Thoughts on Blockchain, Data Ownership, and Its Implications to Humanity

On blockchain technology

I suspect every article you have read about Bitcoin, blockchain, or decentralization begins with “What is blockchain?” I do not want to repeat too much of what others have explained, but I do want to share some ideas I have gathered from pioneers in the field.

To me, the clearest technical explanation starts by treating the internet as a database.

On today’s internet, people can read information and contribute it. The data lives in centralized databases whose owners have the power to read and write everything. The people who create the data may be granted permission to read it, write it, or know when it is accessed, but none of that is guaranteed. Put simply, users and companies create data together, but companies control it. A user’s control over their own data depends on the company’s generosity. Users may never know whether their data is being sold or monetized.

In a blockchain network—Web3—the rights to read and write data, and to know when it is accessed, are meant to be distributed among the network’s participants.

There is something I want to correct here. Today, most blockchain applications still sit on traditional internet infrastructure. Their data remains in centralized clouds and is still owned by companies. OpenSea, for example, may put an NFT’s transaction history on a blockchain, but the image itself still lives in the cloud. A cryptocurrency exchange may use a distributed transaction ledger while keeping its users’ activity data in its own database.

In other words, many blockchain startups have changed the packaging without changing what is inside. Only 10% of a product uses blockchain; the rest still depends on traditional centralized technology. This is an embarrassing detail we often overlook. The database still has an owner. What has become public is the record of its transactions.

The future we hope for is one in which internet data is fully distributed among participants. The network oversees records of reads and writes. Data creators control access to their data and approve its transactions. Companies and individuals who want to use that data must first ask its creator and pay for permission. Whether the creator agrees or not, the company’s inquiry would raise that creator’s standing within the network, calculated fairly and transparently by formulas in the underlying protocol. Imagine an unknown neighbor suddenly being greeted as an old friend by Michael Jordan. He becomes famous overnight. Exactly how famous would be determined by agreed rules.

Here is another misconception: “Blockchain is a technical prerequisite for returning data to internet users.” Existing internet companies could already choose to share data ownership and revenue with their users. Most simply have no obligation to do so. Google or ByteDance could give half its revenue to users—but why would it choose to leave that money on the table?

Blockchain, then, is not a prerequisite for returning ownership of data to consumers. We do not need to wait for the technology to mature before challenging the landlords. Changes to privacy law matter more. I intend to return to that in future writing.

The problems with blockchain

Blockchain is no miracle. The idea that one technology will magically transform humanity is bullshit. Its problems are numerous. Here are the ones I have seen or thought about.

First, a blockchain world can offer anonymity without privacy. Once your identity is established, anyone can trace your transaction history. Digging into someone’s life becomes easier than ever.

Second, a lack of privacy means a lack of room for mistakes. Even if someone is misunderstood or framed, that history stays on the chain forever. They may eventually be vindicated, but the record will follow them for the rest of their life. Human progress depends on making mistakes. A society that denies people the chance to make and correct them is fundamentally hostile to humanity. That deserves serious concern. Blockchain could make online mob harassment worse.

Third, blockchain’s value exists inside the network. The physical world does not run on blockchain. People constantly move between the two—on-chain and off-chain. A participant’s dealings with the outside world are not inherently governed by the chain’s contracts. A conventional government can sanction a network; a fraudster can disappear and start again on another one.

Sanctioning a cryptocurrency can be straightforward. A government need only pressure the intermediaries responsible for approving transactions onto the chain and tell them to stop approving that currency. Those intermediaries exist outside the blockchain and are not protected by its contracts. To survive, they comply. From the government’s perspective, the blockchain’s vision of a better world is a goldfish dreaming inside its bowl.

Fourth, a blockchain’s founders and early participants have built-in advantages. They set the rules and own much of the network’s resources. A clever, malicious founder can deceive those who follow and easily fleece them.

