Toward a Digital Economy That’s Truly Collaborative, Not Exploitative

Overcoming the flaws of an internet controlled by a few major players will enable web services that are more democratic and fair.

A colorful and busy scene of people transacting with one another across a range of digital businesses and services.
Rami Niemi

Not so long ago, as we contemplated the future of the internet, we wondered if we would see an online proliferation of Wikipedia-like platforms and grassroots network movements that would empower marginalized communities and give them a voice. At the same time, we discussed the distant prospect of a dystopian scenario where a few multinational corporations would control our digital infrastructure, our data, and our wired lives — but this latter vision wasn’t so unlikely after all.

From Airbnb to YouTube, every day we use closed, proprietary digital platforms from the so-called “collaborative economy,” a socio-economic model where communities coordinate through online platforms to create, produce, distribute, trade, and consume goods and services. These platforms are typically centralized, concentrating control within a single authority (often a global corporation), which presents serious issues concerning their infrastructure, governance, and economics. 

Recently, a new generation of decentralized technologies has emerged with the potential to overcome these structural problems and support a more democratic and fair collaborative economy. 

Infrastructure

The collaborative economy has given us the likes of Uber and Kickstarter, GitHub and Thingiverse. Its advent has led to rich user interaction, sleek modern interfaces, peer-to-peer connections, online communities, and new forms of cooperation. But it has also brought a wave of new challenges. 

These software platforms enable large online communities whose sheer size is often greater than the populations of most countries — e.g., more than 40 million on GitHub, 150 million on Airbnb, and two billion on YouTube. The success of any of these platforms depends on managing innumerable daily interactions. In terms of both hardware and software, it’s difficult to comprehend the scalability involved.

Without taking profit into account, just running and maintaining one of these platforms is wildly expensive. For instance, before the Trump administration forced TikTok to arrange a deal that made Oracle its new “secure cloud provider,” the mobile video-sharing app reportedly agreed to purchase three years of cloud computing services from Google Cloud at a cost of $800 million. Similarly, the large platforms are all renting Amazon cloud services for exorbitant monthly amounts, like Twitch ($15M/month), Linkedin ($13M/month), and Twitter ($7M/month on top of $10M/month to Google Cloud). This doesn’t take into account many other operating costs, like personnel salaries and software maintenance.

The owners of these platforms are therefore constantly under immense pressure to monetize their online services or die trying. And what do they have to monetize? Our data, of course.

It has become overwhelmingly clear that surveillance is the business model of the internet. Though some critics of this system believe that this is because evil, power-hungry overlords control the dominant web platforms, I’m inclined to see structural reasons as the root cause. The way that the internet and the data economy work today, relying as they do on centralized platforms, facilitates the steady adoption of this (terrible) business model in order for internet-based businesses to become economically sustainable.

The platform ecosystem has become progressively concentrated, reducing the number of players and raising the barriers to entry even higher.

The consequences of extensive data-mining, data-selling, and ad-targeting surveillance practices can be seen far and wide, with platform owners harming individual privacy in a variety of ways. Pervasive ad networks and activity trackers monitor users of platforms — and even those who do not use them — beyond the bounds of their domains through shadow profiling. Take-it-or-leave-it terms of service promote predatory practices, while default “privacy settings” make a mockery of the term, enabling over-sharing of data and information.

It doesn’t stop with privacy, of course. Dominant network effects, walled gardens, and high barriers for competition have produced de facto monopolies, where we overwhelmingly go to YouTube for videos or to Airbnb for apartment hosting. The race for traffic to support ad sales has promoted clickbait content and swarms of bots. Recommendation algorithms encourage extreme polarization and systemic bias. The micro-targeting of propaganda is weakening our democracies

What’s more, large centralized platforms are precarious repositories of the data they collect, and have been shown to willingly collaborate in state global surveillance.

Governance

These infrastructure issues aggravate the problem of governance — that is, the rules and decision-making processes that determine how these platforms are managed. 

People may wonder, “If big platforms are that problematic, why don’t users react in opposition?” And they do. Uber, for example, has faced backlashes on privacy, safety, racism, price fixing, worker protection, tax evasion, law enforcement evasion… the list goes on and on. And yet Uber still holds roughly 70 percent of the US rideshare market.

These platforms are typically run by companies whose management is the same as most multinational corporations: shareholder boards, CEOs, formal hierarchical structures, investors, managers, and so on. Though there is clearly a colossal disproportion of power between platform owners and user communities, the latter are expected to do much more than traditional passive consumers. A platform like YouTube is really an empty shell; it’s the user community’s content and interactions that give it value. But users don’t have a voice in determining things like company direction, new platform features, or how they might share in the value that their activity generates for the business. There may be feedback mechanisms of some sort, but not actual power, accountability, reviewing, or revoking decisions or appointments. 

These large and complex user communities are mediated by software platforms that decide what they can and cannot do. The design of their software interfaces matter, since the implicit values and biases are embedded in the code. The adage “code is law” implies code acts as the main regulator and enforcer of online life — that is, code is what dictates how these users are permitted to upload content, share, trade, or interact with one another. It’s also what dictates the monetary commissions and fees that they’re charged, and when (or if) they’re compensated. Generally speaking, the problem with governance boils down to the idea of taxation without representation.

Economics

This brings us to another major problem: profit distribution. The centralized nature of these platforms and the disparity of power between platform owners and user communities invariably leads to the concentration of resources in the hands of the owners. Though these platforms undoubtedly provide services of value, user communities generate most of the value, and yet the normalized lack of distribution of resources to content creators is astounding.

