Emerging Technologies

If data is the new oil, then enterprise NFTs are the tankers. Here's why

Like oil, data can be extracted and refined - but how can we transport it to where it's needed most?

Like oil, data can be extracted and refined - but how can we transport it to where it's needed most? Image: Shaah Shahidh / Unsplash

Praphul Chandra
Founder and CEO, Koinearth
Arushi Goel
Specialist, Data Policy and Blockchain, C4IR India, World Economic Forum
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The New Data Economy

  • There is enormous value to be realised in treating data as an asset - but doing so presents challenges as well.
  • Non-fungible tokens (NFTs) are a way to overcome these technological, regulatory and incentive-related barriers.

While data and data analytics are undeniably important, many enterprises are becoming increasingly disillusioned with their efforts to capture value from it. Here is what they are missing: sustainable value creation is possible when data is exchanged – not just within a company, but beyond company boundaries in order to derive insights and effectively train artificial intelligence (AI) algorithms. Manufacturing companies, for example, could derive immense value from the inventory data of their suppliers. Similarly, banks can mitigate their risk of lending by viewing the transaction history of their borrowers. Brands can establish environmental, social and governance (ESG) credentials for their products if suppliers share the requisite data with them.

In each case, the challenge is that each enterprise has the data, but is either not sharing or is unable to share it with others in the ecosystem. In the absence of a B2B data-sharing digital ecosystem, data is like oil; it can be extracted and refined, but it cannot be transported to the place where it is needed the most. Why is that?

Have you read?

Why share?

This is the incentive problem. Why should a supplier be willing to share their inventory with a manufacturer? Why should an enterprise be willing to share its transaction data with a financier? Though there is no silver bullet solution to this question, there are three emerging trends that incentivize data-sharing among enterprises:

1.The data requester has enough market-power to require the data provider to share the data – for example, a large equipment manufacturer requiring its suppliers to share inventory data.

2. The data requester offers preferential treatment to the business partner as an incentive to share data – such as a bank offering a lower interest rate to enterprises which share their transaction data.

3. The data requester offers to pay the data owner for sharing the data; one example would be insurance companies willing to pay vehicle car manufacturers for vehicle-telematics data.

All three scenarios and others are likely to co-exist for the foreseeable future.

What to share?

This is the regulatory problem. Considering the evolving data-privacy regulations around the world, enterprises must be cognizant of what data they can share, with whom and for what purpose. In certain conditions, enterprises may require the explicit consent of the data provider before sharing data with a partner for a defined purpose; a bank may need the consent of the retail customer before sharing their data with another service provider for the purposes of availing fintech services, for example.

How to share?

This is the technology problem. How do enterprises create a digital infrastructure to enable data-as-a-shared asset in B2B ecosystems? This is a non-trivial problem. Several cloud-based platforms today provide a data-sharing solution. However, the regulatory and incentivization requirements in B2B data-sharing make existing solutions unsuitable. For example, enterprises may need to secure the consent of the end consumer before sharing their data with a partner, and furthermore they may be required to prove that this consent was granted by the end-user. Some end-users may consent and others won't; yet other users may consent to share only some of their data. The ideal digital platform should offer a solution to these challenges.

Blockchains and NFTs enable data-as-an-asset

To enable the true value of data, we need a digital pipeline through which data can flow across enterprise boundaries in a secure, trusted way while respecting the rights of all stakeholders. This is where blockchain-based ‘enterprise non-fungible tokens (NFTs)’ offer a solution. Originally conceived as a ledger to securely store cryptocurrency transactions, blockchain has evolved into a platform to store any kind of information that may need to be shared in a secure, trusted way. Today, assets like financial instruments, real estate and luxury goods are being recorded immutably on the blockchain. For enterprises, it is time to see their data as an asset. Enterprise NFTs allow them to do so.


Non-fungible tokens

When information about an asset is stored in a blockchain-based registry, a unique token, also called an NFT, is issued to represent this asset. Think of it as a 'title deed' of the asset. This title deed can then be shared within an enterprise or a consortium of enterprises. There are three reasons why enterprise NFTs enable easy and secure data sharing within an ecosystem:

1. Containerization of data: NFTs allow data to be containerized into shareable, tradeable and trackable assets. For example, manufacturers can issue product passports wherein lifecycle data about a product can be shared as an NFT. Manufacturers can offer pay-as-you-go models, financiers reduce risk by lending against a digital asset, insurance companies can enable usage-based insurance models, secondary buyers get a credible record of the product enabling higher value and lower cost of ownership. Enterprise documents such as outstanding invoices or bills of lading can be converted into assets whose ownership can be easily and securely transferred without relying on cumbersome processes. These document-based assets can also be used as collateral in supply chain finance, helping unlock capital in supply chains.

2. Automating data sharing: Once data is containerized as an NFT, enterprises can share these NFTs as an asset amongst themselves. Smart contracts can be used to automatically enforce processes and financial terms under which these NFTs are shared. Given the volume and velocity of data being generated by enterprises, it is unreasonable to have a manual accounting layer to enforce the commercial terms of data sharing between enterprises. Smart contracts automate this process in a secure, verifiable way without manual intervention. Since the commercial terms are programmable, it allows a wide variety of incentives to be embedded and enforced in data sharing.

3. Enabling secure compliance: Any transaction pertaining to a blockchain-based NFT is digitally signed and time-stamped, creating a secure and verifiable audit trail of the asset which the NFT represents. When data is converted into an NFT, its creation, modification, sharing and consent can all be recorded, thus creating a verifiable audit trail that enables enterprises to comply with relevant regulations. A hybrid solution which combines permissioned and public blockchains may also be deployed, where necessary. The NFT can be shared among enterprises over a private blockchain, whereas the audit trail can be recorded on a public blockchain, enabling auditors and regulators to verify compliance.

With advancements in digitalization and connected technologies, large amounts of data are being produced and consumed. However, the potential for creating value from this data remains locked up due to incentivization, regulatory and technological challenges in data sharing amongst enterprises. Data being the ‘new oil’, businesses will need to reflect on data-sharing requirements to be able to compete and innovate sustainably. Enterprise NFTs allow businesses to enable data as an asset and to share it in a secure, trusted environment.

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