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Can the Blockchain and Token Economics Fix Privatizations?

Can the Blockchain and Token Economics Fix Privatizations?

              

Introduction

When I wrote this article about the dramatic collapse of the Morandi Highway Bridge in Genoa, I did it out of anger. Though it was clear to me that the roots of this tragic event were to be found in the wrong privatization model and its wrong incentives, I did not yet realize how this was a global issue. In the sense that the discontent and the failures of privatizations are a worldwide phenomenon — little known, mostly unacknowledged and rarely debated. Indeed, a quick web search under the keywords "failed privatizations" results in a long list of global failures — anywhere from Europe, to Africa, the United States, South America and Asia. This Columbia University paper and the Michael Hudson paper "Let us glory in inequality" are worth reading.

Privatizing state-owned assets or state-run services and functions has been an easy option for governments to raise money to contribute fixing their budgets. If privatizations may effectively improve the efficiency in which some assets or services are managed — whenever such assets or services are subject to free market forces and competition — there are privatizations which rather replace a state monopoly with a privileged rent-extracting private monopoly, which is shielded from free market competition. In practice, the state transfers its privilege of extracting rents — with a public asset or a service — into the hands of a wealthy private investor. This is the downside of privatizations, especially in so-called "natural monopolies" or with key strategic assets or services which the public is compelled to use without any alternative option. Such is the case, for instance, with toll roads, water, general health services, electric grids or prisons.

Dissatisfaction for such a model of privatizations has fuelled many calls to reverse them in many countries such as — for example, in the United Kingdom regarding its dysfunctional railway system or the water and gas sectors. In another interesting research paper, the author, Mildred E. Warner,  

emphasizes:

"The privatizations experiment of the 80s and 90s has failed to deliver [….] This has led to reversals. But this reverse privatization process is not a return to the old model […] Instead, it heralds the emergence of a new, balanced position, which combines use of markets, deliberation and planning to reach decisions which may be both efficient and more socially optimal."

Then suddenly it occurred to me that what I did elaborate — instinctively and out of anger after the events of Genoa — is exactly what is needed globally to achieve this new "more balanced position.” So I went to work again on that initial proposal and the result is this article, which expands on the use of the blockchain and token-economics as a viable model to reverse wrong and dysfunctional privatizations in strategic public sectors.  

I also wish to thank my fellows Thomas Euler and Karl Michael Henneking, who provided me with valuable feedback and ideas on the governance for this new model. Since the crypto space is moving at a rapid pace, I expect to see frequent new developments and innovative approaches on this topic. Thus, I regard this model as being very "fluid" and subject to future modifications and improvements.

Using token-economics

Although the origins of token-economics can be traced back to the early 19th century — in the field of psychiatric studies — the term is now commonly borrowed by the crypto world to refer broadly to a system of economic incentives used to influence stakeholders´ behavior toward a predefined virtuous model that benefits the whole system. Token-economics is a branch of the social studies, and it does not differ from traditional economics, except that it looks closely at behavioral economics and game theory in order to provide the right economic incentives to drive individual behavior.

Creating a blockchain/DLT-based system to manage strategic public assets

The template below can be applied to public assets or services that are strategic to the society as a whole and would be better not left solely in private hands but, ideally, the state shall always retain at least the control of such assets/services in order to shield the society from the consequences of abuses by private operators. Such assets are, for example, vital water sources and its supply infrastructures, energy plants and grids, public roads, minimum healthcare services and infrastructures, and prisons.

The Tokenization: Equity or security token?

The term "tokenization" is mainly associated with securities, equities and real assets, and it indicates the creation of a digital token that represents different types of rights — such as ownership, right to some economical payment, voting, etc. — connected with the underlying asset.  The token is normally issued on a blockchain. In the proposed model, the tokenization is necessary to "translate" economical rights connected with the public asset in a digital format that can be easily distributed to stakeholders and to which smart contract provisions can be attached in order to guarantee the automatic enforcement of certain provisions key to the incentives. The strategic public asset (‘A’) will be transferred into a special-purpose vehicle ("SPV"). Here there are substantially two options:

Option one is to tokenize the shares of the SPV by issuing equity tokens which incorporate ownership rights, voting and profit-distribution rights via smart contracts.

Option two is to issue security tokens — not representing equity participation in the SPV — but simply an economic right to share the profits of the SPV.  

The difference between the two options are: (i) in option one, equity tokens are issued, and therefore the corresponding ownership portion of the SPV and ‘A’ are also transferred; (ii) applicable corporate law will dictate the voting rights belonging to shareholders and, as a consequence, to all equity token-holders. This will likely reduce the flexibility of the governance. Moreover, because applicable corporate law also dictates the formalities for the transfer of the shares (such as companies’ registries and public notaries), those "real world" procedures enormously complicate the reconciliation between the equity tokens issued digitally and the underlying share certificates, thereby impacting on the flexibility and the automated execution of smart contract provisions.

Therefore, I came to the conclusion that the second option is better because:
a) ‘A’ and the SPV remain always 100 percent in public hands;
b) the security token issued does not represent equity in the SPV but simply the right to a monetary payment;
c) even if this is still a security for the purpose of securities laws application and compliance, the issuer will have very few constraints in designing the monetary rights attached to it — as well as their role in the governance (i.e., voting rights);
d) the issuance is not limited by physical ownership like in option one (i.e., one share-one token) or by the value of the shares, but only by the profitability of the SPV-’A’ or, if insufficient, by the willingness of the state to step up to guarantee for the shortfalls;
e) such security tokens can also be airdropped to key stakeholders and/or properly auctioned to investors, should the state need to raise money to either buy back the asset or pay penalties to private investors in the case of reverse-privatizations or,  if necessary, to revoke previously granted private concessions over public assets. In conclusion, option two seems simply far more flexible.

