Programmable Currency is coming

China’s 2021 crackdown on crypto currencies has continued unabated. They’ve now banned all types of Crypto transactions. But don’t be mistaken, China wants nothing more than to move to a crypto economy. The Digital Yuan – their own Crypto.

Currency Creates Control

It is said that you need control the three M’s to capture and control a society. The Media, the Military and the Money. The loss of control of any of these elements can lead to destabilisation of a Government. China is clearly intent on having a firm grip on all three. I’m with China on this one. Any government in the world that moves to a non-sovereign currency (Like El Salvador has making Bitcoin its national currency), will lose control of its economy. That’s not to say we shouldn’t have crypto – just Government issued Crypto. And the reason is simple – crypto currency technology, has many features fiat currency does not. While we may not like China’s policies and record when it comes to human rights – they are out performing other global powers when it comes to economic and geo-political strategy.

The Birth of Programmable Currency

One of the main features of blockchain based crypto currencies is their potential to be digital, yet anonymous. They key word here is potential, because the direct opposite can also be true. The Digital Yuan features what is known as ‘Controllable Anonymity’ given that it will require citizens to register and download the central bank app on their smartphone. But it doesn’t end there. The currency will literally be programmable. The China Government will be able to not only ‘air drop‘ money into people’s accounts, but they will have the ability to easily freeze and close accounts – something which can’t be done with, let’s call them ‘democratic’ crypto currencies.

This is where the move to the Digital Yuan gets interesting. They won’t just be able to control their currency distribution digitally, they’ll also be able to define where and when it can be spent. It will enable China to have a level of control over their monetary system not seen in the history of currency. Transfer payments will take on an entirely new meaning. When economic stimulus is required, they’ll be able to set expiration dates on money transferred to ensure it is injected into the economy and not saved. If it is not spent by a certain date it will literally evaporate from people’s digital wallets. They’ll be able to dictate where certain amounts money can be spent. Grants for students or unemployment may only be able to be spent on groceries, rent and transport for example. If a wallet is presented for payment to an unauthorised type of vendor, the transaction will be declined. They’ll be able to shape spending and investment in a way the global economy has never seen. It will give them an inordinate economic advantage on a global scale. And while it does sound slightly dystopian, it is clearly aligned to all their other economic policies we’ve seen recently as they tighten their grip on their ever-wealthier populace.

Non-Fungible Currency

While it’s not my hope that Australia moves over to a system like this in totality – a more democratic version of programmable currency is an incredibly powerful idea. Countries like Australia and the USA could create incredible productivity via programmable currencies.

Let’s take Job keeper. As published via the independent Parliamentary Budget Office’s analysis –the Morrison government paid $12.5 billion of JobKeeper in the scheme’s first 13 weeks to firms that didn’t experience the turnover declines they forecast in order to qualify for it. Extrapolated to the full 26 weeks of JobKeeper 1.0, that amounts to $25 billion of taxpayers’ money misspent. Around $9 billion was paid to firms whose turnover not only failed to decline as forecast, but actually increased.

This overspend could have been avoided if we could code into the money that it could only be used in wages and salary. We could also remove amounts from their accounts post-hoc once it was clear the firm didn’t face a decline. We could also make sure jobseeker benefits have restrictions on where funds can be spent, which protect the sanctity of the system. We could direct future stimulus payments into preferred economic sectors.

In the future, we’ll all have crypto wallets with two balances – money we can spend as we choose, and restricted funds. The eventual upside is that we’ll enter a pre-emptive tax code – a code where money is directed before it is collected. We won’t re-allocate money after it’s earned, but pre-determine where it can go. This will be something corporations will be able to do with their employees and spending budgets, no purchase will order would be required when money can be programmed on where it can be spent in the first instance. Even parents will be able to use this with their children – restricted handouts if you will.

This fundamentally changes what currencies can do and are. It’s clear that this is a big shift – and it won’t suit everyone, but it is my belief that most economies around the globe will move to Sovereign Cryptos (AU-c / US-c) and remove cash entirely from the economy within the 2020’s.

