After the Bitcoin Bubble Pops

Originally posted at: https://medium.com/@ianedws/after-the-bitcoin-bubble-pops-f6dc1b7bf66e

Steven Johnson wrote an article in the New York Times called “Beyond the Bitcoin Bubble” (https://www.nytimes.com/2018/01/16/magazine/beyond-the-bitcoin-bubble.html) that does an excellent job of contextualizing the recent surge in interest in cryptocurrencies such as Bitcoin, Ethereum and Ripple. Valuations have gone sky high in recent months, and unsurprisingly it appears the bubble is currently deflating as I write. Despite this, Johnson argues that it’s a mistake to judge blockchain, the technology behind cryptocurrencies, by speculative coins and their sometimes highly questionable promoters.

Instead, he argues that the current interest in the space is justified because the underlying blockchain technology could allow the internet to fulfill its early democratic and egalitarian promise:

For many of us who participated in the early days of the web, the last few years have felt almost postlapsarian. The web had promised a new kind of egalitarian media, populated by small magazines, bloggers and self-organizing encyclopedias; the information titans that dominated mass culture in the 20th century would give way to a more decentralized system, defined by collaborative networks, not hierarchies and broadcast channels. The wider culture would come to mirror the peer-to-peer architecture of the internet itself.

But faith in this optimistic story of the internet was lost in the past year, according to Johnson.

'Last year marked the point at which that narrative finally collapsed. The existence of internet skeptics is nothing new, of course; the difference now is that the critical voices increasingly belong to former enthusiasts. “We have to fix the internet,” Walter Isaacson, Steve Jobs’s biographer, wrote in an essay published a few weeks after Donald Trump was elected president. “After 40 years, it has begun to corrode, both itself and us.” The former Google strategist James Williams told The Guardian: “The dynamics of the attention economy are structurally set up to undermine the human will.”'

Whether it is newspaper’s revenue being squeezed due to competition from Google and Facebook (99% of new revenue growth from digital advertising went to these two firms in 2016 in the U.S.), businesses who face competition from an increasingly powerful Amazon, or the use of social media by those intent on disrupting elections in North America and Europe, it is clear to many that the internet has a growing dark side.

But Johnson’s not convinced the currently proposed solutions–changing our habits or government regulation–will be enough.

'For most critics, the solution to these immense structural issues has been to propose either a new mindfulness about the dangers of these tools — turning off our smartphones, keeping kids off social media — or the strong arm of regulation and antitrust: making the tech giants subject to the same scrutiny as other industries that are vital to the public interest, like the railroads or telephone networks of an earlier age. Both those ideas are commendable: We probably should develop a new set of habits governing how we interact with social media, and it seems entirely sensible that companies as powerful as Google and Facebook should face the same regulatory scrutiny as, say, television networks.
But those interventions are unlikely to fix the core problems that the online world confronts. After all, it was not just the antitrust division of the Department of Justice that challenged Microsoft’s monopoly power in the 1990s; it was also the emergence of new software and hardware — the web, open-source software and Apple products — that helped undermine Microsoft’s dominant position.'

It’s seems unlikely that a new set of habits will be enough to constrain the internet. Having email or a smartphone is not optional for most people. You can live without Facebook, but there are social costs. Societies organize themselves around technology, whether social media or the automobile and there doesn’t appear to be any going back.

Regarding regulation, it’s unclear that how much control governments can exert over the tech giants. Some countries are trying, with the European Union’s Competition Minister Margrethe Vestager taking the lead against tech companies when it comes to privacy and taxation.

In the United States, however, the picture is different. The Obama administration was, if not in the pocket of Silicon Valley, certainly well-disposed towards it. There were never any anti-trust investigations of tech firms of the sort Microsoft endured in the 1990’s. Many former members of Obama’s government went to work for tech companies, including former campaign manager David Plouffe, who left the administration in 2014 to become an executive at Uber.

While there has been talk recently about regulating the tech industry like the radio, television and cable industries before it, it’s unclear when or how that will eventually happen, and whether it will be sufficient. Trump has taken a harder line rhetorically, even calling out Amazon as a “no-tax monopoly,” but tweets are cheap.

Instead, Johnson sees reform of the internet itself as a possible solution. In other words, fighting fire with fire, and using blockchain to correct the oversights of the internet’s original design:

'The real promise of these new technologies, many of their evangelists believe, lies not in displacing our currencies but in replacing much of what we now think of as the internet, while at the same time returning the online world to a more decentralized and egalitarian system. If you believe the evangelists, the blockchain is the future. But it is also a way of getting back to the internet’s roots.'

And:

'The blockchain evangelists behind platforms like Ethereum believe that a comparable array of advances in software, cryptography and distributed systems has the ability to tackle today’s digital problems: the corrosive incentives of online advertising; the quasi monopolies of Facebook, Google and Amazon; Russian misinformation campaigns. If they succeed, their creations may challenge the hegemony of the tech giants far more effectively than any antitrust regulation. They even claim to offer an alternative to the winner-take-all model of capitalism than has driven wealth inequality to heights not seen since the age of the robber barons.'

One of the examples he uses is one commonly mentioned in crypto circles: identity. What if people could control their personal information in a decentralized system?

'The true test of the blockchain will revolve — like so many of the online crises of the past few years — around the problem of identity. Today your digital identity is scattered across dozens, or even hundreds, of different sites: Amazon has your credit-card information and your purchase history; Facebook knows your friends and family; Equifax maintains your credit history. When you use any of those services, you are effectively asking for permission to borrow some of that information about yourself in order perform a task: ordering a Christmas present for your uncle, checking Instagram to see pictures from the office party last night.

But all these different fragments of your identity don’t belong to you; they belong to Facebook and Amazon and Google, who are free to sell bits of that information about you to advertisers without consulting you. You, of course, are free to delete those accounts if you choose, and if you stop checking Facebook, Zuckerberg and the Facebook shareholders will stop making money by renting out your attention to their true customers. But your Facebook or Google identity isn’t portable. If you want to join another promising social network that is maybe a little less infected with Russian bots, you can’t extract your social network from Twitter and deposit it in the new service. You have to build the network again from scratch (and persuade all your friends to do the same).'

If a decentralized blockchain were introduced that allowed people to control their identities, then they could open them to proprietary networks like Facebook, Google or Uber when needed:

'The blockchain evangelists think this entire approach is backward. You should own your digital identity — which could include everything from your date of birth to your friend networks to your purchasing history — and you should be free to lend parts of that identity out to services as you see fit. Given that identity was not baked into the original internet protocols, and given the difficulty of managing a distributed database in the days before Bitcoin, this form of “self-sovereign” identity — as the parlance has it — was a practical impossibility. Now it is an attainable goal. A number of blockchain-based services are trying to tackle this problem, including a new identity system called uPort that has been spun out of ConsenSys and another one called Blockstack that is currently based on the Bitcoin platform. (Tim Berners-Lee is leading the development of a comparable system, called Solid, that would also give users control over their own data.) These rival protocols all have slightly different frameworks, but they all share a general vision of how identity should work on a truly decentralized internet.'

However far-fetched or fantastic this sounds, it says something that the creator of the world wide web, Tim Berners-Lee, is working on the identity problem. And it’s possible that blockchain technology plus government regulation could allow such a scenario to unfold.