Data Ownership in Decentralized Finance
Alex Stoicescu
Jul 17, 2024
12 min.
What is data ownership?
The definition of data ownership outlines the ability to control not just any given piece of data but to do what you would like to with it, such as access, share, migrate, and use, among other things. Data ownership also acts as the central tenet of Web3, as we refer to the stages of Internet interaction and utilization and their differences.
Is financial data the same as any other data?
Although they are closely related concepts, there are a few subtle differences between data ownership in a general sense and financial data ownership, differences outlined in the table below.
The main difference is that financial data ownership is limited to financial data, which is often more sensitive due to its direct link to personal or business economic status. Financial data specifically refers to financial-related information, such as transaction records, crypto payment histories, invoicing details, and other financial activities.
The Request Network infrastructure supports financial data ownership by allowing users to manage their financial data within a decentralized framework with the assistance of tools and technologies like encrypted invoicing, secure crypto payment processing, and blockchain immutability.
Privacy as the foundation of data ownership
Privacy enables people to control who may access their data, under what conditions, and for what purpose. This is essential in giving meaning to data ownership since one can have a personal handle on the different elements of their data. For example, ISACA (formerly known as the Information Systems Audit and Control Association) highlights how, in the GDPR framework, individuals' personal data remains the individuals' property, emphasizing the importance of privacy.
Blockchain technology enhances privacy by decentralizing data storage and using cryptography to secure data. The blockchain's inherent properties, such as immutability and transparency, make it (nearly) impossible to alter data without detection, further reinforcing data ownership.
Privacy takes center stage in ethical data handling, as online companies collect and monetize vast amounts of user data, including financial data, often without the user's explicit consent. According to Deloitte, this type of centralized control and data commercialization raises many concerns, which Web3 helps alleviate by returning control to the individuals, allowing them to decide what happens to their data.
Data ownership in Web2 versus Web3
Most conventional banking systems rely on central data control. Centralized databases keep a history of the customer’s information, such as transactions, credit scores, and other financial records. While these structures facilitate controlled data storage and sharing, they have historically proven to be at risk of data breaches and misuse, which, according to AmericanBanker, is one of the biggest issues the banking industry faces today.
Some companies, such as Meta, are moving in the right direction by giving users tools to download a copy of their data from the platform. This includes posts, photos, and activity logs. While still centralized, this feature gives users more control and transparency over their data, allowing them to understand what information is stored and how it can be used. If you’re reading this from an iPhone, perhaps you have at least once stored personal health data from various institutions on your phone and selectively shared it with healthcare providers.
In Web3, Filecoin is a decentralized storage network allowing users to rent out unused storage space or purchase storage from others. Users control their data, which is encrypted and distributed across a network of nodes, enhancing security and ownership compared to centralized cloud storage services.
At Request Network, we provide Web3 infrastructure that allows users to reveal specific financial information for specific needs, such as under-collateralized loans, or participate in decentralized reputation-scoring systems, such as credit-scoring, with privacy and security. We focus on a decentralized and privacy-oriented invoicing system and secure crypto payment processing rails to allow users to manage their data as they see fit. Unlike Web2 companies, the Request Network approach to privacy and data ownership involves using blockchain technology at every step, ensuring that people’s financial information is stored immutably, shared selectively, and accessed securely.
Challenges and Considerations
As promising as the area is, several challenges must be overcome in financial data ownership. One of these challenges is represented by the scalability of various chains. Current networks' transactional speed, gas fees, and throughput capacities often need to be improved, ultimately leading to a loss in efficiency to conduct high volumes of financial transactions. Developing specialized blockchain technologies that can support many transactions without jeopardizing security and decentralization is essential. Another big challenge to the ownership of financial data is the still budding regulatory landscape for blockchain and cryptocurrencies - different jurisdictions are defining various levels of oversight and compliance that need to be considered. Navigating this complicated landscape comes with the benefit of adding a higher level of clarity about rules that can help stimulate innovation, protect consumers, and deter illegal activities.
One of the most serious challenges is the responsibility of handling private keys. In traditional finance, the accounts are handled and secured by banks or other financial institutions. In decentralized finance, users must take care of their wallet keys, which grant them control and access to their finances. Loss of these keys may result in an irreversible loss of funds. Thus, educating users on crucial security and providing them with user-friendly solutions is essential.
Web3 technologies will power the trend toward financial data ownership, which could push the financial services industry deeper on the path to decentralization, with individual control and data sovereignty at the center. Request Network’s existing infrastructure is already taking steps to accommodate a decentralized financial future where users truly own their data. Will you join us?
You can find more information about Request Network and the most reliable infrastructure in Web3 by visiting our website: https://request.network
