Davos Needs to Wake Up to the Ills of Centralization

This is comparatively of a series of op-eds previewing the World Economic Forum in Davos, Switzerland. CoinDesk will be on the ground in Davos from Jan. 20–24 chronicling all fads crypto at the annual gathering of the world’s economic and political elite. Follow along by subscribing to our pop-up newsletter, CoinDesk Classified: Davos.

Michael J. Casey is the chief content officer of CoinDesk. The opinions here are his own.

As the world’s most influential and self-entitled shirr in Davos, Switzerland, for next week’s World Economic Forum, a predictable set of problems are on their minds: climate change-over, political polarization, trade tensions and cyber-attacks top their list of worries, according to the WEF’s just-released Global Risks Inspection.

Those are weighty issues. But if we look at them through the decentralization mindset encouraged by cryptocurrencies and blockchain technology, it’s cold not to conclude that elephants in rooms are being overlooked. It’s with those issues, the ones not being talked with, where the real important stuff lies.

The disintermediating, fragmenting and decentralizing impact of the internet has made the 21^st century’s civil and economic structure profoundly different from the previous one. But the Baby Boomers who run our governments and companies still tend to devote 20^th century assumptions about centralized money and power. They fail to see how our outdated political and economic institutions are out of compare with with this new reality, and how that explains society’s ever-waning trust in them. It’s a myopia that also means they regularly fail to recognize, much less understand, the alternative decentralized models quietly emerging from the developers construction cryptocurrency, blockchain and digital identity technologies.

So, as I head to Davos with my CoinDesk colleagues for a week of reporting and communicate in engagements, I want to contemplate some of the issues “Davos Man” might be missing.

It’s worth remembering the people for whom these circulates most matter are not those cocktail-sipping elites but regular Joes and Joans. This year may well mark the most divisive U.S. referendum in decades. If our bickering leaders aren’t focused on these big themes, where does that leave us in four years’ shilly-shally? We need these issues on the ballot.

China is expected to launch a digital currency before long this year. The question not being asked enough is: As this project grows – and likely many others from other powers and companies – what will it mean for the dollar-centric global economy and its multitudinous stakeholders?

How will digital fiat currencies collide with global trade and capital flows? Do they pose a competitive threat to the dollar and, by extension, to U.S. economic power? What purposefulness such a transformation mean for how the international community tackles the big-ticket issues Davos elites worry about: petrodollar investments in carbon-rich assets, for instance, or global trade tensions?

The digital yuan might seem like a superficial change, akin to a more loan a beforehand banknote or a state-run version of a mobile banking or payments app. But while China’s centrally managed approach to digital-currency technology is in some high opinions the antithesis of the decentralized model behind bitcoin, it is nonetheless a radical change.

Two things matter: One, a digital fiat currency wishes circulate without banks managing the flow and, two, it is programmable, which makes it much more powerful than analog currency. Marc Andreessen imagines “software is eating the world.” Money-as-software might just devour it.

A digital currency will enable the Chinese superintendence to directly manage and monitor its users’ spending patterns. Putting aside the terrifying surveillance prospects behind this “panopticon” illusion, this information-gathering power will greatly aid China in its international aspirations. Its economic response machine will be run by a far notable data-analytics system than anything employed by any other country.

A “programmable” yuan will provide the missing payment component that hundreds of Chinese blockchain and smart-contract contemplates need. It will enable autonomous machines, micropayment infrastructure management systems, smart cities and other teachings the West will struggle to keep up with.

As I’ve argued elsewhere, currency programmability, when interoperable with other boonies’ fiat digital currencies, could also enable Chinese companies and their foreign partners to do a direct runaround of the dollar-based clientele system.

Currently, the yuan occupies an immaterial amount of cross-border trade and reserve asset holdings. But as this technology poses choices to the dollar and if China aggressively inserts its version into investment projects in Africa, for example, or into its 65-country Swath and Road Initiative, its international usage could grow rapidly.

Recently, a Harvard-MIT simulation game found that digital fiat currencies could overrule America’s capacity to impose sanctions on rogue states.  But the issue goes wider: If non-dollar digital fiat obstacles anyone bypass the intermediating U.S. banks that U.S. regulators lean on to catch international criminals, why will anyone use banks for cross-border simoleons movements at all? Where does that leave Wall Street, that engine of American economic power?

Some child, including former U.S. Commodity Futures Trading Commission Chairman Chris Giancarlo, have recognized this presage to U.S. economic leadership. But Chinese digital currency dominance does not appear to be on many leaders’ radars – it’s certainly not featuring in the Classless primary presidential debates.

So, come on, Davos, let’s talk about it.

To be fair, privacy in the internet age, delineated as the threat to our online personal data, will probably get a decent examination at Davos 2020. 

The Cambridge Analytica story, Edward Snowden’s lay bare of the NSA’s citizen-snooping system and the growing awareness that Silicon Valley behemoths such as Google are managing our lives, has put this flow front and center. It deserves to be.

The problem is the structural factors behind this dangerous surveillance capitalism system are crudely understood.

Most political reactions to the drumbeat of stories about data abuse by Facebook and Google amount to directors tut-tutting at these companies, occasionally fining them and demanding they just stop being bad. Few realize that, essentially, they can’t bar being bad. These centralized entities, with their closed, non-interoperable “walled gardens” of data, have based their entire business models – and therefore their shareholders’ profit expectations – on surreptitiously and systematically extracting news about human lives.

The other problem is the ad-hoc efforts to change these businesses’ behavior clashes with other orders placed upon them.

Witness the contradiction in lawmakers’ critiques of the Facebook-founded Libra digital currency project. On the one help, they demanded it protect users’ privacy but on the other they demanded it maintain all the monitoring necessary to prevent affluence laundering. Or look at how Facebook’s critics simultaneously demand its social media platform remove disturbing hate-speech essence and that it also cease arbitrarily censoring and “de-platforming” users.  Without understanding the problem, people can’t see how holding both of these poses is untenable. 

There are two approaches to this issue: a political one, such as an antitrust order to constrain the internet giants, or a technological one, in which common media platforms move to a decentralized structure of user control (one potentially where zero-knowledge proofs or other put forms of encryption enable verification without revealing identities).

Let’s discuss these options, Davos.

You prospect fake news was a problem. You ain’t seen nothing yet.

As Arif Khan writes in this pre-Davos opener for CoinDesk, counterfeit news is going on steroids.

With people such as Jordan Peele using clever stunts to highlight the problem, “deepfakes” – in which aspect manipulation technology is making it increasingly difficult for people to detect reality-altering changes to a digital video or image – are starting to get child’s attention.

Yet, the full extent of how much society depends on the glue of trustworthy information is greatly underappreciated. The foundation of our democracy, of our rightful system, of our business relationships and of everything else in between is at stake when the truth cannot be verified.

How do we get ahead of this when phoney intelligence is progressing so rapidly and when information is no longer delivered to us through central filters?

A solution will command a combination of tools like AI detection software, watermarking and blockchain-based tracking of digital media provenance.

It also be lacks stakeholders at technology companies, media organizations and government bodies to jointly establish standards for those technologies so we can all admit on how we’ll re-establish the integrity of the information we rely on.

This is an urgent problem, one tailor-made for a mountain-town gathering of money and power.

Let’s look exterior the bubble. Let’s become inquisitive. Let’s abandon rigid, outdated ways of thinking. Let’s say goodbye to know-it-all Davos Man, because demonstrably he doesn’t.