Main stakeholders and financial flows

The main stakeholders will then be:

  • The state which owns the asset.
  • The citizens who use the public services/assets.
  • The maintenance and service contractors.
  • Token holders.

Financial flows will be:

  • Fees generated by the ‘A’ and collected by the SPV, such as tolls for public roads or utility bills.
  • SPV´s payments for maintenance services and repairs.

Blockchain and DL

In my first proposal, I advocated for the use of a public blockchain with open access. Some commentators have also disputed the need for a blockchain in that model. Some confusion is generated around the term ‘blockchain.’ This term is now widely used to refer to pretty much any type of distributed ledger (DL) and certainly not only to the first and purest form of blockchain, which is the Bitcoin protocol. Therefore the use of a blockchain/DL in this model essentially means creating an asset accounting system of the records stored. Since the way DLs can be built is both modular and optional, there is no need here to build a 100 percent permissionless and decentralized blockchain like Bitcoin. Some functions can be decentralized, while others can be centralized. Also, centralization can still be positively influenced by governance provisions in order to guarantee more distributed supervision and control.

Moreover, whatever type of blockchain/DL and consensus protocol are adopted to make this model work, this remains a technical issue, which is outside the purpose of this article and which will be solved by technically proficient people other than myself. What is important to note here is that it should guarantee mainly (i) transparency and (ii) immutability of the records stored. This means that the Stakeholders should be able to access all documentation regarding, for instance, the financials of the SPV, maintenance bills, safety reports, engineering reports, public tender procedures, bills from contractors, etc.  Everything should be under the light and open to public and governmental scrutiny, and data should not be changed or corrupted by any stakeholder. This is a well-known problem. When dramatic events like those in Genoa happen, key evidence and documents suddenly disappear from the servers.

Token-economics and the right incentives for stakeholders

A balanced system of economic incentives and governance tools is essential in order to positively influence the behavior of key stakeholders, such as the contractors, the auditors and the state itself. The contractors are an essential part of it. Too frequently, especially in public procurement jobs — such as public roads, for instance — the poor conditions of the work done and of their subsequent maintenance status are of great concern to all the citizens. In the best case, this is both a sign of the state´s incapability of managing its resources and of holding the contractors accountable for the bad jobs done. In the worst case, this is a sign of corruption.  

To hold the contractors accountable, they must have an economic interest in the proper functioning and proper maintenance of the asset which generates the revenues. This can be done by ensuring that contractors "have skin in the game.” In addition to being paid in installments at the reaching of milestones, as is normal, contractors will also be paid-in-kind with the tokens issued by the SPV. This ensures that the contractor holds an interest in the continued functionality of the assets. In case of disputes, the public administration will have an additional recourse against the tokens allocated to the contractor, which can be automatically repossessed or burned via smart contract provisions. Clearly, dispute-resolution mechanisms and so called "Oracles" must be in place as well.

More "skin in the game" can also be given by requiring the contractors to subscribe to an interest-bearing government bond in percentage of the contract value. This government bond can be also ‘tokenized,’ thereby ensuring an additional recourse against the contractor, should it be in breach of contract obligations or of its guarantees/warranties or maintenance periods. This bond will be held as a collateral in a smart-escrow.  While its function is similar to that of a traditional performance-bond — where a bank guarantees performance on behalf of the contractor — the difference here is that the state bond does not have a cost for the contractor, and it benefits, in a virtuous cycle, both the government and the contractor which receives the interest payments. The flexibility that can be achieved by programming different features in that digital bond is another key advantage.

Governance tools

Aligning private contractors´ incentives is only part of the game, while influencing the state´s behavior is much more difficult. To do so, we have to create the right set of governance tools.  The main concern here is to avoid that the state wastes money and to make sure that it efficiently allocates the revenues generated by the asset. Therefore, a proper set of governance rules for the SPV and all the stakeholders are essential in this model.

The first step shall be to earmark the revenues generated by the SPV to be either (i) spent in maintenance or (ii) reinvested in new infrastructure or (iii) distributed to the token-holders. The percentage of redistribution of the residual profits can also be programmed differently in the smart contracts in order to maximize incentives — for example, by rewarding the most diligent contractors with higher percentages.

The second step shall be the creation of governance bodies.

In this model I have conceived three governing bodies, the Treasury, the Asset Committee and the General Assembly:

  • The Treasury receives the revenues from the SPV and, in compliance with its mandate to earmark the revenues as indicated above, it allocates the funds as indicated by the Asset Committee.
  • The Asset Committee shall be constituted by representatives of the state, of token-holders and of technically qualified professionals in the specific sector of activity. The Asset Committee decides how to spend the revenues of the SPV, based on a set of priorities and reports received from third-party controllers, auditors and technical experts on the conditions of the asset (i.e., maintenance and/or new investments).
  • The General Assembly is composed by all stakeholders, and it will vote the composition of the Asset Committee and perform an ex-post supervision of the allocation of the funds done by the Asset Committee.

