| This week we would like to let our Senior Technology Officer lead us in an essay of sorts. Below is Song Shijun's fantastic speech delivered at ChinaJoy last week, entitled, The New Economy Driven by the Blockchain. Hi everyone, I'm Song Shijun from Elastos. I'm very glad to be here to discuss blockchain with you. We have always believed that the gaming industry combined with blockchain will create new economic models. Like most of you here, I am also a developer. Although blockchain technology is very cool, I keep asking myself, what is the real value of blockchain? After two years of exploration and practice, I realized that a new economic model can be created driven by blockchain. First, let's see what blockchain can do. From the perspective of computing models, blockchain belongs to the storage layer. Traditional computers have ROM, which is read-only storage; and RAM, which is readable and writable storage. Blockchain gives us a third type of memory: you can only add immutable storage. What we read is what we wrote before. This certainty is a credible foundation for blockchain. With a credible foundation, can digital property rights be protected? And can privacy be protected? The answer is no. Because blockchain is the storage layer, just like the notary office or the real estate agency that sends you a certificate. As for the protection of property rights and content, this is a problem at the execution level, which needs to be solved by the police. But unfortunately, we have no police on the Internet today to protect us. The truth is, Internet bandits are rampant. 
This graph is a typical Internet software architecture. App is at the front end, the server is at the back end, and it communicates through the Internet in the middle. For example, the app of an e-book runs on a user's device, such as a computer. At this point, a malicious user can get the copyright content in this app by cracking the software. I once used a cracked software, and it only takes about 1 second to turn Kindle e-books into plaintext and to be uploaded elsewhere. This is the first layer of local attack on the Internet. Then, while the App is running, it keeps sending user data back to the server, and the user's behavior is collected. Today, all companies that claim to have big data are able to obtain user data through such a "theft" manner. I experienced something embarrassing two months ago, when I opened my birthday present that my wife gave me. Well, it was…ok, and I told myself that her thoughts mattered more than her ability at guessing what I liked. Yet when I opened Taobao, all the product recommendations seemed to hit the right spot. Big data not only knows you better than your mother but also better than your wife. One day it may even know you better than yourself. The problem is that we are completely exposed to the server administrators, which is as good as running naked in front of them. The third form of attacks come from the operator. When you access the HTTP prefix website through a telecommunication network, you will see on the website that there are many advertisements, which are not from your visited sites, but from the telco network. If you call them to complain, their customer service might put you on their whitelist, and you won't be harassed by these ads for awhile. In this case, do you still think it's safe to transmit data in such a network channel? Although these are the three most common forms of attack, there are many more. So if someone told me that personal data monetization could be done through blockchain, I'd think it's nonsense. Not because we can't sell data through blockchain, but that there are no buyers. It's like selling apples next to an apple tree which is free for picking, so who would buy them? In these three forms of internet attacks, if data can't be copyrighted and protected, then how is data giving rise to a new economy? Since the popularization of the Internet in China in 2000, it is only in recent years that we have started to profit from it. That's because for a long time, no one found a good profit model. Over time, tech geniuses eventually were able to create a remarkable free economy. For example, instead of running an orchard which sells fruits for profit, I am generating income through erecting big billboards next to my orchard selling advertisement space. Isn't it what the free game apps on App Store are about? They are selling games, but advertisers are the only paying customers. The most successful examples are Google and Baidu, which offer free search information to users in order to profit from advertisers. It is great to be profitable, but is there a more efficient way to do so, with less economic friction? Should we run the orchard business wholeheartedly? Or should we continue to sell billboard ads next to it? I think Baidu has asked itself this question many times, but it has yet to come up with a good solution. This is the situation of our Internet today, without little data privacy and run entirely on a shared and free economic model. We are a team of engineers and we like straightforward solutions. Therefore, here are the changes we propose. 
Firstly, we shall separate the app from the data, so apps do not control user data, and their access is subject to user's permission. It is much like in a company, the accounts and expenses are managed by different people. By separating this function, data can be better protected. The data center for storage is a virtual concept, so it could be a local disk, cloud storage, or distributed file system such as IPFS. Next, we will create a trusted operating environment, like a sandbox. It can isolate the host operating system from the data area and prevent piracy. At the same time, this sandbox also isolates the app from the network. Without direct access to the network, sensitive data will not be leaked and spread. Thirdly, we have achieved a new network communication platform: Elastos Carrier. It is peer-to-peer without central governance, which will run independently similar to IPFS, thus there is no server to process the data. ID authentication is required before information is transferred between the nodes, which prevents content leaking or man-in-the-middle (MITM) attacks even from the network service provider itself. We have also ensured data security in the API. Users can no longer hack or copy the gaming apps. At the same time, they don't have to worry about their personal data being collected by the apps either, so it's "each takes what he needs." 
