Bitcoin prices are on a tear, and so is blockchain and ICO hype. Are you as confused as I am? Let’s figure out why.
“This is the Internet in 1993!”
I heard this statement several times at an industry conference I attended earlier this month, and it had been ringing in my ears for any number of reasons well before then. It all feels so familiar, and yet this time, it also feels utterly foreign.
A conversation with Andreas M. Antonopoulos, author of Mastering Bitcoin and The Internet of Money, one of the world’s leading experts on bitcoin and blockchain.
I met Andreas M. Antonopoulos at the inaugural edition of Singularity University Canada Summit in Toronto earlier this fall, where he was breaking down bitcoin/blockchain for a large crowd of business leaders, entrepreneurs and thinkers at Evergreen Brickworks, a former quarry and industrial site reserved for the event. The flurry of emerging conversations around bitcoin and blockchain, the billion-dollar valuations, and the specialized jargon can make blockchain an intimidating topic to wade through. Is the hype justified? Consider:
Bitcoin (BTC) went over $6,200 this week, as the total crypto market cap approached $180 billion.
Plus an AI cagefight between tech’s most famous founders, and a path to salvation through handwriting.
Raise your hand if you understand the blockchain. OK, smarty pants, you can skip to the next story. But most of us may need a primer (or three). And given that blockchain technology dominates tech and business news these days, it seems a good moment to point Daily readers to a trio of relatively painless pieces that will give you a good overview of how it all works.
Start with this short Medium piece from 2013 (yes, four years ago), entitled Explain Bitcoin to me. One of the first bitcoin/blockchain pieces to go viral, author Nik Custodio uses a simple example (a digital apple) to explain the core concepts behind bitcoin, which was the first at-scale use of blockchain technology.
While you were getting on with your life, the world of crypto-tokens and currencies has been evolving at an astonishing clip. Bitcoin broke the ice and introduced the world to the concept, but new mutations are happening fast, many built on the Ethereum platform. Consider:
Startups and new-technology ventures are using “initial coin offerings” to raise capital, auctioning off cryptographically secured tokens (Joon Ian Wong in Quartz). Proponents see this mechanism, which has already been used to raise $150 million this year, as a method for bypassing traditional venture funding and routing around the “take investment, scale up, cash out” mode of technology finance that dominates today. If a new venture succeeds, its token will appreciate in value, giving early adopters a nice payoff. Of course, there’s huge risk for investors, too — and the more value these new currencies have, the harder people will work to break their still immature underlying technologies. Also looming in the wings: regulators.
As venture capitalist Chris Dixon points out, the larger implication of the rise of tokens is that they provide a method to finance the creation and support of open technologies. Traditional financial models demand that innovators close off their work. Tokens allow entrepreneurs to release a protocol or network technology, and to profit as it gets widely adopted, without hoarding the intellectual property. Dixon sees the token movement as “spiritual heir” to open projects like Linux and Wikipedia. Tokens, Dixon writes, are “a breakthrough in the design and development of open networks, combining the societal benefits of open protocols with the financial and architectural benefits of proprietary networks.”
Alexander Ruppert offers a deeper dive on how tokens can decentralize industries as they move up the value chain from network protocols to end-user applications, in realms like law and gov tech, logistics, energy, and payments.
Kik, the chat app, announced that it’s launching its own crypto-currency called Kin (Sonya Mann inInc), which will function similarly to Kik’s existing “Kik points” rewards system. Kin also represents a bid to find a new business model for apps in the social media attention-sphere — one that doesn’t rely on ads.
Crypto-currencies function outside existing financial record-keeping rules and offer some levels of anonymity. That makes life easier for people who want to evade existing laws. The real-world consequences are already on display in the opioid overdose crisis: As The New York Times’ Nathaniel Popper reports, Bitcoin-based online markets are playing a big role in the distribution of the deadly painkiller fentanyl. Every time we introduce a new technology for connection, we amplify both social benefits and costs. It would be nice to think we’d be getting a little better at minimizing the harms, but so far, there’s not much evidence of that.