Interestingly, my colleague Karl Michael Henneking at Untitled-INC has introduced the concept of Proof of Quality Management (PQM), which is basically a rating mechanism to evaluate how efficient the Asset Committee has been in allocating the funds. Essentially, a rating index — reflecting the status of the asset — can be created by comparing the sums invested with the levels of satisfaction expressed by its users and with the reports from the auditors and technical experts. Simply, the more the funds invested and the lower the feedback received from stakeholders, then the lower the rating and therefore the performance of the Asset Committee will be. Vice versa, the lower the sums invested and the higher the feedback reports received, then the higher the rating and the performance of the Asset Committee will be.

Conclusions

While the limitations and dysfunctions of past privatizations are now apparent and ever more publicly questioned, the need for a new approach and a new model for managing key public strategic assets becomes ever more pressing. The interest with which my first proposal has been received was, for me, a pleasant surprise and the enquiries received from a number of public administrations — including from Nigeria regarding the possibility of using this model to reverse the privatization of its electricity grid — brings me hope that something will change in the future and that new technologies, such as blockchain/DLs and smart contracts, will be instrumental to the creation of this new model.

My hope is to see this model applied anywhere there is need to economically and effectively manage public strategic assets without blindly leaving them in private hands nor in wasteful public hands. A new and more balanced model of management for strategic public assets and services is now at hand.

Article Produced By
Andrea Bianconi

Andrea Bianconi is an international business Lawyer with over two decades experience, a scholar of Austrian Economics, monetary history and geopolitics, a believer in the future of Bitcoin and Blockchain based technologies, a trader with interest in commodities, precious metals, currencies, Tech stocks and Cryptos. A speaker/panelist at conferences and events.

https://cointelegraph.com/news/can-the-blockchain-and-token-economics-fix-privatizations

David https://markethive.com/david-ogden

German Gov’t Says Blockchain Can ‘Support Europe’s Unity at a Fundamental Level’

German Gov’t Says Blockchain Can ‘Support Europe’s Unity at a Fundamental Level’

            

Germany's Federal Office for Migration and Refugees (BAFM)

has found that blockchain has far-reaching potential to improve asylum procedures. Following a successfully completed proof-of-concept (PoC), the findings were published on March 26 in a white paper. The paper was edited by BAFM and authored by the Project Group Business & Information Systems Engineering of the Fraunhofer Institute for Applied Information Technology FIT.

The PoC — undertaken by BAFM, Fraunhofer FIT and an unnamed technology partner in the first half of 2018 — focused on evaluating blockchain’s potential to support two crucial aspects of asylum procedures: the creation of reliable and secure digital identities and improving communication and cooperation between authorities at a municipal, state and national level. For the PoC, the three partners used a private and permissioned version of an Ethereum-derived blockchain, using a proof-of-authority consensus algorithm.

The white paper outlines that blockchain can enable the creation of tamper resistant digital identities for refugees that arrive without ID documents, based on biometric data collected at the moment of their initial registration in the receiving country. This immutable blockchain-based identity would then support further aspects of the asylum procedure and ensure the consistent and secure identification of each asylum applicant across multiple organizations. The white paper’s authors propose that a robust, blockchain-based identity solution could have far-reaching positive pan-European implications,

noting that:

“Blockchain could be the ‘digital enabler’ of European federalism in the asylum context. […] A European platform for the decentralised management of asylum procedures […] would enable the transparent storage of a person’s place of initial registration. […] Digital identities are per se nationally agnostic and could thus support Europe’s unity at a fundamental level.”

The white paper notes that data protection laws pose a key challenge for blockchain innovation within a European context — a reference to the General Data Protection Regulation (GDPR), a landmark EU-wide legal framework for personal data privacy, which took effect in May 2018. Nonetheless, a GDPR-compliant architecture for a blockchain-powered asylum system could be possible, the white paper suggests.  A Cointelegraph analysis published in fall 2018 studied the prospective benefits blockchain can bring to strained immigration systems worldwide.

Article Produced By
Marie Huillet

Marie Huillet is an independent filmmaker, with a background in journalism and publishing. Nomadic by nature, she’s lived in five different countries this decade. She’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives.

https://cointelegraph.com/news/german-govt-says-blockchain-can-support-europes-unity-at-a-fundamental-level

David https://markethive.com/david-ogden

QuadrigaCX Would Never Have Lost Crypto Keys Had It Been in Bermuda, Says Premier

QuadrigaCX Would Never Have Lost Crypto Keys Had It Been in Bermuda, Says Premier

           

The Premier of Bermuda, David Burt, has argued that a QuadrigaCX-like situation

could not have happened in Bermuda because of the country’s existing legislation in regard to cryptocurrencies. Burt made his statements in an interview on Fortune’s “Balancing the Ledger” show on March 25.

Burt delivered his comments following QuadrigaCX’ founder, Gerald Cotten’s sudden death last December, and financial difficulty the exchange subsequently faced. QuadrigaCX has not been able to access its cold wallets where it kept most of its assets, because Cotten was apparently solely responsible for the wallets and corresponding keys. Burt stated in the interview that QuadrigaCX’s private keys could never have been lost if the exchange were registered in Bermuda, and not Canada.

Burt said:

“If Quadriga was licensed under the Bermuda Monetary Authority, what has happened would not have been able to happen, because we have rules regarding the custody of master keys and making sure they’re not held by a particular individual.”

Burt apparently discussed the country’s Digital Asset Business Act 2018, the new regulatory regime that sets visible boundaries for blockchain and cryptocurrency-related businesses and protects the rights of their existing and

potential clients:

“It basically states what you have to do with the master keys, how those things have to be handled, and making sure that they cannot be lost, or if they are lost, there’s a way for that recovery to happen.”

