Decentralized Platforms: An Answer to EU Digital Markets and the DSA

With the massive move to virtual life that characterized the 2020 pandemic riddled world, it is no wonder that protecting users from the excessive and largely unregulated power of some digital players pushed the EU regulators to action.

On December 15, 2020, as Europeans were entering the festive season preparation time and thinking of ways to maintain the festive spirit despite the Covid related movement restrictions, the EU published two proposals to regulate several aspects of digital services and markets. 

The Digital Markets Act (DMA) aims to promote "contestable and fair markets in the digital sector" and challenges the leading gatekeeping platforms' aggressive monopolistic behavior, their lack of transparency, still too opaque user data collection, and unfair practices worsened by the absence of contestability.

The Digital Services Act (DSA) has consumer protection at its core and aims to promote consumer trust in the digital economy while respecting users’ fundamental rights. It intends to attain these goals by adapting commercial and civil law rules for commercial entities operating online, increasing fairness, transparency, and accountability for digital services' content moderation processes, ensuring the respect of fundamental rights are respected, and guaranteeing independent recourse judicial redress. 

If any lesson is to be taken from the 2018 GDPR impact, as within two years of adoption, its iterations spread through Brazil, India, China, California, and is being studied for application in the US, this legislation is likely to be emulated outside the EU area relatively soon after its promulgation.

Who are the main targets of these new regulations?

Though the Act's wording carefully refrains from naming any specific platforms, their definition of gatekeeper in the DMA is a perfect fit for the GAFAM (Google, Apple, Facebook, Amazon & Microsoft), or, in other words, centralized entities concentrating enormous power in a few hands, power build on an unregulated market and undemocratically obtained.

This disproportionate power has enabled the GAFAM members to pursue unfair practices to gain more control and led to the current situation where they are omnipresent in the majority of developed countries life who depend on their services for access to essential services such as banking, access to information, and a slew of other daily activities.

To quote the DMA, the targeted “core platform services” are defined by:

• Highly concentrated multi-sided platform services, where usually one or very few large digital platforms set the commercial conditions with considerable autonomy
• A few large digital platforms act as gateways for business users to reach their customers and vice-versa
• Gatekeeper power of these large digital platforms is often misused by means of unfair behavior vis-à-vis economically dependent business users and customers.

The proposed remedies for the excessive power of these platforms revolve around three main axes:

• Fines up to 10% of yearly revenue of the previous financial year
• Daily fines up to 5% of the daily revenue of the previous financial year for continued non-compliance
• Obligation to divest in case of continued breaches

These new EU proposed regulations aim to provide a future-proof governance framework but are still based on tackling a problem born out of hyper-centralization and resulting abuse of power. In other words, they address the symptoms but not the source of the problem, and lawyers will no doubt be able to add many billable hours to find loopholes in the regulations and build complex corporate structures that hide these platforms' continued monopolistic functioning.

Hopefully, their initiative will dampen GAFAM and co disproportionate power until they are pushed aside by decentralized platforms one day.

Are Decentralized Platforms Compliant with the New Proposed Regulations?

Hidden behind the smokescreen of controversies around cryptocurrencies, many entrepreneurs are hard at work, creating alternatives to many of today’s platforms based on decentralization and users’ governance.

A quick look at the services and markets covered by the regulations sows that, aside from cloud services, many already have decentralized alternatives:

This is far from an exhaustive list of decentralized alternatives and just gives an idea of the variety of new projects being born as we speak. 

What all these platforms have in common is their decentralized nature that gives them a built-in regulatory advantage compared to the current centralized behemoth and their wannabe copycats.

To be compliant with the new EU digital regulations, digital markets and services need to respect fundamental principle such as:

Transparency and Fairness

• Disclose any data collection, whether direct or indirect
• Harmonize service and product prices offered by and to business users
• Disclose all price related to advertising space use
• Refrain from the undisclosed use of business users data to access and approach their clients
• Provide full analytics to users
• Provide advertisers and publishers, free and unfettered access to all performance measuring tools, enabling advertisers and publishers to carry out their own independent verification
• Allow freedom to uninstall and pre-installed software app unrelated to the core service
• Refrain from privileging the ranking of core service ads at the expense of paid advertisers ads

Contestability

• Allow any user whose content has been denied or removed a clear appeal mechanism

How do Decentralized Platforms Comply with Those Requirements?

Transparency and Fairness

Decentralized platforms are built with transparency as one of the core values of Web3.0, and, ideally, all interactions are based on clearly defined smart-contracts, the elements of which are publicly disclosed. This built-in transparency by design already prevents many of the abuses routinely performed by tech giants.

Contestability

When algorithms manage the decision to monitor or censor content, errors are likely to happen. Users should have timely recourse to contest the decision to filter out or otherwise penalize their content. 

Today, this recourse is managed by human moderators hired - and paid - by the platform, thus directly affecting the company's bottom line by adding salaries and office space to their fixed expenses. However, on a decentralized platform, the system might include a built-in network of moderators self-selected and screened by the platform users and remunerated directly through the platform system. 2key.network CTO, Eitan Lavi, describes such a mechanism in detail in this video:

So, as 2020 comes to a close, tech giants still rule the digital space. With the upcoming regulations curbing their ability to grow at the expense of users' rights and freedom and the increased inclusion of cryptocurrencies in regulatory frameworks, maybe 2021 will see decentralized platforms and economy gain traction and compete with centralized platforms for the generalized benefit of end-users.