When this happens, we can also expect traditional cryptos to take the place of cash – and be the bastion of the hidden economy and dark money, and tradies doing crypto cash jobs – humans always find a way to hack any system!

Having money which isn’t fungible really marries up with the shift to increased control and autocracy the world over. What we need to ensure is that this shift doesn’t leak into the free market and remains a tool for more efficient Government resource allocation.

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Keep Thinking,

Steve.

Beyond the NFT Bubble

Imagine for a minute that you owned something, but you did not control it, others had access to it, they could share it, use it, copy it, and that there was an infinite number of exact replicas of the thing you owned. If you’re asking the question: ‘How does that amount to ownership?’ – you’re not alone. Welcome to the world of NFTs, or non-fungible tokens.

NFTs are a closely related cousin to cryptocurrency, and as far as booming asset classes go, NFTs are the star of early 2021.

NFT – WTF? – Non-fungible tokens have been used to sell ownership of digital goods and I feel a natural evolution within the crypto economy. NFTs allow buyers to purchase and claim ‘ownership’ of a digital good. At this stage, the good is usually an image, a GIF, animations, or even a piece of video footage. The ownership element takes the form of a unique digital token, which lives on a blockchain as proof of ownership. Unlike a traditional cryptocurrency, these are not fungible – in that they cannot be broken into pieces and partially sold.

The primary purpose at this point has been in support of the artists themselves who trade in digital art.

Now for the weird bit… The only thing the buyer truly owns with NFTs is the claim to ownership, which is the token itself, but not the actual asset. Buyers do not have exclusive use or control of the asset.

The NFT Bubble – As is often the case in burgeoning economies, artists have led the way. Some artists are selling their NFTs for serious money. The advantage for these artists is that if the NFT is on sold again, they get a percentage commission of future sales via smart contracts. A new version of the ‘internet famous’ Nyan Cat’ – (the image at the top of this post) fetched the original artist Chris Torres US$590,000 (which was 300 Ether at the time of sale). The Artist Grimes (also the partner of Elon Musk) has sold art worth more than US$6 million this month. This included some individual pieces for nearly $400,000, as well as pieces for which up to 700 NFTs were sold of the exact same item – yes, you read that right – over 700 claims of ownership – against the same copy-able digital asset. Let’s just say it is a very good result for Grimes. While the digital artist Beeple has been the absolute gangster of this game selling his piece 5000 Days for US$69 million through Christies auction house. The advantage for these artists is that if the NFT is on sold, they get a percentage commission of future sales via smart contracts.

If you think this is an irrational bubble – then trust your instincts.

The Future of NFTs – NFTs present an interesting future for much more than art, but potentially all forms of creative work. After the bubble bursts, the potential for smart contracts around the ownership of not just digital assets, cannot be understated.

Imagine having the rights to the NFT of a song, an image, or even a sporting highlight.  Via the use of smart self executing contracts, royalties could be paid to you as its rightful owner, verifiable on a blockchain. It could change the way monetisation of the internet works, it could go from from a battle of attention and advertising dollars, to actually rewarding the creators of the digital content we consume.

On the flip side imagine you want to use a Drake song on a Youtube video you’ve created. Today, copyright wouldn’t allow it – it would be pulled down. But in the future musical artists could have NFT contracts against their songs which allow you to use it, and pay the artist directly a few cents per view. All of a sudden artists can escape the Youtube vortex and get paid hundreds of dollars from million of fans around the world using their music on their content.All we’d need to make this happen is an AI engine which scours the internet assigning creative credit and revenue to artists in much the same way that google crawls the web. But this would be done via a BlockChain protocol. This would be far more profitable than what they get from advertising dollars and subscription services, and the occasional big pay day from an advertising campaign using a song. It would be better for the artists and consumers. The only losers would be big tech and the music industry.

