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Is Europe Playing the USA v China Tech Race?
There is a chart that shows nothing happens for millennials, despite the invention of monarchy, democracy, and even the rule of law. Then suddenly, the flat line has a massive…
There is a chart that shows nothing happens for millennials, despite the invention of monarchy, democracy, and even the rule of law.
Then suddenly, the flat line has a massive spike. Everything changes and quickly, and it does so because the industrial revolution had arrived.
Some suggest we are on the brink of another one. A tech revolution that combines a number of still very new technologies which effectively amount to creating robotic labour.
Cars are artificial intelligence, someone said, and maybe that’s a good way of understanding what is meant by this misleading label of ai.
Through mechanics a car is made to move under the orders of a human to perform a specific and limited task way better than a human can.
The car doesn’t think, although it kind of does because it “knows” when you press the breaks or when you change the gear.
Much of this is becoming digital, with cars now given the ability to “know” when to change the gears or press the breaks by themselves.
All of this would have not been possible without wifi infrastructure, sensors, and machine learning among other new technologies.
Some claim there are only nine companies in the world playing in artificial intelligence, six American and three Chinese.
There’s Google, Microsoft, Apple, IBM, Amazon and Facebook. We’d add at least Twitter, and many others.
While the Chinese ones are dubbed BAT for Baidu, Alibaba and Tencent, although Ant Financial should be there somewhere and some others.
The claim is these nine companies are making decisions on what bots should choose or decide with those bot choices affecting us all because ai will be all pervasive.
The focus here however is far too narrow and the narrative a bit lazy because it zooms in too much on too few companies and on a very specific application of bot management.
The bots here have a very specific task and it amounts to trying to figure out what humans want. In the process, instead of intelligence, these bots are made very dum.
An easy example is say nice fresh fish on Amazon. The bot gives you only a few choices, thinking otherwise you’d be bored. Then, it gives you “also” products, and here it shows nicer things that you might like, but as it often happens, you don’t like any of it.
Clicking through these also products and then surfing around might eventually land you on the fish you wanted.
What happened here is that the bot was hiding from you information, not because it did not have it, but because it thought you don’t want it.
Those that coded the bot did not bother to wonder whether you should be given the choice of being shown the ‘boring’ version. They instead present you the bot, and they give you no autonomy over the bot.
The claim is the bot “learns,” and through this learning the bot is better than you and knows better than you. That’s false in the present, and will likely remain false for decades to come because…
The chief example we are given of the bot superiority is it winning in the game of chess and now in the game of go.
Both are human created games and are created for humans. Both are mathematical games, but they have a very specific aim.
Chess for example teaches you the cost of impulsive action, or how to think somewhat quickly, how to think a bit long term, and most importantly how to control emotions.
A computer can win in a game of chess because it does not care about winning or losing. For a human, losing is painful. Winning is joyful.
It is very easy to get angry in a game of chess, and that’s the point of it. How to not get easily angry.
It’s design therefore is for humans to play. You take out those human qualities, and there is no game. There’s just ‘silly’ maths.
Computers of course are a lot better at maths than humans, but computers are very far from even getting an F- in literature.
They can not think. They are a mechanical action and reaction. They can not know intention and they can not know want or desire, but they can spot patterns.
This pattern spotting is primarily what these big nine do. They see how many clicked a link, and then the bot ignores what you asked and just presents you patterns, thinking that’s what you want to your great frustration.
This aid could be even desirable, but only if one can control the bot. If one can tell the bot to give the plain results, or to soften the pattern, or to increase it.
This currently is not given as an option, and therefore what was called ai is now seen more as corporate surveillance, or corporate imposition, or even curtailment of autonomy and freedom.
Here, China is advancing as is corporate America, but in an entropic direction.
The Three Systems
Communism with Chinese characteristics is just a slogan to many, but it is actually a pretty good description of the current Chinese governance and economic model.
Tunneling we’ll call the guiding of the young from elementary school to university through a process of selection that in the west culminates with a university ranking list.
In China this tunneling continues after graduation to the workplace because the Chinese government tunnels companies too.
It begins with finding a capable person or entrepreneur in a specific field who is given all the support for building a startup with a specific aim.
This person is then connected to the local council or chamber or whatever may be, which coordinates with the universities for the needed talent, and gradually this startup is pushed and supported to become a publicly traded company.
Therefore while ten unicorns in ai related fields in three years might sound surprising to some, it isn’t very surprising when you understand they are created through a planned economy.
That’s what China is, a planned economy with private ownership to some extent where the state guides the young from primary school to retirement throughout university and then the workplace.
As such, things here begin at the top. The Chinese Communist Party (CCP) says we will focus on new tech like ai, blockchain etc, someone drafts a plan of how to achieve it, and then the apparatus goes into action to set up these startups, furnish them with graduates or personnel through talent programs or other ways, and continues to direct it until it becomes a publicly traded company at which point as far as the CCP is concerned they have succeeded.
The question there is what it has always been: is ten unicorns too much, just enough, or too little, especially when considering other needs? Time will give the answer.
In America, the process is somewhat different. We have the tunneling until university, and then the young are left to fend off for themselves.
That’s in theory. In practice the university ranking corresponds generally to their workplace “ranking” with corporations taking the role of the CCP or VCs being the tunneler for startups in a dual system of extreme specialization in global corporations and risky new ventures in VC land.
The state here has no role but what in practice occurs is that corporations effectively become mini-states and gradually practically they become the state through capturing if the populace is not sufficiently alert.
