Money of the future

One aspect that fascinates me of bitcoin and the crypto industry is to have many young founders and visionaries that are very approachable. You can just hit them up at meet-ups and they might even respond on Twitter. Singapore has a vibrant ecosystem and in the few months that I’m watching the space, I’ve already had the chance to chat with two of them - Binance’s Changpeng Zhao (CZ) and Bitcoin Cash evangelist Roger Ver. Every industry has its charismatic leaders and especially the emergence of a new technology, the great disruptions that come with it, are creating fascinating stories.

Finn Brunton’s Digital Cash is a book that tells the story of the anarchists, utopists and technologists behind the creation of bitcoin. The reader gets to know libertarians and “extropians”, a culture absorbed by science fiction fantasies and “west coast hedonic optimism”, but always with a deep-rooted scepticism of government. Back in the 80s, a loosely organised circle called the “Cypherpunks” formed a mailing list to discuss encryption, digital pseudonyms, black markets, psychedelics, experimental fiction and the collapse of governments, among other topics. Eric Hughes created the first anonymous remailer, Tim May wrote the crypto anarchist manifesto, Jude Milhon penned articles for the cyberpunk magazine Mondo 2000.

Electronic money and credit card usage had been on the rise for more than a decade and the group swiftly pointed out the surveillance problem that comes with it. States will be able to access these central payment networks and thereby control entire societies. Individuals can be profiled and cut off the system with ease. Personal privacy will soon be a thing of the past. “The real choice is between a total state and crypto anarchy,” declared Tim May.

David Chaum had a desire to preserve individual privacy and he even wanted to work together with the existing banking system. Chaum presented his ecash in 1983, as a tool for banks to turn existing currency into digital cash. Banks can create money on a physical card or in a digital wallet that can be emailed. When the account holder spends his money, public key cryptography will blind the transaction to both bank and merchant, although they can still check that the cash hasn’t been spent before. Chaum was running a pilot with Deutsche Bank in the 90s, but his company DigiCash folded at the end of the decade.

There was Phil Salin, a big fan of Austrian School economist Friedrich Hayek. Salin created the American Information Exchange, a marketplace for the free circulation of information and money, for people to trade intellectual property, patents, surveys, analysis. Xanadu, a sister project that was later acquired by the company Autodesk, had the ambition to digitise all human knowledge and to “monetise thought”. It was a network based on property and ownership, with royalties to be paid on every byte transmitted. Salin died of cancer in 1991 and was one of the first to have his head cryogenically frozen, to be revived when science would allow it. How to move money forward in time, to be able to use it in the future? That was one of the questions the Cypherpunks discussed. 

Another participant in the list was Wikileaks-founder Julian Assange, conducting his first experiments with anonymised networks. In 1993, Tim May invented the “BlackNet”, a purpose-built “non-place” where operators won’t know their users and users won’t know who runs it. It deemed nation states and national security considerations as relics of the pre-cyberspace era. John Perry Barlow later published his Declaration of Independence of Cyberspace, telling the world elites in Davos that they are not welcome. In their tradition, Ross Ulbricht created the marketplace Silk Road, to be shut down by the US government in 2013. That was when many of us heard about bitcoin for the first time.

Several ideas contributed to its foundation. Adam Back’s Hashcash and the partial hash collision algorithm, the “proof-of-work” or processing time that miners have to contribute in order to earn bitcoin. Hal Finney further developed the idea into reusable proof-of-work, effectively creating token money. Nick Szabo came up with the concept of BitGold. He was the first to suggest decentral “smart contracts” in order to solve the double-spending problem. Wei Dai’s b-money incorporated most of these ideas, a decade before the actual Bitcoin was released. Satoshi Nakamoto’s white paper was quoting Beck, Dai and Ralph Merkle, the inventor of cryptographic hashing. Eventually, on 11 January 2009, Hal Finney tweeted “Running bitcoin”. And utopia suddenly became a reality.

Finn Brunton: Digital Cash. Published by Princeton University Press, 2019.

Into the roaring 20s

And so another decade ends. First of all, the euro made it through and ‘old media’ continued to decline (two things that concerned me back in the days). Big tech has had a great run since then and is now dominating the media and entertainment space. Smartphones raised personal productivity and brought us ridesharing as well as mobile banking. Social networks have in general facilitated global communication and news flow, but Facebook and Co. were also being instrumentalised by rogue states and populists attacking our democratic system and personal freedom, enabling Trump and Brexit. Also, the ‘millennial lifestyle’ has become ubiquitous. Co-working spaces popped up across cities where people are consuming protein bowls, smoothies (not me, I still prefer espressos) and tons of avocados.