Apple HQ’s Splendid Isolation Is So 1950s
When Apple’s humongous beached-UFO of a new office opens, the world will gawk at its perfection, from the toroid curves of its glass roof to its 40-foot high dining-hall doors. But all you need to do is look at its site to see something that’s horribly, anachronistically wrong with Apple’s project, writes Adam Rogers in Wired: “Apple’s new HQ is a retrograde, literally inward-looking building with contempt for the city where it lives and cities in general.”
Budgets aren’t just lists of priorities; they are statements of purpose and expressions of ideals. A U.S. president’s budget is only an advisory to Congress, which has constitutional authority over government spending. But presidents usually put a lot of care and energy into their budgets — particularly their first ones — because they provide leaders with a chance to say, “This is what I really care about.”
Based on his new budget proposal, President Trump cares very much about spending $54 billion more on the military and building a wall on the Mexican border. He does not care about funding for the State Department’s diplomacy, environmental protection, scientific research, the arts and humanities, and many other functions of government that he has proposed to cut back on or eliminate (Vox). These aren’t just ostensibly elitist institutions like the National Endowments for the Arts and Humanities; they also include agencies dedicated to helping the kind of struggling heartland communities that elected Trump, like the Appalachian Regional Commission and Meals on Wheels.
A good organization complements its leaders’ weaknesses; a bad one magnifies their flaws. Under President Trump, the entire executive branch of the U.S. government has turned into a feedback loop for the man’s moods and outbursts, as an extraordinary account in The Washington Postmakes clear.
The White House team is on a bipolar roller-coaster that rises and falls with Trump’s state of mind — and we’re all along for the ride. If you’ve ever worked for someone with Angry Boss Syndrome, you know how dysfunctional this can get. The organizational focus narrows down to assessments of the boss’s psyche and efforts to influence it, while everyone scurries to buffer themselves from executive whim and rage.
The new cryptocurrencies and post-blockchain smart contracts make it possible to leave behind the simplistic finance model of the industrial corporation.
What is still the mainstream model of the firm was born when the typical company owned and operated a manufacturing plant. Entrepreneurial investors put up the capital which was used to build the factory. The initial investors, the shareholders, were the only parties with significant assets tied up and at risk in the enterprise. This is the historic reason why shareholders are the “residual claimants” to the firm’s income. Residual claimant means that the shareholders get their compensation last, if something is left after creditors and employees are paid. Claims by creditors are fixed and employees typically have negotiated compensation principles in advance of doing something. Payments to creditors and employees are thus seen as independent of the performance of the company.
Brexit, Britain’s exit from the European Community, was supposed to tank the British economy. But so far it hasn’t. In fact, Britain had a great 2016, economically speaking. The economists called that one wrong, just as, a decade ago, they failed to predict, or help us prevent, a massive financial crisis and recession.
Why do economists get so much wrong so often? John Lanchester (The New York Times) looks at the current crisis of confidence among economists, as represented in recent papers by the chief economists at the World Bank (Paul Romer) and the Bank of England (Andy Haldane). The problems cluster around macroeconomics, the discipline that studies the workings of the economy as a whole. As Lanchester puts it, macroeconomists would like us to view them as plumbers, behind-the-scenes tinkerers with reliable systems. But in practice they are more like a bomb disposal squad, summoned in emergencies to prevent catastrophes like the Great Depression.
The mood in the Bay Area and Silicon Valley since the election has been dejected, writes Om Malik (The New Yorker). That’s less about fear of specific changes the new administration will introduce and more a coming to terms with a collective failure in empathy. The inventors of the future — some of them, anyway — are realizing they’ve become seriously disconnected from the occupiers of the present.
Technologists must “try to understand the impact of whiplashing change on a generation of our fellow-citizens who feel hopeless and left behind,” Malik writes. Our “data-driven oligarchies” — Facebook, Google, Amazon, et a. — are creating wonders of technological efficiency. But these engines of change enrich only a tiny sliver of society and actively threaten the livelihoods of a much broader population. And they’re only beginning to wake up to this dilemma.