Bermuda is known for its blockchain and cryptocurrency-friendly stance. Last year, the country’s government announced plans to make amendments to the Banking Act in order to establish a new class of bank to render services to local fintech and blockchain organizations. Burt said then that individual bank policies not to provide banking services to the new type of companies "cannot be allowed to frustrate the delivery on our promise of economic growth and success for Bermudians." Bermuda also implemented new regulations on initial coin offerings (ICOs), that require Bermudian ICO issuers to provide detailed information about “all persons involved with the ICO.”

Article Produced By
Ana Alexandre

Total change in her career took Anastasia into the world of analytics and business information as a researcher and translator in 2010. Some time later she got into FinTech, a dynamically developing segment at the intersection of the financial services and technology. Ana joined Cointelegraph in September 2017.

https://cointelegraph.com/news/quadrigacx-would-never-have-lost-crypto-keys-had-it-been-in-bermuda-says-premier

David https://markethive.com/david-ogden

Bitmain Says Now-Lapsed IPO Made Firm More Transparent, Reveals Appointment of New CEO

Bitmain Says Now-Lapsed IPO Made Firm More Transparent, Reveals Appointment of New CEO

            

Chinese crypto mining titan Bitmain’s filing to list an initial public offering (IPO)

on the Hong Kong Stock Exchange (HKEx) has officially expired, according to an updated list of now-lapsed applications on the HKEx website on March 26. In a blog post published the same day, the company acknowledged that its IPO application was now inactive, and simultaneously revealed the appointment of a new CEO, Mr. Haichao Wang. As reported yesterday, Bitmain’s IPO filing — published in English and Chinese on Sept. 26, 2018 — was set to imminently reach the end of a six-month validity window, pursuant to HKEx listing rules.

These rules provide a window for a given application to proceed to a closed-door hearing before the exchange’s Listing Committee, which is tasked with giving the final approval or disapproval of the offering. Should this fail to happen within this time frame, the listing formally lapses. In its statement, Bitmain confirmed the expiration, emphasizing that it remains committed to realizing the “huge potential of the cryptocurrency and blockchain industry,” which it noted “remains a relatively young industry which is proving its value.”

The statement added:

“We hope regulatory authorities, media, and the general public can be more inclusive to this young industry. We will restart the listing application work at an appropriate time in the future.”

At the same time, Bitmain claimed that undergoing the HKEx listing route has “made the company more transparent and standardized,” adding that the “process of rationalization and optimization” has heightened the company’s focus on the core elements of its mission.

The company outlines the range of measures it has taken to streamline and rationalize its operations, revealing the appointment of Mr. Wang as CEO, who is reportedly a veteran of the chip manufacturing industry and has already successfully headed several units within Bitmain.

As reported, this January Jihan Wu and Micree Zhan Ketuan had stepped aside as co-CEOs: today’s post confirms they will remain on as directors of the firm. The post also alludes to the numerous contractions Bitmain has this year made to its global business — along with cuts to its workforce — noting that “it was a difficult but necessary decision as we continue to build a long-term, sustainable and scalable business.”

As part of its strategy to weather the market downturn, Bitmain outlines that it has established  “clear business divisions for mining hardware, AI, mining farms and mining pools,” and “ integrated the resource lines for chip design, hardware and software to provide more effective support for our key business lines and to allocate premium resources to our major and key projects.” As previously reported, the extensive earnings disclosures that Bitmain submitted in line with the IPO listing requirements had revealed the firm was shouldering hefty losses amid the bear market. Financial, legal, and regulatory difficulties appeared likely to imperil its IPO application, as a Cointelegraph analysis outlined this January.

Article Produced By
Marie Huillet

Marie Huillet is an independent filmmaker, with a background in journalism and publishing. Nomadic by nature, she’s lived in five different countries this decade. She’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives.

https://cointelegraph.com/news/bitmain-says-now-lapsed-ipo-made-firm-more-transparent-reveals-appointment-of-new-ceo

David https://markethive.com/david-ogden

Binance Changes Launchpad Token Sale Format to Lottery

Binance Changes Launchpad Token Sale Format to Lottery

            

Leading cryptocurrency exchange Binance announced major changes

to the format of its Launchpad token sale in a post on its blog published on March 24. Per the announcement, the company “will use a new lottery format for the next project on Binance Launchpad.” Previously, the system functioned on a first come, first served basis, which left many users who joined high-demand sale queues without tokens.  

The post also outlines a lottery ticket system in which participants will be able to claim up to five tickets by holding Binance Coin (BNB) tokens over the 20 days leading up to the lottery, with 1 ticket per 100 BNB. The exchange will announce the number of winning tickets and the amount of funds that the owner of a winning ticket will receive.

Users will be able to choose how many tickets they want to use to participate in a given lottery in the 24 hours before the winners are chosen, with the maximum number based on their BNB holdings over the prior 20 day period. While Binance admits that the new system may cause some fluctuations in BNB trading before and after the snapshot time, its reports that the side effects should be

minimal adding:

“Other market participants may view this as an opportunity, and countertrade to even out the fluctuations.”

Binance Launchpad, as the name suggests, is the company’s token launch platform, which most recently concluded a $4 million sale of Celer Network (CELR) tokens last week. The platform reportedly conducted the Fetch.AI (FET) token sale, which raised $6 million within 22 seconds in February.