NFT’s Get Physical – The Kings of Leon did a really interesting NFT play on their recent album.  They launched a token priced at $50 which includes enhanced media — kind of like an alternate, moving album cover — as well as a digital download of the music, and a limited-edition vinyl. They also had other NFT’s which would give purchasers lifetimes access to concert tickets and things like front row seats. This is where things can and should go. We need to remove the delineation between the physical and digital worlds – because they are quite frankly, the same place. We need to think of NFT’s as a set of rights and conditions for which contracting parties can mutually benefit and create long term loyalty. If we do that, then we’ll have a pretty good chance of moving away from big tech as the arbiters of all that we do when it comes to transacting online.

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Keep Thinking,

Steve. 

 

 

Cars will own themselves

You’ve probably heard about blockchain, but what we really need to understand is how blockchain can be used to fundamentally change what corporations are and how they can be run. Slight nerd warning for this entry – but I think you’re gonna dig it.

During the Age of Discovery, modern corporations were invented to remove personal risk from people taking financial risk. Ever since then, new forms of sovereignty have emerged. Of course, this confuses who owns what and who is actually responsible. There’s even a question mark over who owns your own face these days, as usage and collection of facial recognition data grows. What’s about to arrive is even weirder than that. Very soon, ‘things’, like cars, will be able to own themselves!

What makes this possible?

There are two innovations that make this possible. The first we all know about – self-driving cars. The tech is already here and it works – no explanation required. The second is the technologies most associated with cryptocurrencies: blockchain and Smart Contracts.

To understand where I am going with this, all you need to know is that we now have a technology which enables us to programme the behaviour of ‘things‘ like cars, to behave in certain ways, financially. So instead of people doing deals with other people and transacting – ‘things‘ will be able to do business with other ‘things‘.

We will be able to programme ‘things’ to interact with the world independently. For example, a self-drive car could be programmed to recharge or refuel with petrol when required, and then transact with another robot programmed to extract the requisite funds from the cars’ virtual wallet.

How will we do this?

In the near future we’ll have anInternet of Things’ kind of trading net. Let’s call it the ‘Tradenet‘. This Tradenet will be a bit like the internet as we know it, but instead of having virtual web addresses we visit online, it will have the actual physical location of real ‘things’ like cars registered to it. It will be an internet where we trade the usage of ‘things’. The Tradenet won’t be for all forms of commerce – only for ‘things’ that are commoditised so we know exactly what we will be getting. Every ‘thing’ on the Tradenet will be self-aware: what it is, where it is, how it’s used, who wants it, what its fees are, how it will advertise itself, and how to make contracts with other people and things, and essentially do contracts or ‘jobs’. ‘Things’ on the Tradenet will be self-employed. This will be a separate kind of internet that sits to the side of what we have now.

The Autonomous Economic Agent

A car on the Tradenet will become an autonomous economic agent. It will have an inbuilt set of instructions in its code which not only tells it what to do, but enables it to learn from its environment, constantly upgrading its knowledge and decision criteria.

So what might a Tradenet car do?

Firstly, it will be ‘born‘ into the market when someone buys it and puts it out to work. This could be a person, a corporation, a foundation, or even a charity. The car comes with a ‘mind of its own’. Even if two models of the same car are put on the market, after a time, like twins, they’ll evolve and behave differently, because of how they have learned to interact with the market.

The car will bid for work on the Tradenet, with the objective of, let’s say in this case, maximising profit. It will find the best routes to maximise profit, know where position iteself and the optimal times to get the most rides. When demand is low for people passengers, it will look for package deliveries or other forms of paid transport the Tradenet needs.

At night, it will go on the Tradenet and look for the cheapest car park to stop in overnight when demand is low. It then hits the road again early in the morning, hoping for long airport trips. It knows when it needs to be serviced and cleaned, as well as where and when it is least costly to perform these tasks.

During school holidays when the city becomes quiet, it drives itself up to the Gold Coast to do business with holiday makers. Around Christmas time when the the trucking industry has excess demand, it does trips between major cities hauling gifts for ecommerce purchases overnight. Zipping from Melbourne to Sydney overnight, the car then works in Sydney the next day… before making the overnight trip back to Melbourne the following day.

The car trades based on what it learns about the best routes with other Autonomous Economic Agent cars – for a fee!