Fifth, a blockchain can execute an established order very well while struggling to adopt more radical changes to that order. Someone seeking reform must persuade the network’s influential members. Their existing interests make it difficult for them to embrace radical change. In this respect, blockchain resembles ordinary society: an established network struggles to encourage its own continual reinvention. A revolutionary may find it easier to leave and build a new network than to win over those who benefit from the old one. I do not see how this improves on our existing social systems.

Sixth, a blockchain cannot establish whether an item entering it is genuine. It can establish the record of that item’s transactions. It cannot tell you whether a medicine or a bottle of wine is authentic, or whether a cat is really a cat. It can only tell you who owned the unfortunate cat first. This helps explain the prevalence of counterfeit NFTs. The authenticity of the item itself still needs someone’s guarantee, bringing a central authority back into the picture.

For a digital artwork, the NFT platform still has to put its own reputation behind the claim that the work was made by the artist named. Unless every element of the entire world goes on-chain, complete certainty about authenticity remains impossible.

The struggle over data between people and companies

Let us change the subject and talk about data.

Users use a company’s products, and the company owns their data. It sounds like a seamless arrangement, almost a law of nature. Where is the conflict?

I want to approach this from two sides: how the monetary value of data is divided, and who controls the lives behind that data. One concerns money. The other concerns life itself.

The value of data

There are eight billion people in the world, and five billion use the internet. China, the United States, and Japan are the largest markets. Outside China, there are Google, Facebook, Apple, and Amazon; inside China, Alibaba, Tencent, and ByteDance. Their combined value exceeds US$20 trillion, equivalent to one fifth of China’s annual GDP. In 2021, advertising supplied 75% of Google’s revenue and an even more striking 97% of Facebook’s.

That US$20 trillion represents only part of the journey from supply to demand: the value of technology companies acting as advertising intermediaries. We have not yet considered the profits of the upstream producers.

More than 70% of these technology giants’ accumulated wealth comes from activities built around trading user data—in other words, precisely targeted digital advertising.

A merchant has a product and wants to sell it at the highest possible price. Who should see an ad? When? What should it say, and how should it be presented? How can the smallest advertising spend produce the largest profit?

None of this works without intelligence. None of it works without personal data.

Digital advertising has a well-known term: customer lifetime value, or CLV. Roughly speaking, as a merchant, how much money can I extract from a customer over the period in which we might do business? Everyone’s CLV is different. Measured annually, and depending on the industry, it may range from tens to hundreds of thousands.

Merchants want to identify high-value customers precisely and find the best ways to keep them buying, achieving high profits at low cost. Calculating CLV requires enormous amounts of historical data. Technology giants own social networks and search engines that almost everyone uses. They can continually supply both the data and feedback from advertising auctions.

At any given moment, roughly a hundred thousand data and advertising companies around the world are facilitating transactions between merchants and their target users. Advertising is the modern internet’s biggest financial backer.

The absurd, sad part is that ordinary people never participate in this complicated trade in their data. What appears in front of us is a stream of promotions and a choice about whether to buy. We are always the lamb that discovers, too late, what it was being prepared for.

So how much is my personal data worth? I can only guess. A few hundred?

The unfair distribution of data’s value

The relationship between users and companies resembles a capitalist employment relationship. Users are the tenant farmers; companies are the landlords. Users produce the data; companies own it. Users have no idea what their production is really worth.

Take ByteDance. Users produce data on Douyin. Free access to Douyin is the compensation ByteDance gives them for their work. The difference between the platform’s operating and development costs and the actual value of that data is what we call surplus value. Modern social networks are platform economies: users create content that attracts other users; influencers attract users and more influencers. The company supplies the technical infrastructure. As the snowball grows, the economies of scale can become astonishing.

Suppose Douyin spends ¥1 to run its platform and attracts 100 users whose creations generate ¥100 in data value. Through free access, it returns ¥1 of value to those users and keeps the other ¥99.

The distribution of surplus value is a starting point of Marx and Engels’ Capital. It is also a fundamental point of conflict between workers and capitalists, and between users and companies. As in the struggle between labor and capital, users are at an overwhelming disadvantage. The wealth and power their production generates are not fairly distributed.

