By Pat Kane. First published on SEPTEMBER 16TH, 2017
WHEN a genuinely powerful new technology comes into the world, it shakes apart old institutions and ways of doing things. And as the woodwork squeaks, out come the freaks, quacks and chancers – pushing open these cracks with all the irrational exuberance that humans have always brought to their trading relations.
Thus it is that we find Baroness Michelle Mone, the underwear queen of Scotland and irrepressible lifestyle entrepreneur, taking a shot at the head of JPMorganChase, the US’s biggest bank. On what basis?
Well, Ms Mone is selling luxury flats in Dubai using only “bitcoin” – a new digitally encrypted currency, birthed by a mysterious hacker, and threatening disruption to all existing banking models. Meantime, Jamie Dimon, the head of JPMC, has warned his employees they’ll be fired if they’re found to possess any bitcoins.
Morgan says the craze for bitcoin is “worse” than the tulip bulb craze in the 17th century. “It won’t end well. Someone is going to get killed … Currencies have legal support. It will blow up.”
Easy to say, of course, that if Lady Mone is involved in anything, it must be pants. However, her comeback to CEO Dimon demonstrates that Mone gets the basic radicalism of bitcoin, and the “blockchain” structures that sit behind all these cryptocurrencies.
“It’s the currency of the future”, said Mone. “And I think because everything is logged and registered, everything’s transparent, that I wouldn’t be getting involved in it — especially from the House of Lords element, I’m a baroness — if it was a kind of ‘dodgy’ industry.”
Not sure about the “Lords as insurance against dodginess” bit. But Mone is right to identify what is powerful about this next wave of network and digital development. The bubbling froth about the validity of bitcoin – with the Chinese government also now wading in to outlaw it from their financial system – sits on top of what will effectively be a new kind of internet.
One which is based much more on security than openness; one that reliably verifies who you are, and what you’re doing, rather than the current maelstrom of spam, scam and fakery.
This is what a “blockchain” makes possible. A blockchain is a giant digital ledger of all transactions that are made within its system. Those transactions are encrypted, turned into unlockable code, so no-one can track you down individually. But it means you can trust the system as a whole. Even more so, as its information is distributed across every computer that signs up to the blockchain: it doesn’t reside in some central bank or corporation’s databases.
And all of this is orchestrated by automatic algorithms, with very little human input.
It may now be obvious why alternative currencies have been the first flowering of the blockchain. Given how murky, mendacious and outright corrupt the financial giants were in the run-up to the financial crash in 2008 – poorly assessing creditworthiness, imposing stealth charges on consumers, creating unmanageable levels of risk and speculation – one can understand the search to establish a fairer system of monetary exchange.
A “cryptocurrency” holds out the promise of trustworthy financial exchanges taking place in society, happening directly between connected individuals and organisations – without the skimming off the top of standard banking practices. Even a tiny percentage saving on those practices would return trillions to the global economy.
But it’s wild out there. The currency part of this at the moment is literally a gold-rush – or one could say, a “gold-standard” rush. A blockchain’s power to verify and certify means that it can create a limited number of “coins” – like a virtual version of an old-fashioned Treasury, piling up its gold ingots.
SO there is currently an almighty scramble to become a “standard” cryptocurrency, the possibility of which is reinforced by the amount of users on your network. To the victor in this struggle goes most of the spoils – something we’ve seen in the eventual dominance of other Internet giants like Amazon or Google. In a sense, it’s no wonder that bitcoin – way ahead of the pack – is beginning to seriously freak the monetary establishment.
Other than Baronness Mone and her ermine-lined shield of virtue, there are quite a few Scottish angles on the blockchain, stretching from sweatily speculative to literally stately.
We already have, as you might have anticipated, a “Scotcoin” – a billion of them initially “mined” by some ScotNat techies, but recently bought over by the financial advisor David Low. Low’s rhetoric chimes with bitcoin’s anti-corporate instincts – the attraction of trading with it, says Low is that neither “Mark Carney, nor any of the big banks, takes their clip”.
This isn’t just geek obsession. In a recent conversation, I was surprised when some creative colleagues revealed they’d all taken punts with buying Scotcoin to some degree.
Yet one strand of blockchain thinking currently holds that perhaps the best place for it to flourish is in small, well-governed, high-trust national governments – not with freelance financial advisors.
The Scots-born-and-matured Vinay Gupta is a major guru in the world of blockchain. He was part of the team which brought Ethereum to realisation – a blockchain offer which holds out the possibility of “smart contracts”, made out of algorithms and code rather than law (and thus cutting out the lawyer’s “clip”). It’s currently revelling in multibillion-dollar valuations.
But Gupta’s other major venture was to shape the United Arab Emirates’ adoption of blockchain as a way of verifying citizens’ access to government services. The circle of this citizenship can be widened. Finland is currently running a blockchain called MONI for refugees coming to their country. It provides both a verifiable digital identity and a money account (in association with MasterCard).
These allow both the right to benefits, and a way of being immediately paid for work. The cryptographic anonymity of the system is also reassuring for asylum seekers, worried that their old regimes may be trying to track them down.
Scottish politicians who are interested in an efficient and universal take-up of services, but sensitive (post the Named Persons Scheme) about charges of being a nanny state, might be expected to be interested in the blockchain possibility.
Gupta is hugely ambitious for blockchain. In an August presentation, he placed it in a historical sequence: the 70s meant one computer per organisation, the 90s meant one computer per person (all networked together). But we are now on the brink, he says, of “one computer per planet”. That is, we have the possibility of integrated computation, all databases talking to each other, way beyond national borders.
This could not only assess planet-wide conditions such as carbon usage, but actually enforce better behaviour, through what Vinay calls “the internet of agreements”. Your internet connection becomes as much an enforceable contract as it is a flow of communication.
Gupta believes this makes a form of global governance and democracy, conducted by anonymous but verifiable global citizens, possible for the first time ever. And what if one of its first votes saw a majority demand Western reparations to formerly colonised and exploited nations?
That seems science-fictional (though that’s not necessarily a critique). But as the hype about cryptocurrency and blockchains escalates, a daft but prescient bit of sitcom comes to mind. Little Britain used to have a great sketch – where a saturnine service worker would answer all her customers’ enquiries with a few keyboard stabs, and a standard monotone response: “Computer says no”. Does blockchain just exponentially multiply the number of ways that computers could say “No” to us?
As the coders get ever more intense about the cleverness of their protocols, I’m pining a little for a time when our networks were basic and functional, serving the cleverness, initiative and creativity of humans … rather than the other way round. But with our viruses, memes and scams, haven’t we somewhat squandered the promise of that “open” internet, raised a decade and a half ago?
A better Net evidently needs to be built. Let’s see if the blockchainers have some answers.