Facebook recently erased $125 billion of its market value after publishing a quarterly report, the largest drop in the history of the American stock market.
And it’s not about their fiscal numbers – the company actually reported a 42% revenue increase. It’s about the users: the user base increase just isn’t as high as it once was; With fewer people sharing information on the platform than before, its popularity is seemingly on the wane.
Some analysts go as far as to predict the demise of the social networking giant. They argue the platform is ageing badly and that more and more youngsters are becoming “Facebook-nevers”.
It’s true that 12 years, which is Facebook’s age, is a century in internet time, and that it may have lost its appeal for many users. It also had a series of privacy scandals, and admits the introduction of GDPR in the EU cost the company 1 million users.
Changing Technological Landscape
But stock value and revenue numbers aside, this could have a wider technological impact.
Facebook not only stores and displays our ideas, pictures, and comments, it’s the world’s largest storage of identities: information such as our name, profile, location, login, and password.
You know that button saying “Log in with Facebook” that you click every time you sign up at a vendor to make the process fast? It could disappear soon. And that’s no bad thing – our confidence in Facebook’s ability to safely store our personal data is fast fading.
It is unlikely Facebook’s dominant role in social media will be replaced by one single new entrant. We will more likely see users shifting to a variety of specialized niche platforms, which focus on a particular theme or technological approach. Similarly, Facebook’s role in personal data management may transfer to a number of alternative providers.
Blockchain is then the obvious choice for anyone wanting to build a personal data management framework. It would not only optimize its functionality with automated processes based on smart contracts, but it could regain user’s confidence in storing their data online by providing transparency on top of strong security.
Above all, blockchain could put users back in control of their personal data.
It is possible that banks or telco operators, who also store our personal data, will become the new providers, and arguably we trust them more than we trust Facebook. They could earn revenue providing personal data-as-a-service to partners.
Here’s how it might work:
When a user opens an account with a bank or a telco, a digital identity would be created. Its private key could be safely stored with the user, inside their phone, credit card, or other device. The provider then creates a virtual identity, using a public key from the digital identity.
When the user now visits a vendor wanting to know their identity, the vendor site starts running an app provided by the identity provider, to supply the identity. A copy of the ledger entry is sent to the vendor site app. Now the vendor app can look up all entries for that same virtual identity.
Once the virtual identity is established, the vendor needs to know that it belongs to the user, so its app takes the public key from the virtual identity, encrypts a challenge and sends it to the user who decrypts it, using the private key, and responds. Now the vendor site generates a virtual identity which is then stored in the ledger itself.
The ledger would hold the transaction history, so we would finally be in control of who knows what about us, and who asked what and when. We would be better off and the identity provider could still earn with this model.
Activists see blockchain as a means to eliminate all intermediaries in the storage and exchange of our personal data, and see a future with open-source applications managing their flow over a public blockchain network. Hence there is a vision that excludes the role of commercial identity providers.
Whatever the final solution built on blockchain will look like, users will certainly benefit.
Being bearish about Facebook’s future suddenly feels somewhat optimistic.
Or perhaps Facebook will also endorse blockchain themselves?
David Marcus, one of the company’s top executives, has recently said that he’s leaving to “set up a small group to explore how to best leverage blockchain across Facebook, starting from scratch.”