Communism seeks to free workers from this disadvantaged relationship so that they can become the owners of what they produce. The same ambition applies to users and companies. We want data producers to take ownership of their data, decide whom to share it with, receive appropriate compensation under transparent market rules, and free themselves from exploitation.

Returning to Douyin, we can imagine two arrangements that benefit both sides. Here, “data revenue” means the advertising fees merchants pay the platform to market to its users.

• Under a free-platform model, ¥100 in data revenue comes in and ¥1 pays for maintenance. Of the remaining ¥99, 60% returns to the 100 users and the company keeps 40%. Each user receives ¥0.594.
• Under a paid-platform revenue-sharing model, each user pays ¥0.01 toward operating the platform and may choose to lease their personal data to the company. The company returns 60% of the revenue to the user. If the data earns ¥1, the user’s net return is ¥0.590.

If data revenue is transparent and verifiable, revenue sharing could narrow the gap in wealth and power between consumers and technology platforms, allowing a relatively fairer distribution.

Control over users’ lives

A company’s monopoly over data reaches beyond money. It also gives the company influence over people’s material, emotional, and everyday lives. This manipulation can happen without our noticing, which makes it especially frightening.

To explain, I want to go back to capitalism more broadly.

Since the nineteenth century, successive industrial and technological revolutions have pushed productive capacity far beyond basic human needs. To address the imbalance, producers have had to manufacture demand and stimulate consumption. Marketing and advertising emerged from that need. But a single flyer is never enough. Creating demand—or manufacturing desire—requires pressure from every direction.

That means changing the course of ordinary lives. Someone who once needed one steamed bun now supposedly needs two. Someone who needed a bed now needs a villa. Reshaping these expectations requires encouragement and pressure across society: from advertising to education, governments to insurers, banks to doctors. Competition between people helps too. My neighbor buys a fan, so I buy an air conditioner. They drive a Santana, so I buy a Passat. Your son goes to Tsinghua; my daughter must go to Harvard.

This is how the original neijuan—the escalating race of competition—begins.

We give it a nicer name: stimulating domestic demand. We eat more, grow fatter, work harder, and live in bigger homes. Rising demand feeds back into production. Producers expand in anticipation of further growth. Consumers, facing upgraded products and ever-changing measures of success, work even harder, driven by anxiety and pressure from others.

It is like a group of lab mice generating electricity by running in wheels. They compete, run faster, eat more, grow fatter, and then need to generate still more electricity to earn more food. The vicious cycle keeps expanding.

This pressure moves from the physical to the psychological, from one household member to the whole family, from a city to its surrounding towns, and from developed countries to less developed ones. Wherever differences remain—wherever there is a temperature gradient—capital rushes toward them. Its expansion continues until the whole world reaches a standstill.

By the time the world becomes a single stagnant pool, its resources are exhausted, people’s mental lives have collapsed, and social conflict has passed its breaking point. By the time humanity wakes up, it is too late. This is the destination of a modern society driven by capital’s expansion, and the same force that drove Western colonialism a century ago.

Growth has limits. We need to rescue ourselves from its trap. This may be the deepest problem humanity needs to confront and recognize.

Back to the expansion of data capital

The struggle over data between users and companies follows the same process toward the same outcome. Data points toward capital, giving its expansion the potential to accelerate exponentially.

Once, persuading someone to buy two steamed buns took a sales pitch and a printed flyer. Now, changing a single variable in code can reach into billions of minds. Human optimization is rapidly being accelerated by machine learning. The consequences are frightening.

In the era of web portals, users could read or choose not to read. Today, users both read and write, yet their ability to opt out has weakened. Those who own the data have learned to hold our desire to read and write in a tight grip.

Through endless feedback loops of data mining and A/B testing, companies can refine how they break down our independent judgment, encourage comparison with others, and guide us into a maze they have already designed. Like billions of lab mice, we move anxiously yet reassuringly along the algorithm’s planned route, unable to see the capitalists and scientists above the maze.