Predicting the future is foolish. But awareness of trends can help to stay ahead of the curve. A few things I’ll be looking at...

Financial Markets and Central Banks

Overall it has been a pleasant decade in the markets, one just had to put the money into standard ETFs and sit out the trend. Coming out of the great financial crisis of 2008 (which is still haunting many folks), prudence has been front and centre for investors, companies, bankers and governments. It feels like those in charge are doing everything to let us not even come close to another downturn. The economic cycle appears orchestrated and engineered, interest rates artificially kept low (so the narrative), markets maintained alive by permanent stimulus and money printing. Other less discussed factors might also keep inflation low, like technological progress. But the blame is generally on the FED and the other global central banks (and their governments behind) who chimed in entering a competitive run to the bottom and below. Are we seeing a ‘new normal’ (unlikely) or will the tide be turning at some point? How will it play out? I’ll have the popcorn ready! 

Bitcoin

Or the digital gold. I never got the goldbugs. Projecting value on shiny stones that you dig out of the ground and then hide in your bedroom. They say it’s scarce (cannot be inflated), has proven to be a store of value over centuries (other than paper money) and can be anonymous, protecting one’s privacy. Attributes that are also claimed by Bitcoin advocates. Well, the protocol only exists for ten years so far, but it worked without major hiccups. Bitcoin is a predictable piece of software that guarantees a fixed, decreasing supply (as an answer to the inflating government money) and the privacy of its users is warranted. Bitcoiners also highlight its ‘unconfiscability’. They tell the story of the Cyprus banking crisis of 2013 when the country’s largest bank was forced to close under pressure from the European ‘Troika’ and the IMF, seizing part of the account holder’s money to repay its debt. Bitcoin still has some ‘PR issues’ to respond to, the high volatility and assumed use by criminals. Although the latter might still mostly utilize cash given that Bitcoin transactions are recorded on the blockchain and can theoretically be traced back. Time plays in Bitcoin's favour, as younger generations will likely prefer a sound computer programme rather than an old fashioned and greedy banker when depositing their savings or making a money transfer. Central Banks and private companies (Facebook’s Libra) are jumping on the trend and  test their (centralised) versions of digital money, which obviously won’t be anonymous. 

Globalisation - what next?

Is de-globalisation the big deal in the years to come? Nationalism and protectionism are on the rise, trade barriers rising and populists are pushing back globalists. It might just be the final hurrah of the boomer generation. Millennials and Gen Z are already mobilising their peers, protest movements are popping up around the planet to fight global warming, inequality and the erosion of personal freedom. The protests are those of true globalists, people who are used to freedom of movement and the ability to communicate openly, having grown up with the internet. The speedy advance of technology has a lot of momentum and won’t be stopped. But technology also led governments to become more assertive propping up its surveillance apparatus. China has become the poster child leading the world in the facial recognition space and monitoring of money flow through their tech behemoths, feeding all this data into their social credit system. Privacy is under attack!

The future of news

The disruption of the traditional news industry became a serious thing at the beginning of the last decade. The first response was attack. At Dow Jones, which I left last year, we created several local language editions for the Wall Street Journal, adding blogs and video services. We integrated news and data into a single product to take on Bloomberg. By the end of the decade, the local editions have shut down, and so has the print production of the paper, with exception of the US. Data products continue to serve some niche audiences. Digital subscriptions for the WSJ are thriving, but mostly in the home market. Last fall, the Journal partnered with Facebook to feed some content into their news aggregation product. Other brands are surviving with the help of billionaire investors or after being trimmed by private equity. Thomson Reuters will end up under the roof of the London Stock Exchange which aims to become a data provider. As mentioned initially, the likes of Google and Facebook are wielding significant influence and power, to an extent that they could be broken up. On their platforms, new species like the social media influencer or video channel publisher have sprung into existence. A new wave of (to say it with Taleb) ‘artisan’ content producers have become proper businesses, broadcasting directly to millions of followers. They’ll certainly be here for some time, co-existing with the smaller established media brands. Interesting times ahead!