Privacy and Bitcoin

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This article builds on the ideas and techniques discussed in the article ‘Profiting from privacy’ by Dr. Craig Wright. In this article, Dr Wright outlines some of the ways that Bitcoin can change the way we manage our own privacy, and reclaim ownership of our data.

One of the unfortunate side effects of today’s corporate strategies is to monetize the information that users input into their platform with scant regard for privacy, whether mandated by the law or not. Services are provided to users at no cost, and users are asked to sign away their rights on term sheets that are tens of pages long. People use these services, because they are extremely useful. They allow us to connect, to communicate, to store and retrieve information, and to participate in games, conversations, events and more.

It’s interesting to understand the profit models of these companies. Facebook had revenue of over $11 billion last year, or almost $6 per user, but how many Facebook users have ever paid them a cent, let alone dollars? This money is generated through the monetization of human information.

Facebook is a data warehouse whose catch is trawled from the public by providing users with new and better ways of sharing everything about themselves. Every like, click, message and photo catalogued and kept on ice for later analysis, grouping users in a thousand different ways, allowing them to be bundled and sold for targeting by Facebook’s real customers who are the advertisers seeking to buy access to your feed. It is amazingly easy for anyone who wants to sell you goods, services or even ideas to buy advertising space that targets exactingly chosen groups of users who precisely fit minute market segments, maximising the impact of campaigns. This is used with amazing efficacity in sales campaigns, elections and more.

Turning the tide towards more privacy

I like to live by the mantra that if something is given to me for free, I am not the customer, but the product. Where a service we use daily is provided to us for ‘free’, generally it is the information that they store and the things they do for us which are being re-packaged and sold. With the advent of Bitcoin, we have the opportunity to turn the tables on this business model and to bring that money home, giving users the ability to choose what details they provide to the host of corporates vying for their attention, and to monetize those choices themselves. Facebook and others can still be a part of this new business model, but rather than building the tools they need to monetize you, they will build and sell you the tools that you need to monetize yourself.

In this new landscape, you will be in control. Imagine for instance a Twitter service where all tweets are sent onto the public ledger. Using nChain’s novel threshold key encryption methods you will have the ability to restrict access to a specific set of people such as your family, or to a larger group you’re your friends or colleagues, or people who live in your city or country. You’ll also be able to send a message with access so broad that anyone with a Twitter account, except the people you’ve personally blocked can view. Twitter can even allow you to tag a message in such a way that it allows people without a twitter account to view, giving them something they can curate to entice new users into the system. They could even pay you for this privilege. Even more interestingly, once you have given access to a certain group or individual, you have the ability to revoke it as well. Threshold keys make it possible for any information that you store on the blockchain to be made private, and for you to change the availability of that information.

This can change the nature of how Twitter works, but puts you, the user, in the seat of power. Earn enough credit to make one tweet by watching an ad. Participate in a survey to upload one image. This advertising can still be targeted to you, but because you are being paid directly, you will appreciate the ad more. You will be able to choose what advertisers see. Vote in a poll to earn the right to follow 10 more users. The more you share about yourself with advertisers, the more likely you are to be shown goods and services that interest you, but ultimately you are still in control. Or you could simply bypass the whole thing by paying Twitter directly, using Bitcoin to buy the tokens you need to use their system. $0.005 per tweet. $0.05 per image. $0.5 per 30 seconds of video. By integrating Bitcoin into their system, Twitter could make it simple and easy for users to tip other users in cash. No payment gateways, no SQL layers. Just Bitcoin, peer to peer. This can be done in such a way that Twitter gains a 1% cut of all money exchanged on the platform. It can also be done in a way that allows users to monetize their own content. To sell access to their pictures, their videos and more. Rather than receiving a tiny percentage of the advertising revenue monetize your content and be part of a new industry.

On-chain privacy and the IoT

As Dr. Wright discussed, one of the greatest strengths of Bitcoin is its ability to allow all users to exert private control over the devices and information they own. When we begin to think what this means for the Internet of Things (IoT), we can see whole new ways of approaching distributed control and data acquisition systems.

At the simplest level, let us imagine you have a door lock. The lock has an address and a connection to the network. When you first set the lock up, you and it generate a shared secret that allows you to be the master controller of the lock. This shared secret is held by you and the lock and allows you to send it messages on a private channel only visible to you. Through this channel, you can enable others to unlock the unit, giving a serviceman a one-time access, your cleaner time locked access, or unlimited entry for family members. You can also to choose what events you want the lock to log in your private channel. You could also tell it to send you an off-chain log of every access event, successful or unsuccessful, encrypted and encoded ready to be stored permanently on the blockchain at the press of a button. This might include a photograph or video of the person interacting with the lock, or myriad other details. All accessible only to you, or to you and whoever you choose to show it to, but invisible to the rest of the world.

The major difference between this smart lock and the systems of today is that the encryption and security that gives your data its privacy is embedded within the casing of the device itself, and the device needs only to connect to the Bitcoin network. No secure sockets, no APIs and no default administrator logins. No more will simple hacks enable the video feeds from thousands or millions of people’s security systems to be accessed via the internet. Never again will your security be compromised by poor design. By imbuing your data with the secure and immutable properties of a Bitcoin transaction and locking its ownership and accessibility to you, a new level of privacy can be achieved. One which is not dependent on your network expertise, or the ability of a remote web server to remain secure. Your data will be as safe as your money.

What does privacy mean?

Many people misunderstand Bitcoin and think of it as an anonymous system; however this is not the case. If Bitcoin were completely anonymous, none of the applications described above could be built. You would have no way of knowing that the video being sent from your camera was actually coming from your camera. You could never be certain of the origin of a message that said it was from your friend. In fact, you could never be 100% sure that any of the information you saw was real. With privacy, all these things are imbued with a level of certainty that cannot be achieved without providence. If you cannot tell from where something came, you can never be sure of its truth. And ultimately, that’s what Bitcoin is about. The establishment of an immutable source of truth for everyone to use.