As Cointelegraph recently reported, changes made to Binance’s public Application Programming Interface seemingly reveal that the company is working on implementing margin trading. Last Tuesday, two exchanges, LBank and Bit-Z, overtook Binance on the adjusted trade volume cryptocurrency exchange rankings on CoinMarketCap, but research published on March 18 by the Tie suggests most of their volume is fake.

Article Produced By
Adrian Zmudzinski

Adrian is a newswriter based out of Pisa, Italy. He's passionate about cryptocurrency, digital rights, IT, tech and futurology and likes to think about the future in a positive way.

https://cointelegraph.com/news/binance-changes-launchpad-token-sale-format-to-lottery

David https://markethive.com/david-ogden

Major Latin American E-Commerce Company Bans Cryptocurrency-Related Ads

Major Latin American E-Commerce Company Bans Cryptocurrency-Related Ads

              

The largest e-commerce company in Latin America,

Mercado Livre, has banned cryptocurrency advertising on their website, Cointelegraph em Português reported on March 18. The development was revealed in an exclusive interview with Cointelegraph em Português after the company’s users reported receiving of emails informing them about the change in Mercado Livre’s policy. The new policy requires all users to remove their listings pertaining to digital currency, otherwise all listings will automatically be taken down from the platform starting March 19. One of the users received a letter,

saying:

"We would like to inform you that as of March 19, you will no longer be able to advertise used products in the following categories:

– Cryptocurrencies

– Prepaid cards for games

Because you have ads for used products that will soon be banned, we recommend that you end them. Otherwise, they will be finalized on the date mentioned above. "

Mercado Livre reportedly stated:

"Mercado Livre clarifies that as of March 19, crypto ads that are active on the site in the ‘used’ condition will automatically be finalized and new ads can only be created as ‘new products’."

Mercado Livre (or Mercado Libre in Spanish) has overtaken fellow e-commerce giant Amazon in Latin America. Earlier this month, the firm reportedly sealed a deal for a whopping $750 million investment via a sale of common stock to payments network PayPal.

Large technology firms like Google and Facebook have previously introduced similar bans. In March last year, Google announced the ban of all cryptocurrency-related ads of all types starting from June 2018. The move affected all of Google's ad products, meaning companies were not able to serve crypto-related ads on the search engine giant’s own sites, as well as third-party sites in its network.

In January, Google reportedly blacklisted keywords mentioning Ethereum (ETH) on its advertising platform. Google reportedly stated that cryptocurrency exchanges targeting the United States and Japan could be advertised on the platform, and that targeting other countries could be the reason for the ad rejection. Last January, Facebook prohibited ads that use “misleading or deceptive promotional practices,” which reportedly includes ads of cryptocurrencies and initial coin offerings.

Article Produced By
Ana Alexandre

Total change in her career took Anastasia into the world of analytics and business information as a researcher and translator in 2010. Some time later she got into FinTech, a dynamically developing segment at the intersection of the financial services and technology. Ana joined Cointelegraph in September 2017.

https://cointelegraph.com/news/major-latin-american-e-commerce-company-bans-cryptocurrency-related-ads

David https://markethive.com/david-ogden

Blockchain and AI: Leading the Way to the Fourth Industrial Revolution Against the Odds

Blockchain and AI: Leading the Way to the Fourth Industrial Revolution Against the Odds

                                 

Human imagination and the strive to turn science fiction into science fact

goes back to ancient times, but has only truly begun to manifest itself in the last 50 years. Though mostly unseen by average users, artificial intelligence (AI) is already deeply embedded in the basic processes people have become accustomed to. Blockchain technology has come to the forefront in much the same way AI had, through a long development process full of trials, tribulations, ignorance and triumphs over skeptics and critics alike. The application potential for blockchain is no less extensive than it is for AI — and today, these technologies are more complementary than competitive in their natures. Both AI and blockchain work on the principle of analyzing vast amounts of data and solving the issues of specific industries. Just as AI found its applications in the fintech sector as a data aggregator and automated solution determiner, so began blockchain in its permeation into areas of application where its properties can be of most use.

Into the unknown

Society is now entering what is known as the Fourth Industrial Revolution. But unlike the first three, which were based on the application of machinery for streamlining of the means of mass production through digital information accessibility, the new wave of technological progress promises to be a revolution of automation, rather than an involvement of masses of people needed for maintaining industrial processes.

AI and blockchain may become the leaders of the Fourth Industrial Revolution, as they can allow artificial constructs and programs to perform a vast number of tasks that had previously required human labor and entailed high risks of error. According to a study carried out by researchers from PwC in 2018, 30 percent of jobs may become automated by the 2030s, with 44 percent of workers with a low level of education being at particular risk. At the same time, as the report showed that automation could help the United States’ gross domestic product (GDP) reach $15 trillion by 2030.

The background underpinning the modern world is big data, the factor uniting blockchain and AI in their applications. The modern world produces a staggering amount of information that needs to be processed. Since the information being produced is of an endless variety of topics, there is physically no human workforce capable of analyzing such vast amounts of data. The AI can analyze large amounts of data and blockchain can serve as the immutable foundation for securely storing the records for use by various industries, since the Fourth Industrial Revolution is more of a breakthrough in data analysis.