If you do not see yourself as a lab mouse, let me give you some examples.

A limited-time sale on flights and hotels looks like a merchant sacrificing profit and giving customers a bargain. In practice, it exploits the pleasure of getting a deal, creates a desire to travel that was not there before, and uses a deadline to turn anxiety into a purchase.

I had no intention of spending Christmas in Bermuda. Then JetBlue sent me a 24-hour flash sale offering half-price flights. Suddenly I wanted to book. This was my chance; missing it would be stupid. I worried about spending Christmas miserable and regretting it, so I bought the ticket. Now I also needed a hotel and a rental car. When I arrived, I found crowds of other fools who had made the same impulsive purchase. And I still had to spend more at restaurants and bars.

Or consider business-class mileage redemptions, or a five-star hotel such as the Park Hyatt Toronto offering a night for only 20,000 points. To enjoy luxury cheaply, I anxiously rearrange my life and walk into a maze of consumption the merchant has prepared. At the hotel, I buy the overpriced buffet. Next time, the same mechanism pulls me in again.

Do I actually need business class? Do I need the Park Hyatt? Might I prefer somewhere cheaper and closer to everyday life? I cannot tell, because I have had neither the time nor the space to understand what I really want.

I have fallen into these traps countless times, and I still do. Other examples include Liu Yifei’s sudden effect on tourism in Dali, banks’ “red envelope” giveaways that bring users back to an app every day to grab one yuan, and fitness apps that promise points for walking but never yield anything you can cash out. Again and again, our consumption is steered away from our actual needs.

Psychological suggestion through technology

Here is an example of suggestion.

We play a game. I sit in front of you and offer two face-down cards, one on the left and one on the right. I can influence which one you choose.

If I want you to pick the left card, I can chat with you while repeatedly glancing toward it. You may never consciously notice the cue, yet your subconscious has already been recruited. You become more likely to choose that card.

Magicians use this kind of technique all the time.

Technology companies are equally fluent in suggestion. Their bosses do not have to sit down and chat with you. They put the cues into the platform’s content. They manufacture fear by repeatedly showing you layoffs, disease, and war. They create anxiety: someone else was promoted—congratulate them. Through your friends’ posts, they encourage comparison: someone went to the Maldives, someone to Iceland or Norway. When you log into your bank account, it tells you that you are still a million dollars short of retirement.

It is easy to be bombarded into feeling tiny and powerless. Your success depends on Daddy Tencent; your survival depends on Mother Apple.

Your father is no longer your father. They are your father—and your father’s father. You all live at their mercy. You are all slaves.

With technology, a few lines of code can deliver a psychological cue to hundreds of millions of people at once. Even if its initial success rate is low, time and continually optimized algorithms eventually bring users into the trap.

The scraps of time in our days have become prizes companies fight to capture. We once used those moments to daydream, reflect, examine ourselves, or make peace with ourselves. Now we look at our phones.

Every product has metrics by which its success is judged. Consumer technology commonly uses daily active users and session duration. The longer people stay, and the more people who use the product, the more opportunities the company has to make money through advertising and subscriptions. For a product to succeed, its teams must keep finding ways to glue people to it. Hence the endless short videos, limited-time sales, alarming headlines, and bottomless recommendations for yet more articles.

I believe technology companies often begin by wanting to gather users and make some money. But pressure to monetize turns them into experts in psychology, raising lab mice, and harvesting their users. Too many people who could have been independent revolutionaries become anxious, fearful workers waiting for someone else to decide their fate.

Modern technology companies have become more skilled at this than earlier capitalists and dictators. What happens if the technology companies and dictators join forces? That possibility helps explain the fear and anger toward Facebook in Western societies.

Why the battle over data matters

Winning users’ ownership of their data is a necessary part of confronting capital’s expansion. It is also a necessary step toward getting ourselves off this accelerating downward trajectory.

