“Walled gardens” has become a common metaphor to designate closed systems such as app stores or large technology platforms presenting a free flagship product. It is argued that these platforms are by design engineered to hold your data hostage, deliberately preventing you to seek alternatives. You’ve possibly heard this on many occasions : if you’re not paying for the product you are the product. “A small number of companies have enticed vast numbers of users to join by luring them in with network effects…As a result these walled gardens have stifled innovation and effectively monopolised vast sections of the web.” reads the NEAR white paper. Let’s consider for example our most sensitive data: balances of wealth and and identity profiles. Currently this data is held by centralised institutions such as banks and governments. These are by their very own nature too vulnerable to corruption and theft because they are somewhat too centralised. Mitigating these vulnerabilities has been an ongoing effort through regulation institutions and law enforcement across the world. Indeed this over centralised system has been effective in fending off bad actors to some extent but arguably insufficiently.
Upon a closer look to applications we all currently use we can identify the following vulnerabilities:
- The developer who is releasing or updating the code
2.The platform where the data is stored
- The servers which run the application’s code
Essentially the problem here is the custody of your data. By being stored on a central server it becomes vulnerable to the developer taking ownership or the server failing technically. If we zoom out to institutional level the “platform” here is a bank or some governmental institution holding your balances of wealth and identity profile. The custody of your data is still very vulnerable to unauthorised access. In theory if we solve the problem of data custody in a centralised system we have removed the two other points of failure. The developer cannot act maliciously having no longer access to your data. The failure of servers won’t necessarily occasion the loss of your data.
The solution proposed by blockchain technologists is a much less centralised system where your most valuable data resides, in order to reduce exposure to the vulnerabilities mentioned above. It is proposed that there should be multiple instances of your data stored and processed in anideally vast network of nodes thus preventing a single point of failure. It is suggested that this network of nodes should be a sort of community run cloud. Its governance should by design be implemented on a voluntary basis by multiple actors validating transactions, storing and processing your data to reduce the possibility of malicious access. The Blockchain is indeed the technology that would make this rather ingenious system possible. Anecdotally it was created as a reaction to the 2008 financial crisis that brought the existing financial system to its knees. It was a way to say lesson learned indeed. To continue exploring the sort of decentralisation proposed by such a technology lets refer to the NEAR white paper. It states “There is no single point of failure because there are multiple redundancies around the world”. In plain english your data is replicated to the number of nodes forming the said network. This very replication process is referred to as a “consensus” mechanism. The purpose of a consensus mechanism is to bring all nodes to agreement so that your data is reliably reproduced in each node. In this case consensus is achieved programmatically to minimise the type of collusion and corruption we are currently familiar with across our centralised systems. The entire system is really based on a very simple idea: the replication of your most valuable data in each node forming this network will make it more secure comparatively to a centralised system. A malicious actor will have to act on every node of the network to falsify your data. This will be technically impossible if there is large scale adoption or at least be costlier than the potential gains. Furthermore the governance of this network by a community rather than a small number of individuals or an individual will form another layer of security as it will be far more difficult to persuade an entire community to bend rules.
Consensus is key
Network consensus is achieved when each node is in agreement about the data stored and processed. Once this is done validation occurs .Each state of the network containing a snapshot of your data and relevant transactions is stored in blocks of data produced by node operators hence the name of the technology called “Blockchain” referring to a chain of blocks. Node operators are rewarded for this work with transactions fees charged to users for using the network. In most cases an inflation rate is also programmed into the currency or FT(Fungible Token) in use in the network. The Near token for example does not have a capped supply but its inflation rate is capped to 5% a year. This inflation does not only serve to reward node operators but also serves to fund the community treasury. Within the NEAR ecosystem 90% of this inflation serves to reward node operators and 10% goes to the community treasury. Block production rewards are distributed every 12 hours. The existence of an in house currency makes it indeed possible to have an in house economic policy otherwise referred to as “Tokenomics”. Apart from market speculation which arguably drives adoption, this token and its economic policy facilitates a form of decentralised governance mentioned above through DAO’s : Decentralised Autonomous organisations.