Via this working model, an app is like a CD within the CD player, and different user data is played without being leaked or hacked. This is because the system is not connected directly to the internet, and it does not have a local data storage system. Through this, we will integrate blockchain technology. We will the use blockchain based Decentralized ID to verify users and their identity. It is similar to a Bitcoin wallet, it can be safe, simple and convenient for users. It cannot be replicated and repudiated. Besides that, we also issue Access Permit to an app in order to establish its copyright on blockchain. Only those who have the Access Permit can run it. This factor also allows Access Permit exchange between users, they can gain access to the apps by exchanging their permits. Which means they can either sell of give away their app. This is a completely different experience from the current App Store model. After we purchase a game there, even if we no longer play it, we cannot sell it or give it to our friends. If a product is not at your disposal, does it really belong to you? In the trustless operating environment of blockchain, we create a solution for decentralized ownership that gives everyone more options. For example, game developers can presale their games by issuing access permits. On one hand, they can test the market prospect of the game; and on the other hand, it allows them to raise funds for the game development. By transferring access permits, a secondhand market for games is established. So the players can cash out from their games, and the developers can share a percentage of such gains too, which is a new monetization model. Since there are access permits to the games, players can make multiple purchases of each game. So if someone is a chat group or forum admin or a social media influencer, he can use his influence to promote the games that he likes and earn a commission from it. Such commission can be paid through smart contracts, which do not require any third party agency or authorization, and it executes automatically. Therefore, this personal data ownership will lay down the groundwork for the monetization of personal data. Let's take a look at an example. A game consulting company would like to collect data on a player's usage behavior. And since personal data is protected within a sandbox, they have no access to it except to buy it from the players. Therefore, they developed a software to evaluate the data in different categories and priced them accordingly. My colleague Xiao Ming saw the rewards and he was very interested. So, he downloaded the evaluation software and ran it on Elastos Runtime. After getting Xiao Ming's permission, it assessed his personal database, analyzed his playtime, game genres, playing frequencies, etc. Once the analysis was done based on its own set of criteria, Xiao Ming scored 92, which was a very good match, so they offered to buy his data. Xiao Ming accepted it in a heartbeat. The evaluation software then made a payment immediately and received its access permit, then sent the assessment to its server. Xiao Ming's reward, in this case, was also shared with the app developer, because they had helped him monetize his data. Through this process, rewards are distributed fairly to those who have contributed. We no longer need to disguise our intention. In this example, although the evaluation software was authorized to gain access to Xiao Ming's data, it wasn't allowed to send the data out because it was operated on Elastos Runtime. It's only readable, but cannot be taken. After purchasing the data, what they will receive is non-personal information processed by the software, so it protects user privacy too. Finally, let us recap. Today's internet is a completely free and open one, relying on a free economy to generate revenue; thus we can use blockchain to establish personal property on the internet. Leveraging on data assets, we can create multiple viable economic models, to give more opportunities to the small, independent developers or entrepreneurs. We can defeat Taobao without being like them. Of course, we need to break free from the current rules of oligopoly. However, using Blockchain technology, it puts us on a different trajectory, giving us the opportunity to surpass them. Will this new system have a big enough market? That I do not know, but as compared to Taobao, it is built upon a trusted system between users. Taobao provides a secured transaction between strangers through Alipay, and uses a testimonial system to evaluate user credibility. This is similar to what we are trying to achieve, with the latest 2018 financial reports, Taobao has achieved more than 1,500 billion RMB in revenue. Taobao's business is still mainly on selling products. If we can ensure that the data within all of the Internet is protected, providing testimonies even Jack Ma cannot erase, how big do you think our market will be? We will leave it to your imagination. As time is limited, this is just a sneak peek. If you would like to know more details, you can meet us at Hall W4. I hope to have more developers join us, and together we can open more opportunities in China. We will await you all at Hall W4 tomorrow, just beside Facebook. Thank you everyone. See you again soon. | 
Viking Capital (http://www.vikingcapital.co/)
