What social good do Cryptocurrencies serve? They enable us to store and trade our personal data using decentralized applications. With no corruptible middlemen to lose or abuse our data, we are free to use it to fuel Artificial Intelligence for humanity’s benefit.
Congressman Sherman demanded the answer to a simple question: “Is there some great social purpose, that cannot be met in any other way?”
Why should we put up with the fraud, the money laundering, the rampant speculation. Why is it worth it?
Faced with the congressman’s question, the assembled panelists at the Financial Services Committee hearing sat in silence.
“No volunteers?” The congressman crowed.
I’ve watched the scene several times and everytime I think to myself: What a missed opportunity! Why didn’t they have an answer at the ready? Why did they just sit there?
I think I would have answered the Congressman’s question with another question:
How else can you build a Company where no one is in charge?
Many people cite the Internet when comparing Cryptocurrencies to previous innovations, but a better comparison is the Corporation.
In Ascent of Money, Niall Ferguson writes about the Corporation:
Looking at the Andes, it is hard to imagine that any kind of human organization could overcome such a vast natural barrier. But for one American company, their jagged peaks were no more daunting than the dense Amazonian rainforests that lie to the east of them. That company set out to construct a gas pipeline from Bolivia across the continent to the Atlantic coast of Brazil, and another - the longest in the world - from the tip of Patagonia to the Argentine capital Buenos Aires. Such grand schemes, exemplifying the vaulting ambition of modern capitalism, were made possible by the invention of one of the most fundamental institutions of the modern world: the company. It is the company that enables thousands of individuals to pool their resources for risky, long-term projects that require the investment of vast sums of capital before profits can be realized.
The company allows a large network of people to organize themselves by submitting control of their resources to the company’s corporate leadership.
This new economic organization quickly grew to rival and exceed the State in the size and scope of its economic achievements. Unlike the State, the Corporation was a network one joined willingly, through investment or employment; this enabled it to draw resources from anywhere in the world. Unlike the State, the Corporation deployed resources in response to the Market price of its products and shares instead of the directives of fallible central planners.
In a final face-off, the corporate economy of the United States simply out-produced the state-run economy of the Soviet Union, driving it into collapse like a persistence hunter running his prey to exhaustion.
But both the State and the Corporation have a fatal flaw: centralized governance and operations. The Chief Executive Officer often reigns over a vast technical and security infrastructure, which houses financial and intellectual assets accrued by the Company over the course of its operations. Inevitably, this includes everything there is to know about its customers.
Surveillance Capitalism is when companies collect any and all information they can about their customers so they can more effectively advertise to them. Companies like Google and Facebook provide a free service to consumers to harvest their personal data and then use it to power dead-accurate advertising to their real customers: businesses selling products. Everytime we use a “free” online service we are actually buying it with information about ourselves. An interesting implication of this is that, just by existing, you are generating a valuable resource: personal data.
For example, Facebook might want to predict which ad to show in your news feed given that it knows you recently bought a can of paint. Should Facebook show an ad for a cheap paintbrush, or an expensive chandelier? Which are you likely to click on so Facebook can charge more for its targeted ads? Well, where was your last vacation and what hotel did you stay at? Which restaurant did you go to recently? By knowing these things about you and seeing what people like you clicked in the past, Facebook can predict what you will do. The more people it knows about, and the more things it knows about those people, the better its predictions will be.
The amount of data Facebook collects is directly proportional to the amount of money it makes, because the amount of data it collects is directly proportional to how good Facebook’s AI algorithms are.
Artificial Intelligence is not only about advertising, it has massive benefits for consumers, which is why we willingly submit ourselves to a level of surveillance that Adolf Stalin could only dream of.
The same technology, which is so good at predicting the brand of cereal to advertise to you, is also great at figuring out that you want to go see a movie when you type “get out” into a search engine. It’s the same tech that powers speech recognition so that Siri can translate the noises coming out of your face-hole into something useful like requesting an Uber. The same tech will chauffeur you around in that Uber without a driver, relieving you of performing the most dangerous activity any of us do on any particular day. AI will enhance all aspects of our economic system and all of it will run on data, Data, DATA.
The reason data is such a valuable resource is because of the way that Artificial Intelligence works. All AI algorithms make predictions about the future based on patterns learned from digesting vast amounts of relevant historical data. Consider how AI diagnoses lung cancer using x-ray images. An AI model is trained by processing hundreds of thousands of x-ray images each labeled with the correct diagnosis. The model learns that when particular pixels, or groups of pixels, are a certain level of darkness, then this implies the presence of a tumor with some level of probability. When a new image arrives with no label, the model runs all the pixel values through the model it has learned and assigns a probability that the x-ray contains a tumor.
The more examples an AI model has trained on the better its predictions will be. The Perfect AI algorithm would need to have seen everything to make the best possible prediction. Because of this, Corporations are in a data arms race, and your privacy is the collateral damage.
All of the smart devices in your home log data back to the servers of their manufacturer. Your Amazon Echo records your commands, your Nest thermostat records the temperature at your house. Your self-driving car records everywhere you drive. All of this data is needed to improve the product, but at the cost of your privacy.