There are many consensus mechanisms in use and development by a variety of projects in the field. The most familiar ones are possibly “proof of work” and “proof of stake”. The former – POW – involves the resolution of an adaptive computational problem by node operators in order to produce blocks of data. The production of these blocks is referred to as “mining”. The computational difficulty for mining is adjusted according to network usage and size. The latter – POS- involves the depositing of the ecosystem’s currency as a collateral to become a stakeholder hence the process being called “staking”. The staking here serves as a guarantee for good behaviour as well as a proportional allowance for governance that determines one’s voting power. Indeed improper behaviour here namely the attempt to falsify data will inevitably lead to the loss of part or all of this staked collateral. Thus node operation is computationally cheaper but bad behaviour is subject to substantial penalty. The downside of such a consensus mechanism is the centralisation of power by large stakeholders. Solutions are being designed to control this centralisation pressure. In the case of NEAR protocol for example a type of consensus mechanism called “Thresholded “ proof of stake has been developed where seat allocation to become a validator is based on a form of auction pegged to the total amount token staked on each node.
The NEAR ambition for creative industries
Bitcoin can be considered as the first version of the community run cloud. It is mostly used for storing and moving a digital asset : Bitcoin. Ethereum is the second iteration of this community run cloud, more sophisticated in a sense that it can run applications called smart contracts as well as a storing data. NEAR has the ambition of an evolution beyond the two by solving the problems of user friendliness, scalability and security that has somewhat plagued the aforementioned ones. It provides “a community-operated cloud infrastructure for deploying and running decentralised applications.” according to the white paper.
The use cases of such a secure technology are still in the exploration phase. Beside identity profiles and financial transactions a number of use cases that are currently thriving in the creative industries. Such a secure way of bringing data ownership to the individual has made a form of digital intellectual property possible such that we could perhaps call it the day one of intellectual property on the internet. The advent of the internet has brought explosive growth to the way we consume everything. Indeed as Eric Trautman who leads the NEAR foundation states in his “ How the blockchain will save the creator economy” : “…you can do more with a MacBook today than a whole studio could 20 years ago”
With the gentle encouragements of a pandemic our lives have mostly moved to the digital realm. This has made finding communities with common interests, regardless of geography, much easier. However “the boom in creation wasn’t matched by a similar boom in sustainability of creators”. Indeed the lack of a protocol establishing property in the digital realm and the opportunism of distributors of content who have become the gatekeepers of these walled gardens has somewhat diminished the creator’s revenue considerably.
The “change” is NEAR
So how might a cryptographic technology such as the blockchain and a project like NEAR change this? The attribution of a unique cryptographic code to a piece of digital content and a unique identity -wallet- that is then stored across a vast distributed network technically establishes unique ownership of this content. The wallet here is one’s unique identity on the network but also an application with many other essential functions, such as interaction with decentralised finance platforms, governance communities and marketplaces. Through this wallet these interactions can be performed without most of the middlemen we are currently familiar with. Furthermore, balances of wealth and identity mentioned above are now owned by the individual instead of a bank or institution. Indeed the seed phrase key to every wallet technically grants you ownership of this data. Digital properties and balances of wealth can now be transferred to any other network or platform freely without a third party’s consent. The proceeds of any transaction or sale of content here are again fully under the control of the individual wallet and content owner. The attribution of a unique cryptographic code establishing ownership of a piece of digital content is referred to as the “minting” of a “non-fungible token” or its acronym “NFT”. In financial jargon, the removal of a third party verifying transactions here is referred to as a “trustless” and the fact that anyone can democratically participate to any transaction with transparency is referred to as “permissionless” . Thus with the advent of digital intellectual property, data ownership, trustless and permissionless transactions, the walls of the garden may have began to fall.
A New System
The new system is based on the restructuring of intellectual property, financial tools and communities based on the block chain technology. It is based on the NFT – Decentralised Finance (DeFi) – Decentralised Autonomous Organisations (DAOs). With NFTs the dependency upon common digital content distribution platforms are removed. Indeed these platforms have so far held content and communities alike hostage forming “walled gardens”. As a result communities and fanbases supporters of content can now autonomously organise and align their interests with their creators more effectively because they are no longer at the mercy of of a small number of distribution networks. New financial tooling with trustless and permissionless participation allows this interest alignment more effectively as income from content is now under the control of supporters/consumers of content and their creators in the form of self organised independent organisations (DAOs).
Written by Tolga A., – July, 2021