How blockchain-based startups could replace Uber, Airbnb and other major players in the sharing economy market. Part 6. Security and decentralization.
A conventional aggregator platform stores its data in a traditional way, with a centralized point of storage and backups. There would typically be a main server or group of servers and backups. The aggregator would fully control the servers and the data. This means that if the government or some other third party needed the data, the platform could alter the data, randomize it or make a number of other changes to it.
Hackers could also get access to the data or change it in a way that isn’t even obvious to the company. For example, according to Bloomberg, in October 2016, hackers stole information about 50 million users on the Uber platform. They stole names, addresses, and emails. Attackers were also able to access over 7 million driver records, including driver license numbers. The laws require that a business alerts users and government agencies when something like this happens, but Uber chose to not disclose the information and paid the hackers $100,000 in an attempt to keep them quiet.
In essence, there are two different problems here. The first one is the problem of hacking and the issue of the security of the data. Sometimes hacking occurs in a way that becomes evident quickly, just like it did with Uber. However, often hacking can occur in a different way. Hackers can infiltrate a network or gain access to data and start changing it slowly, without the hacked company even realizing that this is happening. This latter type of hacking is harder to perform with large companies because large companies typically have several layers of security and easier to accomplish with smaller businesses because a small business may not even have an information technology department and may not realize what is happening for a long time.
A blockchain network solves this problem by using cryptography algorithms to make data secure.
The second issue is the issue of a central authority making decisions when the transparency is lacking. Blockchain technology solves this issue, too.
While Bitcoin is just one example of an application of blockchain technology, it shows perfectly how transparency works on blockchain networks. With Bitcoin, the software code of Bitcoin blockchain is open-source. This means that everyone knows the rules and anyone can inspect the code at any time. Everyone knows how the network operates, how transactions become a part of the blockchain and how the network adds coins to circulation. There is no authority that can hide a problem or change the rules of the game.
Decentralization of blockchain networks
In part, transparency is possible because of the decentralization nature of blockchain technology. With public blockchains such as Bitcoin or Ethereum, anyone can download a full copy of a blockchain. This copy would contain a record of all the transactions that have occurred on the networks since their inception according to the network rules. This copy would also be as valid and as legitimate as any other copy of a blockchain. As long as a copy of a blockchain is valid, it is no different than any other copy. Computers on a blockchain network that contain a full copy of the blockchain are called nodes. You can see a map of all Bitcoin nodes that are online as you are reading this article by visiting this website: https://bitnodes.earn.com/
Bitcoin and Ethereum are public networks, but a blockchain network doesn’t have to be open to anybody and everybody. For example, on a blockchain network that connects drivers with passengers, only drivers that have completed a certain number of rides could have access to certain information. A network could have its own rules and laws. What is critically important and different from current aggregator models is that these laws would be open and transparent to all members of the ecosystem and no single member would be able to hide or change information.