Mark Zuckerberg testified in front of Congress that Facebook collects data about people that aren’t even Facebook users and until recently Facebook bought financial data about you from data brokers like Datalogix, which collects financial information about consumers. The more data the more profit. Another such broker of financial data is Equifax. They were hacked allowing information that can be used to impersonate the identity of millions of Americans out into the wild.
The question then becomes: How can we get the best movie recommendations, and see the most relevant advertisements without every detail of our lives being stored in poorly secured data warehouses that are constantly at risk of being hacked. How can we harness the benefits of smart homes, self-driving cars, and intelligent assistants without a handful of fallible CEOs peering into every relationship we have, every purchase we make, and every book we read and as a result wielding enormous power over us?
Must we choose between our privacy and our convenience? Must we give up our digital sovereignty so we can wield the sum of human knowledge for our benefit?
Cryptocurrencies’ primary innovation is the decentralized digital ledger. It allows an arbitrary network of people (through their computers) to maintain and secure a written record without having to know or trust each other. These participants are rewarded for contributing to the network by the automatic issuance of a digital currency. This currency is written into existence on the very same ledger the network secures.
The consequence of this is that large groups of people can pursue a shared cause using the ledger to coordinate amongst each other. This is analogous to a Corporation which directs the efforts of a large number of people and resources, but, in the case of a cryptocurrency, there is no trust required for a central authority like a Chief Executive Officer.
Not having a Dear Leader poses some challenges and various governance models are being experimented within the cryptocurrency community, however there are some very important advantages:
Network functions and governance models are implemented through open source code, auditable by anyone who can read it, automating away a lot of politics and uncertainty.
The ledger, which keeps track of network participants’ contributions, is immutable and therefore impervious to political manipulation.
The data in the ledger is cryptographically secured by default so it cannot be hacked and provides various levels of pseudonymity or anonymity.
No central point of control means it is difficult for external forces to shut down the network, making it resilient against outside influence.
These features make it practical to launch decentralized versions of your favorite applications also known as dApps. dApps greatly reduce the costs of centralization. One of the most impactful uses of dApps can be to harness the world’s data to train powerful AI algorithms without incurring the costs of centralization described above.
AI is a compelling use case for cryptocurrencies because at its best it needs to know everything about you, and it is dangerous to concede this personal data to a handful of executives, as we blindly do today.
Let’s run through an example of how it might work. Let’s say I want to build an application that recommends books for you to read. To make the most relevant recommendations the AI algorithm needs as much information as possible. Everything you’ve ever read before, and how much you liked it, everywhere you’ve been, the movies, shows, and plays you’ve seen and enjoyed, your political orientation, etc. Today this data is collected by a few companies and then sold, or rented out, to the highest bidder to manipulate you into buying products or electing politicians.
A superior approach would be to install audited, open source software to spy on yourself. Instead of sending your personal data to a Corporation, the software would encrypt it and track it on a decentralized network. Interested companies would bid on your anonymized data using the network’s native coin: DataCoin. DataCoin would be traded against other currencies, including the US dollar, on the open market; DataCoin’s value would reflect the value that your personal data has to the Companies bidding for it.
The DataCoin software would encrypt your personal data and splinter it across thousands of servers, so no single computer could be exploited by hackers. The software would aggregate the data, so as not to reveal your identity to the Companies using it.
The DataCoin network will remove Facebook and Google as intermediaries and allow you to profit from trading your personal data directly to the Companies building AI algorithms for product recommendations, medical diagnosis, self-driving cars. Even advertisers who wish to monopolize your consciousness can do so by paying you a fee for the privilege. Facebook and Google might then become services that users pay for, using the money they earned through the DataCoin network. Users would then be served as customers, instead of harvested as a commodity.
The data arms-race is happening because the entities who control the most data will have the smartest AIs, make the best decisions, and have the most power. The power of AI is the power to predict the future. Power corrupts.
In 2006, mathematician Clive Humby declared: “Data is the new Oil.” Imagine if the energy needs of the industrial revolution were met not by the Oil companies but by peers, you and me, willingly participating in an open network to do the work of providing energy and being compensated for our efforts. How would the world be different? Would there be as many wars? As much pollution?
Cryptocurrencies’ social good is the ability to decentralize the large-scale endeavors of man, so that we may benefit from them without empowering a new generation of tyrants. AI is only one application used to demonstrate this concept. There are many other applications conceived of already, and ones that we haven’t been able to fathom yet. Anytime there is a valuable resource which needs to be harnessed, without having to rely on a middleman, a cryptocurrency can be deployed.
Think unused computer storage which can be shared among everyone without having to trust a company not to access your files. Think sharing idle internet bandwidth so that an Internet Service Providers can’t censor or throttle content. Think sharing your idle solar electricity so everyone pays lower prices and becomes less dependent on our aging power infrastructure.
Maybe the most powerful application of cryptocurrencies is the decentralization of money. The same innovations which allow us to cut out the middleman from many of the described use cases will work to limit the role of governments and banks in the creation, distribution, and control of money. So maybe, when the Congressman asked the panel what the social good that cryptocurrencies provided was, they didn’t have the nerve to tell him to his face that the social good was to limit his power… but that’s a story for another time. Please sign up for our newsletter below, if you’d like to hear it.