Complementing each other

By being able to continuously analyze data under a strict protocol required for achieving desired results, AI leads the way by allowing data to be properly stratified and shared. This essential attribute automates a mundane process and brings to the forefront one of the main qualities of AI in the form of efficiency. Blockchain, on the other hand, is the vital component that lends its characteristics to make sure the data is handled in an environment that is safe from external interference, as well as tampering of data ownership and sequence. This is what may complement AI and solve the problem of trust many people face. Take, for example, the recent scandal engulfing Facebook, when personal data from over 50 million social network users were harvested by Cambridge Analytica via an algorithm that targeted voters during the U.S. election. Paul Lee, co-founder and CEO of Mind AI, an AI-powered platform, believes that blockchain plays an essential role in the process of making data

management decentralized:

“We don’t see AI and blockchain as two separate, incompatible technologies, but rather as two technologies that can complement each other very nicely. The world of AI is an arms race, with large internet giants leading the progress with their seemingly unlimited resources, specifically data. These corporations collect data from their users in a centralized database. The data is owned and utilized by these companies for their own self-interests, while the users who provided the data are left empty handed. This also creates an uneven playing field in the advancement of AI technology, since data is the primary fuel that powers most modern AI systems. This can be detrimental to humanity, as AI technology is extremely powerful.”

And although the use of AI to collect personal information has become the most common way to use this technology, blockchain can help change the reputation of AI by storing the AI ??mechanisms that process data on a distributed registry. At the same time, using private and public keys, users themselves determine who should be given access to their personal data. And for those who want to further protect personal information from third parties, AI-powered blockchains may provide decentralized identification.

US, UAE and Malta lead revolution

One way or another, everything depends on the approval of regulators and authorities in matters of adoption of any kind of technology. No matter how innovative a technology is, it first needs to prove its worth to average people to become profitable. And that is why governments are considering the capabilities offered by AI — an already proven and effective technology — and its merger with blockchain, which still requires considerable research.

The U.S. government is already leading the charge after issuing an American AI Initiative order that will facilitate investments into AI and related technologies research. On Feb. 11, the Trump administration announced that the president signed an executive order that calls upon federal government agencies to allocate the necessary resources and workers to adapt to the era of AI. The initiative has documented Trump’s long-term plans to enter the AI-powered future. Back in May 2018, the White House held a meeting devoted to AI, with over 30 large companies from a number of industries — including Ford, Boeing, Amazon and Microsoft — in which the officials promised not to prevent the technology’s development by creating AI regulations.

The United Arab Emirates is trailing close behind as the National Program for AI and Blockchain Capacity Building was launched on Nov. 28, 2018 to provide university courses and scholarships in AI and blockchain technology under the purview of the Ministry of Education. The innovation has complemented the UAE’s Strategy for Artificial Intelligence, which is aimed at turning the country into a leading power in the adoption of AI by 2031.

Malta is seeking to take on a leading role in this brave new world of technological races as it strives to become a “Blockchain Island” and a “top AI nation.” As reported by Cointelegraph on Nov. 1, the Maltese government announced the launch of the initiative called “Malta.ai,” creating friendly conditions for the companies developing AI solutions. Finally, India, a powerhouse economy, is launching initiatives aimed at improving its energy sector using AI and blockchain. The government created a special committee to carry out a national AI program that aims at helping startups and venture funds to conduct research related to the technology. The country also announced a partnership with Russia to cooperate in using blockchain and AI technologies at the Strategic Economic Summit, which was held in Russia in November 2018. The two countries agreed to boost two-way investments in the high-tech sector to $30 billion by 2025.

Use cases

Despite the fact that blockchain and AI seem to be incompatible at first glance — the first is based on the principle of decentralized data storage, and the second allows information to be concentrated in the hands of centralized corporations — today, companies have learned to combine them in their processes. New networks combining AI and blockchain aim to make machine learning transparent and less biased, says Jeremy Epstein, the head of Never Stop Marketing. Today, industry leaders are solving the nontrivial task of combining two technologies in order to preserve the privacy of user data and achieve greater automation in complex analytical processes. DeepSee, a media platform, strives to provide the solution to the problem of fake news and become a decentralized alternative to Reddit, YouTube, Medium and Twitter. At the same time, DeepSee reportedly uses the same machine learning mechanisms used by Facebook, but transfers them to a trusted blockchain platform that guarantees transparency of privacy settings, as well as rewarding users for high-quality content in a similar way to Steemit.

In the health care sector, personal information security is of the highest importance. The AI-powered ??company Deep Mind, acquired by Google, is already leveraging blockchain to better protect users’ health data. In February, Neuromation also entered the health care sector, entering into a partnership with the Longenesis, a decentralized marketplace of personal data. Longenesis, in turn, intends to provide individuals with control over their own personal data and the option to monetize it by passing certain data to corporations, research institutes and medical institutions at their discretion. Such data includes not only a medical history or a genetic profile, but also, for example, test results. “Our goal is to create a new, data-driven economy,” says Alexander Zhavoronkov, chief science officer of Longenesis Limited.

Another use of the blockchain in AI-based services is being investigated by Mind AI and SingularityNet. The companies use a decentralized registry to reward users. Mind AI, a company that has invented an AI-powered solution aiming to achieve human-level reasoning, leverages blockchain to make the entire machine thought process transparent for average people. As an open-source platform, Mind AI rewards its contributors with tokens for adding value to the platform’s ontology database. Thanks to the AI-powered reasoning engine and the ontologies input by the community, Mind AI can reason like a real human, requiring no massive quantities of data. Lee, the platform’s co-founder and CEO, believes that blockchain in AI solutions enhances the way users’ data is protected and used for the

community benefits:

“We believe blockchain provides the foundation to creating [sic] AI systems that are transparent, decentralized, and beneficial for many, rather than a few.

