How the Data Economy is Powering DeFi Growth
After a meteoric rise, then a bear market, then a strong recovery, the DeFi industry has shown that it is not going anywhere. Its roots have been firmly planted and it has proved to the world that these services are sorely needed. Peer to peer transactions, investments not tied to any one country or currency, and borderless transactions with minimal fees; these are use cases that five years ago the average person could not comprehend were even possible. Now the industry has shown that it is strong enough to handle market swings and continue to grow, with a massive amount of financial market yet to cover.
And it is this vast untapped percentage of the financial market that is at once so daunting and so encouraging. Compared to the trillions in TradFi market, DeFi is still a relatively small player. But that growth continues and can keep growing for a very long time, giving the DeFi industry strong prospects. The only question becomes, how fast can we grow it?
The answer to that is unclear, but there are leveraging factors that have been shown to escalate that growth. One such driver, though it is not always top of mind, is the data economy. This is the glue that holds a rapidly growing industry together and allows connections to be made. New entrants are hitting the market daily, and finding the right customers, platforms, and partners can be overwhelming. Let’s explore the data economy in more depth, see how exactly it can provide a major boost to DeFi’s growth, and show how new partnerships between data and DeFi (such as AllianceBlock and Crunchbase) are proving out how this process can benefit everyone involved.
Data Economy: Insights and Connections
Before we look at how DeFi can benefit, let’s establish what we mean by “data economy”. The term has evolved as key technologies such as search algorithms, advanced analytics, and artificial intelligence (AI) became more and more accessible to companies. With Web2.0 came the increasingly large waves of Big Data, which quickly became a focus as people learned how to efficiently sift, analyze, and gain insights. While we take massive amounts of data for granted today, the early internet did not have a way to collect this information. Like the novelty of DeFi, many people didn’t even understand the usefulness of such a data treasure trove. Since we had always lived without it, finding use cases was difficult for many people. At the same time, even when experts laid out just what could be done with all this data, it sounded more like science fiction. Just as we had never experienced big data stores, we had also not imagined what advanced tools, algorithms, fast processors, and intelligent analysis processes could do. Even today we are in wonder of what can be done with the combination of vast amounts of info, given to tools that can provide insight. This is the definition of ChatGPT and its peers: combining vast data with advanced analytics.
What brought Big Data into the mainstream was not just the advancement of data analysis tools, but the intuition with which an average person could use them. It became more and more easy to search, and tools became more embedded into what we already used to provide additional insights. The more we saw what it could do, the more we wanted those benefits. This is where the data economy started to explode. Companies realized there were two sides to this economy: developing tools to sift through the data and transform it from data to information, from information to insight; and those who developed tools and processes to search out sources of data, scrape it, collect it, and organize it. This second element is where the data broker sub-industry developed, and admittedly this came with both positive and negative effects. While it is fascinating to watch Amazon predict your next order with creepy accuracy, and there are data brokers who use unethical practices to get and sell private information, the benefits from companies collecting and using the data responsibly has been (quite literally) world changing.
Data Is Jet Fuel for DeFi
In the B2B world, one of the companies providing critical data to its community is Crunchbase. Unlike data brokers, the organization has created a way for businesses to find each other, to find investors, and for new partnerships to grow. Businesses and investors provide their information to Crunchbase, which then organizes it in a way that enables businesses to search less and connect faster. It uses various analysis tools, including both AI- and human-based verification to ensure the data is valid and useful. This is a crucial difference in the big data, insight creation industry. Community members provide information and benefit from it, instead of that data being taken and used without their permission.
There is a massive opportunity for this service to be used for DeFi. There are many use cases for this, but a recent partnership between Crunchbase and Allianceblock may be worth watching. While Crunchbase holds business and investor data, Allianceblock’s Data Tunnel was designed for decentralized peer-to-peer data sharing. Instead of businesses searching for information in many different places, the Data Tunnel provides this information directly from sources, cutting out brokers and allowing all parties to benefit from information sharing. With Crunchbase’s contribution, the amount of data available (along with the high quality) is enough to supercharge the DeFi industry. New connections, new insights, and faster/better decisions.
What’s Next?
The Crunchbase/Allianceblock partnership is a strong example of the many data economy developments being made right now. As DeFi-specific data sets, insight tools, and communities continue to evolve, this ability to leverage decision-making will add a much-needed booster toward DeFi’s growth as an industry. Unlike many traditional industries, DeFi has the ability to create decentralized, peer-to-peer data sharing that benefits everyone involved.
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