Unveiling the Reputation Power Matrix: Decentralization’s New Hope
This is a derivative article relating to the Research Center’s version of the Reputation Matrix Lightpaper. In this brief article we will be discussing the “why” behind creating this system. Click here to access the main article.
Part 1: The Need for Decentralized Systems
Distribution vs. Decentralization
There are two main concepts we need to account for in our current and future versions of the web: distribution and decentralization.
A distributed system refers to the system itself (more specifically, the network infrastructure) to be spread out across multiple locations and entities. One aspect of decentralization refers to the dispersion of decision-making power from founders and developers to the protocol’s community, including but not limited to, users, operators, liquidity providers, supporters, etc.
A big misconception is that distribution and decentralization are equivalent in nature. However, it is important to note that though many web3 projects are distributed, not all are decentralized.
GMW3 has a brilliant way of illustrating this through a visual matrix:
Our Current Web’s Problems
Web2, our current web, can be classified under the “concentrated and centralized” portion of the matrix visual. The organizations include big-tech companies that essentially control our presence on the web. Google, Meta, Apple, Amazon are examples of platforms used by many individuals on a daily basis.
Being centralized companies, these organizations have full control of our own data. What we do on the Internet- communication, content creation, search engine utilization, sharing of information- leaves a digital footprint, which is mostly controlled by these companies.
There is no doubt that we need to bring back decentralization. Our original Internet, going back to the original concept of DARPA, had the goal to build a fully decentralized ecosystem. However, as these bigger players entered the market leading to a system where profits were dependent on centralization and competition was eliminated through consolidation, we’ve developed a more centralized framework.
One such example was Facebook, which originally started as a social networking platform, acquiring Instagram and Whatsapp, now controlling the majority share of the online messaging market.
On top of that, many incidents including hacked Twitter accounts, the Facebook privacy scandal, and various health data breaches exposing millions of patient’s protected information indicate the dire consequences of centralization.
Web3 Challenges
Web3 promises to bring back the roots of our initial vision of a decentralized ecosystem where each user can take back control of their own data, while overcoming the privacy challenges in centralization.
Such projects taking form to achieve this vision can be classified as decentralized. Ethereum, Metis, Aave, and Uniswap are projects that are both highly “distributed and decentralized.”
There are still, however, projects that fit into the other two categories. As mentioned before, many web3 projects nowadays are distributed but not decentralized, fitting into the “distributed but centralized” category. In order to achieve decentralization, equivalent voting power should be dispersed for the community- it is not enough to merely distribute a portion of tokens to the community or the public.
Projects that fall in this centralized category either lack protocol governance, have skewed decision-making power, or improper token distribution. For example, early projects that are funded by privatized token sales allowing VCs and institutional investors to obtain a significant amount of the tokens for these projects prior to their ICO can be seen as more centralized.
Why RPM is Needed
In order to achieve true decentralization, a new system is needed. Even the most decentralized systems today are still semi-decentralized because user identities are contained within a boundary. That boundary encompasses the system the user is part of (ie. the organization/protocol).
That boundary is often restricted and is referred to as a container. Reputation Power Matrix proposes an individual-centric DAO where privacy is able to be contained within the individual.
In this way, by utilizing a privacy-first regime, we can achieve both 1) privacy protection and 2) sustained value within the individual.
Part 2: The Web3 Solution
Why is Web3 necessary?
One major question many people have is, why is Web3 necessary? Our current web, Web2, is already succinctly developed. After all, our entire digital lives were formed through Web2- all of our favorite websites, countless social media accounts and established systems that we use to work, play, and communicate are all hosted with Web2.
That being said, why do we need to recreate a completely new version of our web if there’s already an established one that we rely on daily? The truth is, the digital profiles we create through our online presence aren’t actually owned by us.
Our data that we generate is actually owned by centralized organizations, including digital giants, governments, and service providers. These organizations instead profit from aggregating users and our user data.
Over the years, these organizations have only deepened their grasp onto our digital lives. Regulatory measures are of little or no avail and nothing has really changed, despite the many breaches, attacks, and privacy issues that have occurred. These organizations’ almost predatory behaviors are instead enhanced due to their ability to increase profits.
For example, Meta (back when it was Facebook) in 2020 generated about $86 billion in revenue, despite it being a free platform to use. How did they do this? Part of it was selling advertisement space, but another large portion of it was by selling the data of its users. These tech giants’ entire business model is earning revenue through their own customer data while having systems that are optimized to extract maximum value from each user.
Dangers of Centralization
You also may be wondering, what’s the actual harm of these centralized organizations owning our data? As long as we can access their applications and continue our day-to-day operations on them, what’s the big deal?
The key problem lies in the fact that our web is completely centralized. Meaning that there are a few overlords controlling the billions of user profiles and identities on the web, leading to concerns with data privacy. The centralized manner of Web2 also makes it an easy target for malware. Over the years there are many cases of cybersecurity threats leading to data breaches, identity theft, and abusive marketing.
Let’s look at a few examples.
The Facebook Data Privacy Scandal
Going back to an early example referenced about the $86 billion that Facebook made in 2020, we’ll do a more thorough examination of how this happened.
The real problem lies in the fact that these data privacy incidents have been ongoing- not just a one time occurence- and the reality is, little to nothing has been done about it, and to accompany it, an almost indifferent response in return.
In the most well-known event involving Cambridge Analytica, a political consulting firm behind many campaigns (including the 2016 US presidential campaign as well as the Brexit campaign), personally identifiable information of up to 87 million people were leaked to Cambridge Analytica.