Here’s the real kicker – when the car itself is too busy and market conditions are just right – it gives birth. It uses its excess profits to purchase a new baby car from the Tradenet. It buys the right car for the market, which may well be a different model to itself. When the new baby car arrives, the parent car downloads all that it knows to the child and puts it out to work. Of course, it teaches the child to learn from the mistakes the parent has made and hopes it does even better financially. The cars which learn the most will make the most money, as a quasi-autonomous corporate family. The more babies a car has, the more successful it is.

As the original car ages, it might even put itself into retirement. Or worse, its ‘kids’ collude to send it to the scrapyard as it is dragging down the car family’s profit. 🙁

Next Generation Corporations

Yes, our next iteration of the corporation is ‘things’ that act just like companies do, except there are no people involved in running them. People might have shares in Autonomous Economic Agents and as soon as self-drive cars are affordable and the regulations allow, this ownership model will follow.

The only question is, which entrepreneur will be first to the write the code to make it a reality?

 

Your data, your asset

Large corporations are currently walking over each others’ faces to gather data on us. Who can blame them – the biggest and most profitable companies in the world specialise in it. They see data as an inevitable asset class, one they can plunder. But that’s all about to change.

Personal Customer Data will very quickly move from being an asset to a liability. We haven’t seen it yet, but coming soon a courtroom nearby will be ‘data litigation’ cases. Think multi-billion dollar court settlements for lax protections and real physical consequences of data misuse. We’ll see corporations hit by both governments and citizens. The technology needed solve the data problem couldn’t come at a better time – yep, here I go again espousing the virtues of blockchain. But this thing is as real as the promise of the internet was. Just like the dot com boom, blockchain will misfire and take a little while to sort out the tech shortcomings, but it will be as big as promised. It is filled with opportunities to literally turn the data business upside down.

The problem of course has always been that while our data isn’t worth much in isolation – a few dollars per user per quarter – it is worth a lot when it gets aggregated by a single firm like Facebook. Many applications in the social media realm like steem.io are creating social platforms where we will own and control our data. Steem might end up as the Friendster or Myspace of blockchain social, but the shift is big, and it goes a little something like this:

In the future, we’ll be able to sell our data to corporations. Those who currently buy advertising, based on our data, will eventually pay us directly instead of some intermediary. Let’s take banking as an example. Currently banks invest millions per month trying to reach people who might require finance for a new home. They use services like Facebook and Google to see who’s posting about open houses, having garage sales or maybe just had babies – social triggers that locate their best potential target audience. But for every hundred or so people the reach, they do business with only one. While the cost of advertising in digital is cheaper and more targeted than TV and outdoor, the cost per acquisition of a new home loan is still very high –  few thousand dollars minimum. Imagine instead us allowing banks ‘rent a data key’ off us directly for a few hundred dollars. With all our relevant financial, employment, living expenses and other anonymised data. Banks who want our business pay us directly for the privilege of access to customers with real intent instead employing a digital dragnetCompeting banks then put an algorithm to task to come back with their best offer for a loan. We get paid via our data to choose a bank to do business with. It will be cheaper for the banks. It will be profitable and painless for us. All the while the data more accurate as it is promulgated via a blockchain. Banks would only need to pay for data sold by customers who actually take out a loan, via a time-sensitive smart contract. This way the process maintains integrity. And boom, just like that, a great data reversal has occurred.

It’s possibilities like this that get me excited about the emerging blockchain era – it seems it is possible to get the internet we always dreamed of. Now it’s time for us to get building the world we want to live in.

The Blockchain Evolution

New technology often goes through a hype cycle, but few get get hyped more than Blockchain. I imagine most of my readers are across it, if not, I wrote a blockchain 101 article you can read in 2 minutes flat. Now, I’ll put my hand up high, and admit right here and now that I’m a true believer. Before I tell you why, the image below is the reason I decided to write this.

