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Another blockchain Facebook-killer is in the works—and it’s being funded by, of all companies, PayPal.
On Tuesday, the company completed a Series A funding round for Cambridge Blockchain, Forbes reported. Cambridge Blockchain is a Massachusetts-based startup building a service to give customers sole ownership over their personal online data, without the need for a middleman (i.e. Facebook, Twitter and, er, PayPal).
The sum PayPal invested in Cambridge Blockchain has not been disclosed, but SEC filings suggest that the company has recently raised around $3.5 million in equity.
On its website, the startup purports to offer customers a way to establish their identities online without entrusting their data to a centralized intermediary. In particular it references KYC checks, a known bugbear for crypto-finance people who are forced to relinquish control over their data to obtain control over their money. Cambridge Blockchain’s solution is to place such data on a decentralized server—giving only those with the cryptographic key the power to share it. (Meaning exchanges like Coinbase won’t be able to lease it to analytics companies.)
Establishing identity is key to enabling easier and more secure crypto payments. No wonder, then, that this is PayPal’s biggest move so far into cryptocurrency. Against the backdrop of an industry that expressly wants to kill it, an investment in a company like Cambridge Blockchain makes for a compelling counterpoint—”Listen, we’re just like you. We care about privacy and security,” it may as well be saying.
And although PayPal did flick at building its own competitive alternative last year—when it filed a patent for speeding up cryptocurrency transactions and trialled a token-based incentives system for its employees—this is a far more concrete, more philosophically in-vogue investment.
Indeed, using blockchain to give users ownership over their digital identities could—seriously—be revolutionary. Data-dealers sell upwards of $125 billion worth of personal data annually, giving back none to the customers they took it from. The result is a sort of piggy-in-the-middle, with customers unable to grasp their own data as it is tossed back-and-forth, high above their heads.
Giving people control of this data changes that profit model—it is no longer the companies’ data to sell. Companies like Wibson let customers sell this data themselves, as Wired reporter Gregory Barber did last year for a whopping, er, 0.3 cents.
There are means, of course, for centralized systems like Facebook to set up something similar. But central to the issue is trust—how could we be sure Facebook, with its tarnished reputation, wouldn’t just continue selling off the data behind our backs? A decentralized system, managed correctly, would make this impossible.
And it’s not as if PayPal doesn’t need to put its own house in order. In 2017, an enormous data breach saw the data of some 1.6 million of its customers compromised. It has only just climbed out of the ensuing shareholder stock-drop lawsuit. The source of the breach? PayPal had outsourced its data to a third party, a cloud-based payment processor called TIO Networks. And PayPal admitted last year that it still shares its data with around 600 companies (though it insists it doesn’t sell it).
With its choice of Cambridge Blockchain, PayPal has found an ambitious first mover. The startup, according to Forbes, is already preparing to roll out its technology in Luxembourg, where it is expected to serve the country’s 600,000 strong population. It is also working with vast iPhone manufacturer Foxconn to help link buyers with sellers.
PayPal’s new stake in Cambridge Blockchain is a bold move into the arena that is disrupting its own monopoly. And it also demonstrates real fears about the outliers that are encroaching into its space: think the retailers taking on fringe crypto payments services; Spankchain, which has built a payments service designed specifically to rout around PayPal’s exclusionary user-vetting; or Bitcoin itself, which is…well, trying to rupture the entire banking system.
PayPal wants a cut-throat Silicon Valley upstart, much like itself, to protect your data. What will the price be this time?