As a result, the firm was able to harvest data from all of these consumers without their knowledge, specifically for the use of voter profiling and targeting.
The profile data was included but not limited to private profile details including status updates, private messages, and likes. Additional data was harvested through their personality quiz that was used to group individuals in order to create better targets. Abusive marketing through targeted ads is one such concern that arises from this, especially from tactics used through deception and manipulation.
The compromisation of profile information is one subject, but what if it was your personal information that can lead to both identity theft and financial loss?
Equifax Data Breach
In 2017, Equifax underwent a data breach exposing the personal information of over 147 million people. Intruders were able to obtain access to home addresses, phone numbers, Social Security numbers, driver’s license numbers and birthdates.
Hundreds of consumers in the US reported cases of identity theft as a result of the breach, and overall cost Equifax over $1.7 billion in repair damages.
The data breach was largely attributed to improper network infrastructure that was susceptible for digital intruders to break in. Inefficiencies and vulnerabilities within the infrastructure has led to many cases of cyberattacks, a problem that Web3 aims to minimize.
Data breaches and cybercrimes are present in many other industries — public administration, finance / insurance, education, retail, and even healthcare.
If we look into another example with the 2015 Anthem breach, criminal hackers were able to break into its servers and steal over 37 million records containing personal identifiable information, including member names, health identification, medical IDs, Social Security Numbers, and street addresses- very similarly mirroring the Equifax breach.
In fact over 80,000 cyber attacks happen per day. In the healthcare space itself, over 41 million health data records get stolen each year, resulting in overall industry revenue loss of over $6 billion. And the fact that this has been happening for years with many instances of breaches is purely unacceptable.
Web3’s Promise
Where’s the hope in solving this problem if it’s continuing to get worse over the years? Web2, a system which we once thought was so great and brought so many promises in fostering connection in community and innovation in user-generated content is now failing.
Web3, on the other hand, gives users complete ownership over their own digital assets. We can have the same interactions that we make in our current web with Web3, except without the need for centralized platforms.
Web3 uses a new stack of technologies, primarily through blockchain, enabling new economic, business, and social models. Web3 users are able to own their own data, and therefore their own identity. Depending on the type of platform or protocol, they can act as shareholders by owning the protocol’s tokens.
The reclaiming of identity enables the transfer of power from these centralized overlords and gatekeepers. Web3 allows for power distribution, not power consolidation.
Roots of the Web
In our previous discussion about problems from our current Web, we noted how Web2 organizations (ex. Big tech) are classified as “concentrated and centralized,” having full control over our presence. As a consequence of not having the ability to own our own data, data breaches, identity theft, and privacy issues often occur and are especially prevalent.
What is the solution to this problem? By identifying the root cause as centralized ownership, we need to design a system where power is given back to the users.
In other words, we need to turn back to the roots of the web. DARPA, the original internet protocol, notes that “the internet architecture must permit distributed management of its resources.” Web3 embraces this concept through a decentralized approach.
Web2 vs. Web3
Here’s what we mean:
When you’re browsing the web, you probably see the HTTP at the beginning of the web address. Like https://www.google.com/, https://www.youtube.com/ or https://www.facebook.com/.
The HTTP takes the form of a unique web address in order to find information relating to that site. All of the information is stored on a single server (fixed location). Being stored at a single location implies centralization, which means it is more prone to attacks and little control over data.
Web3 on the other hand will be simultaneously stored in multiple locations to ensure decentralization. Instead of the unique web addresses being used to locate information, content will be used to find information.
Web2 focuses on reading and writing content. We can see this through millions of articles, videos and interactive websites. Web3 revolves around creating content. While Web2 aims to connect individuals, Web3 works to increase trust.
Old Traps of Centralization
However, as we mentioned in the previous article, there are still problems with recently designed Web3 systems. In our matrix representation, various projects may fall under the “distributed but centralized” category. Our goal is to be both decentralized and distributed.
If we don’t make critical design changes we may fall into the old traps of centralization once again. Those that are kickstarted through VCs or investors are also backed by them upon launching, meaning that most of them have a significant amount of tokens at the start. This “concentration” may lead up to “centralization.”
These systems are still semi-centralized- very pre-value focused within a zero-sum value system. We want to create a post-value system based on mind-bound values. Generating content and fostering creativity (generative value system) should be prioritized more than our current societal approach- the number of accumulated resources / power (resource-based system).
Even with our Web3 systems, we’re still facing attacks from our nation state players. The recent ban on tornado cash by the US government where certain addresses and transactions were censored has very negatively affected the current and future prospects for the crypto community.
It not only questions the freedom of speech, but also leads many to think that the increase in censorship may make Web3 completely meaningless.
Privacy-First
In order to create an optimal Web3 system, we have to transfer dependence from the protocol to ourselves.
In Web2, we had to trust the companies (big tech and service providers) behind them, which as we have seen, has failed multiple times. In Web3 so far, trust is minimized because we have to trust the protocol behind them. This has proven to be reliable in purely decentralized and distributed systems, but what happens to purely distributed systems where a larger stake is given to initial starters and investors?
In the next article, we will be discussing a new system design involving the post or generative value system while being fundamentally decentralized and distributed, the Reputation Power Matrix (RPM).
Our goal for RPM is to create a personal datastore for all data to be kept private within a full economic cycle. By giving back complete control of data to users, we will be able to achieve our true form of decentralization.