I notice this image on Linkedin – it was posted by someone in an industry poised to benefit significantly from the technology. What astounded me was the absolutism of the statement. Even if a technology doesn’t emerge, it’s a far more useful life and business strategy to have an open mind to new possibilities.

There’s 3 simple reasons I think Blockchain will become a vital layer in our lives.

(1) It solves a real problem: It allows us to transmit things of value (like currency) without making a copy and removes the need for traditional intermediaries. We can finally trade with each other online using cryptography to create trust and transparency/anonymity.

(2) The technology has proven use cases: It has already been proven to ‘work‘ with crypto currencies. While it faces technology hurdles including excessive energy usage, a poor user experience and slow transaction speed – these are problems many similar technologies, like the early internet faced as well. Dial-up internet anyone?

(3) There’s a huge amount of financial and human capital going into it: The sheer investment of intellectual capacity and money flowing into the space almost guarantees that problems with it will be solved and new ways of employing the technology will be found.

In fact, that’s how it always happens. Cars today are very different from cars in 1920. The internet is a very different beast today compared to when we browsed on Netscape. And it’s always the three factors above which are required to keep a new technology from disappearing.

Blockchain isn’t Blockchain, rather, it will become something somewhat different from what we see and experience now. With the prize so big – it has potential to topple some of the worlds biggest industries, and so many people engaged in inventing the desired functionality, we can be certain it won’t go away. Historically, making a technology work smoothly is where the biggest financial wins usually come from.

 

Some companies are infallible, or are they?

In a classic case of economic externalities, privacy has become the hot issue in the Digital Industrial Complex. It’s the industrial pollution equivalent of the digital era. There’s a lot of attention going to startups which circumvent or avoid centralisation of their services, or use what is becoming known as Block Chain technology. In fact famed Venture Capitalist Fred Wilson is calling their 2014 fund the Block Chain cycle. In simple terms, startups in which the information is distributed across the network of users, rather than stored in the companies server farms.

It got me thinking about how what seem like minor road bumps can become the key factors which entirely disrupt companies and industries. Privacy could be the type of road bump which up ends businesses, whose infrastructure is based on an old method. That method being, centralised data aggregation and distribution. I’m talking about brands like Google and Facebook. Companies who at this very moment seem entirely infallible, simply too important, big and powerful to ever lose their position of dominance. Personally, I don’t think it will happen, because unfortunately most people have a level of apathy where they usually don’t care about a potential problem until it really becomes one. And even then they sometimes still don’t care – just look at the climate change issue. Why this is interesting is that the thing which disrupted the recording industry, the retail industry and many others was that the infrastructure they set up became a distinct disadvantage. I’m starting to wonder if internet based companies with centralised data systems are creating an infrastructure which isn’t in line with a shift which technology seems to wants to make happen. The shift to distributed data.

Some recent numbers on a search engine called Duck Duck Go – a privacy based search engine are interesting. It is growing rapidly. Here’s a description of what they do straight from Wikipedia:

DuckDuckGo is an Internet search engine that emphasizes protecting searchers’ privacy and avoiding the  filter bubble of personalized search results. DuckDuckGo distinguishes itself from other search engines by not profiling its users and by deliberately showing all users the same search results for a given search term. DuckDuckGo also emphasizes getting information from the best sources rather than the most sources, generating its search results from key crowd sourced sites such as Wikipedia.. 

Here’s a chart of the recent growth that Duck Duck Go has achieved:

Screen Shot 2014-05-08 at 10.58.25 am

 

While this search engine doesn’t operate on a distributed system, it is interesting to see how a slightly different proposition to the incumbent can have a lot of meaning to groups of end users. Yes, it’s tiny in the scheme of search, but this is how change begins. Every disruptor was insignificant at some point. And we’ve already seen the disruptors being disrupted. For example streaming music impacting iTunes business in the space of under 10 years. It seems like dominance occurs in shorter life spans now.

The key thing that we shouldn’t forget is that once powerful organisations can fall quickly. They seem infallible, untouchable. But the two things we ought remember are that companies like Ford once had a Google-like air about them and in a digital world the barriers to entry and dissemination of change are lower than ever.

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