Here is our follow-up to our recent article Facebook Will Be Next.
We have stated on a number of occasions that social media companies such as Meta/Facebook and Twitter overstate the number of active users given that the active user metric is a self-reported figure and given that no outside firm has the ability to authenticate the number of active users on Facebook or Twitter in real-time. Facebook for example took action on 1.6 billion accounts in Q1 2022, while Facebook daily active users were 1.96 billion on average for the period (the hyperlinked text refers to Facebook’s “Fake Accounts” policy and recent trends and Facebook’s recent quarterly results respectively). In our previous article we detailed why the fake account problem is a big deal given its enormous impact on the valuation of FB and TWTR.
Fake accounts are part of a growing problem as it relates to all forms of user authentication. Think about it: identity theft, zero day attacks, phishing attacks, deep fakes and more are examples of how the combination of technology and human ingenuity have created a massive multi-billion dollar if not trillion-dollar plus fraud economy.
Today’s legacy Internet with its outdated password protocols, archaic payment systems and not always well-intentioned cybersecurity firms aren’t up to the task of combating cybercrime. I refer to today’s Internet as Frankenstein’s Monster – well-intentioned but harmful. Human training could do much to help combat cybercrime.
A new Internet protocol will be required to enable the online economy to scale in a relatively safe manner. While there is significant venture capital promotional hype around “Web3.0” and “Blockchain”, we believe a Blockchain-based future where one’s digital identity is stored across a series of distributed databases with permission-based access (the “permission” is likely to be biometric in our view – face ID, retina ID, palm prints, body chemistry), is where the world is headed.
Various third-parties will access pieces of our distributed digital identity in order to execute online transactions. These third parties would include everything from gyms where we exercise to our primary care physicians to utility companies to government agencies and various other commercial enterprises (insurance companies, banks, titling agencies, auto dealers, video game platforms and publishers, you name it).
The downside is the bad guys will figure out various methods of throwing a wrench into these Blockchain-based workflows. The upside is that our current digital lives have far too much risk – risk that is preventing the online economy from scaling primarily due to fear – fear of cybercrime being perpetrated against us as well as a fear of more benign activities which result in time consuming inefficiencies (not receiving an online confirmation, duplicative online orders, lack of online transaction activities, etc.), that stem from dated Web technologies and a lack of online commercial best practices). One won’t have to ask for a copy of the invoice or a receipt or a transaction history or a proof of signature as every action on a given Blockchain/ Distributed Ledger is stored on the ledger for all interested parties to see.