“Without ontologies, Mind AI is like a car without fuel. We’ve split the source code of the AI engine and the ontology database to make sure the ownership of our technology is not centralized. The ontologies will be crowdsourced and stored into a distributed storage system utilizing blockchain, and the contributors of the ontologies will be the owners of the data. The community has control of the data, gets rewarded when their data is used, and has a voice in how his or her data is used.” He also shared with Cointelegraph the challenges that may be faced when developing and managing such

complex platforms:

“One of the main challenges with designing such a system is adapting to the constantly and quickly changing technologies in the blockchain space. There are a few promising technologies we’d like to utilize, but many are only at a conceptual stage. For example, we’re constantly looking for the best distributed storage system that can provide the adequate speed, security, and the amount of data we need. A centralized, local storage is going to be, overall, much faster and much more robust than a distributed storage at this point of time. Currently available blockchain platforms might not have the adequate TPS (transaction per second) […].”

SingularityNet rewards users with tokens every time someone uses its proposed AI model, thus allowing anyone to monetize AI algorithms, and letting companies and developers buy and sell AI at scale. In an interview with Cointelegraph, Ben Goertzel, CEO of SingularityNet and chairman of the Artificial General Intelligence Society, explained how both technologies can be used to socialize the

AI industry:

“If you had a global decentralized network and you can put your AI there and anyone can access it and then use it in a way that connects it with other AI tools that are out there, that can provide a way for people to monetize what they’ve done, without having to go the currently standard route of creating a startup and selling the startup to Google or Amazon or something.”

In the run-up to changes

A revolution, as the term implies, is a complete turn of events around a focal point, thus leading to a new stage or phase. With technologies, revolutions involve a variety of changes in everyday lives. But the uniting factor of all revolutions is a strive for improvement and efficiency. Experts predict that by 2021, the blockchain technology market will grow to $2.3 billion and investments in AI will grow to $52.2 billion. As the investments in both AI and blockchain grow, more and more global companies — including Microsoft, Dell, and Porsche — are spending money on their research and testing.  Fred Ehrsam, the co-founder of the cryptocurrency exchange Coinbase, predicted it could take some time for these systems to prove themselves and show the results in practice, but that once it happens, they will boost the industry’s democratization.

Article Produced By
Julia Magas

Julia is good at analysing cryptocurrency and blockchain market, as well as finding the deep and most demanding information, even when it's practically impossible. Julia writes for a number of digital information resources, raging from music to technology and game reviews. Practices some trading for experimental and analytical purposes.

https://cointelegraph.com/news/blockchain-and-ai-leading-the-way-to-the-fourth-industrial-revolution-against-the-odds

David https://markethive.com/david-ogden

Republican Leader Claims Blockchain Can Make US Government More Efficient

Republican Leader Claims Blockchain Can Make US Government More Efficient

                                 

Rep. Kevin McCarthy, the current Republican Minority Leader

in the United States House of Representatives, said on Tuesday, March 12, that blockchain can make the U.S. Congress a more efficient and transparent place. Speaking to the Select Committee for Modernization of Congress, McCarthy said that blockchain technology has changed the paradigm of security in the financial world: “Blockchain is changing and revolutionizing the security of the financial industry. Why would we wait around and why wouldn’t we institute blockchain on our own, to be able to check the technology but also the transparency of our own legislative process?”

The lawmaker also suggested that Congress use “21st century technology” to make the government more friendly, but at the same time more accountable. “We have an opportunity to take this window to make this place more effective, more efficient, and most importantly, more accountable," he concluded. McCarthy became a member of the U.S. House of Representatives in 2007, serving as House Majority Leader from 2014 to 2019, and as House Minority Leader since January 2019. The Select Committee for Modernization of Congress was established during the 116th Congress in early 2019. Democratic congressman Derek Kilmer chairs the committee, which forms recommendations for modernizing the legislative branch.

As Cointelegraph reported in October, U.S. Representatives Doris Matsui and Brett Guthrie proposed a new bill, dubbed the "Blockchain Promotional Act 2018," to the House of Representatives. The bill aimed to create a working group to study the potential impact of blockchain across the policy spectrum, and to establish a common definition of the technology. More recently, the state of Wyoming passed two blockchain-related bills. The first laid groundwork for storing so-called certificate tokens representing stocks on a blockchain “or other secure, auditable database,” and permitted their digital transfer. Another acknowledged the establishment of special purpose depository institutions to serve blockchain-related businesses, as they are often unable to receive services from federally-insured banks.

Article Produced By
Ana Berman

https://cointelegraph.com/news/republican-leader-claims-blockchain-can-make-us-government-more-efficient

David https://markethive.com/david-ogden

Kakao Affiliate Dunamu Launches Blockchain Service Platform

Kakao Affiliate Dunamu Launches Blockchain Service Platform

                                  

Dunamu, the fintech arm of South Korea’s largest Internet corporation Kakao,

is reportedly launching a blockchain service platform designed to help companies start businesses using blockchain. Korea’s JoongAng Daily reported the news on March 19. The platform, which is called Luniverse and supervised by blockchain technology research lab Lambda256, is geared to help IT startups develop blockchain-based services. The platform reportedly has a high level of security and an automated scaling function, that can adjust blockchain sizes in accordance with the amount of data stored on it.