If people want to recover their autonomy, take ownership of their happiness and lives, become self-sufficient, and escape the exhausting race, they need to own their data.

We need to decide who can read and write in our databases, rather than let others decide whether we can read and write our own data. That distinction matters enormously.

Blockchain and communism

Although most communist experiments ended in failure in the last century, I still want to discuss communism.

Looking across modern history, the communism advanced by Marx and Engels comes closest to a “technology” for resisting capital’s expansion.

At its core is the ambition to give workers control over surplus value and free them from the exhausting competition that expansion produces. I see blockchain as a digital upgrade of that idealism: one possible route for individuals to gain agency when facing financial powers far larger than themselves.

Ideal communism requires a more developed human understanding of value than our societies may currently possess. The same may be true of blockchain’s celebrated principle of decentralization.

A blockchain is a network of trust. We can think of it as a commune formed by people who share the same values. Their productive contribution is validating transactions. In return, they earn standing and resources under fair, transparent rules. Those who contribute more receive more work points, and those with more points receive priority in future opportunities to contribute.

The network has no substantive owner or capitalist boss. Its resources are shared and collectively owned. The system based on Marx’s original theory of surplus value is similar. It differs somewhat from the version many of us know: it does not involve a government redistributing all social resources or a state directing production and distribution. In other words, it does not imply a centrally planned economy or a large centralized government.

The shortcomings of blockchain and communism

I have already described several vulnerabilities in blockchain. I want to compare them with ideal communism.

First, revolutionary pioneers enjoy greater priority and control more of the network’s resources. It is harder for later arrivals to overtake them than in a society driven by capital. In ordinary profit-seeking markets, entrepreneurs can rapidly acquire wealth through industrial upgrades and technological innovation. That route is much harder inside a blockchain network.

Second, and perhaps the greatest weakness of today’s blockchain networks, is their relationship with the existing world outside the chain. We can think of that outside world as a capital-driven society and the blockchain as a communist world, an internal system. If participants intend to exploit differences in pricing between the two, convert the resources they accumulate inside into outside wealth, and eventually leave, later arrivals will inevitably be fleeced.

These supposed revolutionaries are then speculators who can abandon their commitments and collaborate with the opposing side whenever they wish. They can take rice acquired through work points and ration coupons and resell it in a capitalist market for a hundred times the price. If participants’ real home remains outside the chain, the network cannot last.

This also helps explain the disorder in cryptocurrency and Web3 gaming. Going on-chain is temporary; cashing out is the goal. A mindset built around exploiting later arrivals cannot produce a mature third-generation internet.

Like communism, a blockchain network asks participants to loosen their attachment to established measures of value, place less emphasis on money, and care more about life itself and the happiness that comes from directing it. Most of humanity has not reached that state of understanding.

Most communist experiments suffered a period of failure toward the end of the twentieth century. Under centralized communes, people disengaged, deceived one another, or found themselves in systems that departed from human nature and became unstoppable cults.

Idealized blockchain, like idealized communism, differs enormously from the society we live in. That difference does not require us to reject the ideal altogether. We need a practical road map for change: moving on-chain in stages, winning smaller battles with expanding capital in the near term, and gradually helping people shift toward longer-term values and a deeper inner life. Such a path needs patience, time, and continuing effort.

Conclusion

In the mid-nineteenth century, Marx questioned the expansion of capital under the Industrial Revolution. His answer was the theory of surplus value and communism. In the early twenty-first century, Satoshi Nakamoto questioned the power of banks after the financial crisis. The answer was decentralized blockchain.

Ideas cannot be separated from ideals. Turning a vision into reality takes generations of practitioners trying, failing, and trying again. Communism and blockchain, two ideas in which people have placed great hopes, may help humanity develop. They may turn out to be utopias or fallacies. Only time will tell.

Finally, I want to make my position clear. Whatever methods we choose, I sincerely believe we must fight for ownership of our data. Blockchain technology is not an absolute prerequisite for either fighting or winning that battle. I intend to explore practical approaches in future writing.