, too, but they can get tokens for a specific service instead of collecting payments.
Aside from cryptocurrency and virtual assets relying on the blockchain, users can also expect decentralized applications running on decentralized networks, self-governance, data privacy laws, and control over data and online identities.
How WEB3 will change everyday life
As Web 2.0 fueled content creation and a culture of participation, it has influenced how we live today. Web3 will also shape the near future.
As Web3 evolves to get rid of the issues with its predecessor, a more efficient internet will undoubtedly change our daily lives. There are around 6.57 billion smartphone users in the world today, which is expected to reach 7.7 billion by 2027. This higher population density will enjoy a more personalized browsing experience, advanced search engine capabilities, and enriched web apps as Web3 comes to fruition.
Brands will depend more on the blockchain and become more user-centric and transparent. The dominance of large corporations in providing financial services will be gone. Artificial intelligence will also play a crucial role in enhancing manufacturing, supply chains, and the overall decision-making process of entrepreneurs. Government regulations on businesses might also be reviewed as the business landscape changes.
Payment with tokens on the blockchain will remove restrictions on commercial activity across borders. The movement of virtual assets will not need intermediaries and will practically have no delays. Because of this setup, government interference and regulation of businesses will not be as tight as we know today.
Ordinary people can easily invest in startups using tokens and play a role in the governance of these brands. Decentralized organizations will see stakeholders as equals, shaping how companies are built.
Consumers will demand hyper-personalization of products and services. Businesses must keep up and ensure an excellent customer experience. Web3 could paint a world without constraints for the tech-savvy generations. However, for folks who might not be able to keep up with the pace, the world running on Web3 could shape daily struggles for them.
Why WEB3 transparency is a double-edged sword for data privacy
When Gavin Wood coined Web3 in 2014, he highlighted a broken model where we entrust our information to organizations. Instead of the data monarchy of big tech firms with the most considerable servers in the world, the new version of the web is focused on data democracy.
Data privacy in WEB3: The good, the bad, and the ugly
With Web3, data will be on the blockchain. Data will remain transparent and easily traceable. This paints a picture of equality and true freedom but raises questions on data ownership and how to protect users' data privacy.
For example, your data and personally identifiable information will be in the transaction in blockchain transaction. Transactions can be tracked down to their sources. And that has so many implications.
Web3– with blockchain and decentralized apps– promises consumers freedom from profiting corporations but comes with data privacy risks. Ideally, the sender and receiver of financial data should be non-public to achieve anonymity. Likewise, the amount should not be known for confidentiality. Combine the two, and you will have a utopia for data privacy.
With data on the chain, it becomes prone to front-running. This is an attack where miners insert transactions ahead of others to extract higher maximal value than regular users.
If AI systems manage the flow of data, there will be questions about the design of its algorithm and who will be responsible for it. With leniency to no regulations necessary, what will happen if hackers gain access to your data? Who will be accountable for the data breach? What can you do legally to go after them? Cybersecurity must evolve as a system designed to empower users, or you run the risk of bad people prowling around, and no one is capable of policing them.
A tsunami of phishing may also occur in the form of cybercriminals duping unknowing victims using malicious blockchain transactions to hand over virtual assets and properties. Rug pulls are also happening as early as now when a crypto project is hyped and insiders run off with early investors' hard-earned money.
The pseudonymity in Web3 and the strong possibility for regulation gaps may open the door for money laundering and financing of terrorist movements.
Cloning cryptocurrency wallets might be another form of attack on data privacy. With seed phrases or keys to retrieve lost wallets, people can trick users into providing this information, find a loophole in the verification process, and eventually steal or store whatever is stored in the wallet.
What will it take to resolve the WEB3 data privacy paradox?
The transparency of Web3 brings to the surface its most sensitive data and privacy weak points. It is still early, but data privacy and security challenges must be adequately addressed.
Public and private entities must establish access control source-of-truth data for Web3 vulnerabilities to be adequately managed. Decentralization frees entities from responsibilities. No one owns the problem, which has significant ramifications for ordinary users.
There should also be a distinction between public and private blockchains. The former allows anyone to join the network, while the latter controls who can join them. Public blockchains will be more resistant to censorship and decentralized. At the same time, its counterpart will be a closed system governed by rules and comparable to existing databases where the owner has access to and controls confidential data in the ledger.
Smart contracts can also be implemented on public blockchains to secure and enhance data privacy. These tools can be used to customize data access and control.
Ultimately, there should be anonymity and confidentiality for true data privacy. To achieve this, users must have control over disclosing their data before commencing a transaction to have data privacy. Accurate data control means decisions about data breaches will solely be on the user.
Web3 is an exciting development, but still confusing to the majority of people. As individuals, we must be ready to understand how blockchain and other Web3 technologies will impact our lives. Organizations, businesses, and governments should collaborate to address data protection, privacy, and security worries to prepare the groundwork for Web3.
ByteBao, a Reel Unlimited client specializing in web3 consulting, has sponsored this article. If you are interested in incorporating data privacy into your Web3 project, please reach out to ByteBao by emailing info@bytebao.io or visiting bytebao.io for more information.
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