To implement the service, Dunamu reportedly collaborated with blockchain companies that provided various blockchain apps and products following clients’ business fields. Park Jae-hyun, CEO and former research head of Lambda256 said that “in the past, a lot of companies built their own blockchain, but an alternative is outsourcing the establishment of a blockchain in the form of a service offered on cloud systems.” Yesterday, Kakao announced the integration of its cryptocurrency wallet in its messaging app KakaoTalk, which will purportedly enable more than 44 million South Korean KakaoTalk users to send peer-to-peer transactions using Kakao’s crypto-powered wallet.

Also in March, Cointelegraph reported that Kakao will repeat its initial coin offering after netting $90 million from investors. Klaytn, the blockchain platform which is the responsibility of spin-off firm Ground X, will now seek to raise another $90 million. In December 2018, Kakao had first announced that it was planning to raise around $300 million through Ground X to develop its own token. As reported in February, in the fourth quarter of 2018 Kakao’s operating expenses related to new businesses, such as blockchain and artificial intelligence, was 65 billion won ($57.5 million), which reportedly led to a net loss for the whole period. Kakao’s consolidated operating income was 4.3 billion Korean won ($3.8 million).

Article Produced By
Ana Alexandre

Total change in her career took Anastasia into the world of analytics and business information as a researcher and translator in 2010. Some time later she got into FinTech, a dynamically developing segment at the intersection of the financial services and technology. Ana joined Cointelegraph in September 2017.

https://cointelegraph.com/news/silvergate-bank-onboarded-59-new-crypto-customers-in-q4-2018

David https://markethive.com/david-ogden

Opinion: Europe Must Embrace Blockchain to Avoid “Cybercolonization”

Opinion: Europe Must Embrace Blockchain to Avoid “Cybercolonization”

                                

Expert Take

On September 27, the EU Competitiveness Council met in Brussels to discuss how to support Europe’s digitization, particularly with regard to artificial intelligence — an area that has tremendous potential, but also faces extreme global competition. AI, of course, runs on data. The unfortunate reality is that U.S. tech companies control and exploit large amounts of European data, in turn monopolizing our digital economy.

That’s why I, among 16 other executives, signed a letter to the council’s ministers—who engaged in a public policy debate and “competitiveness check-up” at Thursday’s meeting—urging a focus on these monopolies and the unfair business practices they get away with, from the exclusion of third parties to spontaneous changes to terms and conditions to unjustified interference, to name a few. There are alternatives to giving away the data, and thus, sovereignty,—something I emphasized as part of the National Digital Council in France and as the leader of numerous working groups focused on AI and privacy.

France, for one, has worked hard to attract major foreign investment in this space, opening AI hubs while seemingly ignoring the fact that Google, Apple, Facebook and the like don’t pay taxes in the country, yet still extract significant wealth from it. This hurts innovation and many local startups working hard to improve the region. London, Paris, Berlin, and Zug are popular tech destinations, yet they often get overshadowed or pushed out of the market because of the dominant U.S. players. Google, of course, dominates web search market, conducting 77% of all internet searches and processing 400,000 every second—gathering significant amounts of data in the process. Such dominance means, as AI specialist Cedric Villani aptly put it, that large foreign companies threaten Europe with “cybercolonization.”

Online platforms that mediate buying and selling account for a whopping 60% of the private consumption of digital goods and services. Europe cannot be lax and blindly open its market to foreign platforms who are only creating monopolies. Their goal is to lock both buyers and sellers into their ecosystem—to be the central point of the majority of digital transactions. This level of centralization has become synonymous with a dependency on tech oligopolies, and a lack of country sovereignty. Even the “local” companies we think we have working in AI are often very dependent on U.S. tech.

The good news is that every problem that exists with closed, proprietary marketplaces and platforms can be solved easily with blockchain. Through the GDPR, Europe and France have already been the first to regulate data privacy, protecting both individual rights and digital sovereignty from foreign tech giants. Blockchain—which in fact has developed faster in Europe than in Silicon Valley—can take this a step further, and can transform Europe in to the next Crypto Valley. Decentralized AI means that algorithms run directly on end-user devices, preventing sensitive data from being sent to the cloud at all.

Also, rather than having an intermediary between people buying and offering digital goods and services, blockchain allows peer-to-peer marketplaces. These marketplaces often have no fees, meaning all of the value can be captured by buyers and sellers. On the other hand, when U.S. tech giants hold a monopoly they can charge significant fees, force certain types of payments, and coerce end-users in a myriad of other ways. With a decentralized approach, no single person or company controls the content. The suppliers and buyers decide for themselves what should be included in the marketplace.

It can be tempting to want to make Europe attractive to some of the biggest names in tech and AI, but we must recognize what we are sacrificing by doing so. Many local startups can’t compete because having a monopoly means you can, more or less, do whatever you want—even if that means engaging in unfair business practices or doing things that are good for your bottom line but bad for actual users. One way to avoid such cybercolonization, though, is to embrace decentralized technologies. They’re the key to both innovation and sovereignty.

Article Produced By
Dr. Rand Hindi

Dr. Rand Hindi is an entrepreneur and data scientist. He is the CEO at Snips, the first decentralized, private by design voice assistant. Rand started coding at the age of 10, founded a Social Network at 14 and a web agency at 15 before getting into Machine Learning at 18 and starting a PhD at 21. He has been elected as a TR35 by the MIT Technology Review, as a "30 under 30" by Forbes, and is a lecturer at Sciences Po in Paris.

https://cointelegraph.com/news/opinion-europe-must-embrace-blockchain-to-avoid-cybercolonization

David https://markethive.com/david-ogden