Various models for compensating users and content creators exist. Flickr, Twitter, and Mendeley, like most platforms, do not provide any economic compensation to content creators while extracting their private data — a case of the consumer becoming the product. Airbnb and Uber charge both producers and consumers for the use of their service, extracting value from fees as well as their private data. YouTube and Medium pay high-profile content creators but don’t compensate lower-level creators. On the other hand, Kickstarter and Goteo, like most crowdfunding platforms, due to their nature, do enable fairer retribution for content creators and typically don’t charge fees to projects that don’t reach their funding goal. 

The platform ecosystem is also becoming progressively concentrated, reducing the number of players and raising the barriers to entry even higher. Tech giants eagerly purchase platforms in order to integrate data streams and neutralize potential competitors, with Google buying YouTube and Waze, Amazon buying Goodreads and Twitch, and Microsoft buying LinkedIn and GitHub. 

Future Alternatives

Overall, current internet services are overwhelmingly biased toward enabling centralized platforms with serious structural issues. The P2P Models project, of which I am principal investigator, studies the notable exceptions that constitute commons-oriented platforms, such as Wikipedia, GNU/Linux, Fandom wikis, and Reddit. The research project also examines how we can combine new technologies and commons-oriented models to build platforms where no single entity controls the infrastructure, where communities have a voice in how they operate, and where profits are more widely distributed across users.

The aim is to leverage the potential of modern technologies, including blockchains, to explore the construction of collaborative platforms that are decentralized, inclusive, democratic, and economically sustainable. Among other things, this work involves studying collaborative platforms and determining how blockchain and free/open source tools can help them transition to a more decentralized paradigm.

What if we had a diverse ecosystem of interoperable Airbnb-like services that shared the same house listings, users, and reputation history?

The red flags of an internet controlled by a few centralized major players have become increasingly clear. To counter this, decentralized technologies have enabled the emergence of a new ecosystem of projects that aim to address these problems. The Dat Protocol aims to decentralize data management, for example, helping overcome the problems of siloed centralized data hubs. The sharing of large files can benefit from WebTorrent’s adaptation of the classic peer-to-peer system BitTorrent to work as a decentralized browser-to-browser file transfer network. Even World Wide Web creator Tim Berners-Lee acknowledges the centralized internet’s faults and is leading the Solid project, which is focused on enabling users to own their personal data.

Another example, Mastodon, is the largest decentralized social network, accounting for 4.4 million users. Though it relies on servers, they are interoperable federated servers that don’t lock users in. Free of ads or controversial business models, it’s a community-driven software project that enables organizations to deploy their own social media communities. This local, federated approach with smaller communities enables them to have moderators, local codes of conduct, and generally safer communities compared to the troll-packed Twitter.

Meanwhile, blockchain technology has enabled new forms of decentralized financial instruments — cryptocurrencies (e.g. Bitcoin), but also crypto-bonds and smart contracts (e.g. Ethereum). This has enabled services that are based on new business models and so-called tokenomics, i.e. value exchanges that distribute transferable and non-transferable (reputational) tokens. The proposed models are typically inclined towards distributing resources, (micro-)paying users for actions performed, and minimizing the use of private data. 

Blockchains have also enabled decentralized governance, allowing the rise of decentralized autonomous organizations (DAOs). In DAOs, user communities are mediated by code as in traditional platforms, but instead of having a sole platform owner, the code is deployed serverlessly throughout the nodes of a blockchain network. DAOs may be programmed so that their code can be changed only by certain rules, such as by a democratic vote of its users. These autonomous digital platforms can provide services without relying on any central server, without trusting a central controller, and without any single party able to arbitrarily change them, revoke APIs, or shut them down.

Such organizations can provide services or resources to third parties, and even hire people to perform specific tasks. Individuals can transact with a DAO in order to benefit from the service it provides or to get paid for a contribution they made. DAOs can be considered fully autonomous in the sense of not depending on their original creator, with developers and users all potentially partaking in their governance. Under this model, the source code that mediates and conditions user interactions is in the open and under discussion rather than a proprietary secret. These organizations can also be considered self-sufficient to the extent that they can charge users for their own services or assets in order to pay for the services they need. 

If DAOs start competing with traditional platforms, they may provide attractive features that centralized global platforms will have difficulty matching. What if we had a diverse ecosystem of interoperable Airbnb-like services that shared the same house listings, users, and reputation history? One service might offer better insurance protection given its peer-to-peer nature, another might be fully anonymous and privacy-preserving, services might tailor themselves to local cultures to help preserve their character, and so on — all potentially without unreasonable fees, data hungry predators, or de facto monopolies. This vision is today within reach.

DAOs are not science-fiction: we can already see 1,400 DAO communities created in the Aragon platform, and other platforms like DAO Stack, Colony, and DAOhaus are already deploying their own. Though it’s still early, our recent research shows that these communities are already pretty active and experimenting with new governance models for voting or staking on user proposals. 

Could they bring new problems? Indeed — there are already concerns about inflexibility, barriers to entry, liability, and user experience. Codifying governance rules is problematic, since words are always more flexible than code. Unfortunately, it’s all too common for early open-source projects to have terrible interfaces for non-techie mainstream users. There are also multiple challenges to overcome before DAOs can offer similar services to today’s global platforms: from technical challenges on scalability and security to the reliability of new, sustainable business models. Clearly, there’s still plenty of room to experiment before these projects become mainstream. 

When that moment comes, it will be exciting to see whether DAOs develop into promising democratic alternatives to existing online platforms that are free of their structural compromises. If they facilitate new bottom-up, cooperative business models that scale while empowering user communities, they can break the monopolies of centralized platforms and balance the web ecosystem, creating a fairer collaborative economy in the process. Though it’s unclear if they’ll deliver on this potential, I believe we should give them a try.

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A colorful and busy scene of people transacting with one another across a range of digital businesses and services.

Artwork By

Rami Niemi

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