The Unfulfilled Promise of Blockchain

Since its arrival more than a decade ago, blockchain technology has made great promises of decentralization, disintermediation and radical transparency. Underlying such visionary rhetoric, however, lies a sobering reality: Much of the wealth of data generated on public blockchains remains closed 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.

Public blockchains were considered open ecosystems where participants could interact without centralized gatekeepers. Transactions that occur on these transparent ledgers reveal ground truths about economic activity, user behavior, adoption curves and other dynamics.

Although the ethos of blockchain is openness and accessibility, the current asymmetry in access to information can be glaring. On-chain data analytics – the lifeblood of informed decision-making – remains primarily in private platforms, behind paywalls, unreadable to the average reader and largely out of reach of regular users.

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

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

That’s not to say that existing analytics platforms shouldn’t 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 see and benefit from. And for serious commercial users, these platforms can offer paid subscription tiers that offer 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.

In addition, 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, driving high quality contributions through collective ownership and exploration.

While this may be an ideal, mutually beneficial arrangement, there are even simpler ways to sustainably provide free data to users. Platforms can 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-bound or ad-supported access.

All this is to say, efforts must be made to better connect commercial interest with the public interest in 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.

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

The solution to misinformation and opacity is simple in principle – the community needs to come together and treat data in the chain 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 fenced off.

After all, transparency is not simply related to how value moves on blockchains, but who has access to 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 that take place across blockchain networks? Open and accessible by default.

Unrestricted access to on-chain data offers collective benefits that go far beyond fairness. This will allow global talent to test assumptions under pressure, clarify misconceptions and enrich systemic understanding. Such transparency and critical analysis could attract skeptical institutional players to crypto’s vision for the future.

We have many real-world examples of the benefits of open data. Especially with blockchain. When COVID-19 disrupted global supply chains, the value of blockchain solutions became clear. Companies that have implemented blockchain technology have been resilient. Companies have improved transparency and traceability in their supply chains while also reducing administrative expenses.

Fundamentally, those in the industry don’t need to be preached about blockchain’s inherent transparency. The problem is that the value proposition is not fully understood by everyone. But to really reap its benefits, we need open data access to allow everyone else to directly evaluate blockchain’s real-world effectiveness instead of trusting the word of an NFT PFP on Twitter.

If crypto is to serve as the gateway to web3 that we envision, onchain data must be freely visible to all through that gateway. 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.