Such corporations therefore have in their interest maintenance of power and longevity, with competition being a threat that is generally removed by incorporation or underpricing. The people, in this corporate dictatorship system as we have, are to be ordered, not to order.
Artificial intelligence here therefore is more interested in what you do, and in how you respond to their orders, and in how they can please you while they maintain the ability to order and give you no such ability.
It can all be described as in effect a slightly decentralized dictatorship where there are numerous giant companies competing through the same model which discards completely labour, thus humans, but has an escape valve through the VC model which can potentially disrupt the corporations.
Meaning there is more pressure to respond to market forces and resource wastage is less tolerated, but the dominance of giant corporations has a constraining effect which in some ways can amount to a planned economy, but by corporations.
The Third Way
The very advanced European economy stands out for lacking any giant tech companies and that may be more a product of their economic system than their level of advancement.
Cambridge Analytica, for example, was not a global brand but is pretty good at bot creation and management.
There are many other companies that are pretty good at what they do, but are not pervasive global brands, are not an octopus with many legs as is usually the case for American companies.
Germany exemplifies this third way the best. The key differentiator here is that there is worker representation, with 1/3rd of the board made up by those working in the company.
Also generally German companies tend to be medium sized and family owned, focusing on one thing rather than a thousand things, and therefore what they do is not easily known to the media which creates these narratives of just nine companies.
Here we can see in some ways the three systems. Notice how Google gives us no control over that “Images” bit for example which we should be able to close.
More importantly, notice where street view operates. Not at all in China, because Google was kicked out. Not at all or very little in Russia because they have their Yandex. And most surprisingly, very little in Germany.
Germany stands out for obvious reasons and the above picture tells you plenty about their governance and how they view technology.
Unlike the blind belief in America and much of Europe that corporations can only do good and should be allowed to do what they please, Germany thinks the state, and thus the public, can and should have a say in what they do with that 1/3rd representation being a law.
A company like Google could never operate in Germany because it would have been broken up a long time ago under anti-trust laws provided their government was not captured as arguably the American government was.
Therefore artificial intelligence in Germany takes a different form. First, it is more focused towards industrial applications. Second, it is more spread out in smaller companies which are more focused and therefore have less visible results to the public because artificial intelligence is primarily backend efficiency gains, rather than front-end surveillance.
So Europe is playing, it’s just no one knows it because they don’t gimmickly boast about a a computer beating a Go player, instead they quietly get on with working on 5nm semiconductors and some of them, eyeing even 3nms.
The government here is trying to get a role through the European Union, but it is primarily medium sized companies driving things forward in a more competitive environment which generally drives specialized innovation and efficiency.
Who Will Win?
The tech race is a race between three systems. All three have their strengths and weaknesses. For China, resource wastage is way too easy, but so is coordination. For America, big corp is big dull, but it drives startup disruption. For Europe, economies of scale are not fully utilized, but it secures a more balanced approach with humans first.
China needs to think very carefully about the failure of planned economies. America needs to enforce more its monopoly laws. While Europe should be a bit more enthusiastic about the continental level role the EU can play especially in continental level matters, such as the space race.
AI is unlikely to have a winner as such, however. It’s more about which approach is better, who can implement it first, and who is able to utilize it to its full extent.
The German model of medium sized companies you’d think would be best placed because actors more directly affected by market forces are the ones making decisions.
The American system can maybe drive it further but at the risk of dead ends. While the Chinese system would be better placed to copyingly implement it because of its coordination advantage.
Meaning we are witnessing a competition between three systems which is visible through this tech race and many other races in frontier fields.
Analysis: Are CBDCs a Threat For Bitcoin or The Opposite?
Ever since Facebook announced its plans to create a digital payment currency dubbed Libra, central bankers have tried to counter it with an invention of their own.
While Libra is facing regulatory troubles, a BIS report indicated that over 80% of the world’s central banks are currently developing a central bank digital currency (CBDC).
The idea and purpose of a CBDC are fundamentally different than everything Bitcoin stands for. As such, the community has been speculating on possible consequences for the primary cryptocurrency. Will a government-owned digital currency harm BTC’s role in the online world, or will it simply set the stage for its grand entrance?
Scenario A: CBDCs Are Bad For Bitcoin
The CBDCs will represent the cash bills that we use every day, but, as the name suggests, they will be digital-only. There’re still many unknown factors regarding their developments. Which country will be first, what technology will they use, will CBDCs be for retail payments or not?
These questions will eventually receive their answers. However, most people fear that the introduction of a CBDC will give governments absolute control to track, approve, or suspend all future payment transactions.
Authorities have justified this potential constant surveillance by claiming that they will be able to reduce and even eliminate illicit activities, such as money-laundering.
On the other hand, concerns have emerged within the community that the inevitable launch of a CBDC will harm the industry and its most-well known representative – Bitcoin.
Binance CEO Changpeng Zhao (CZ) recently predicted that a well-designed CBDC could “become a threat” for the first-ever cryptocurrency. He highlighted that most such currencies will be very centralized and won’t provide the same freedom as Bitcoin.
Consequently, world governments will push their own inventions further while be inclined to reduce the role of something as decentralized as BTC.
Bitcoin’s whitepaper described it as an “electronic peer-to-peer cash system.” However, having tons of competition backed by the world’s superpowers could indeed decrease its role. It could be especially harmful if the CBDCs enable cheaper and faster transactions than BTC.
Additionally, their value won’t fluctuate as much as Bitcoin’s. This may be another reason why people would prefer sending or receiving a currency that won’t lose any value by the time the transaction is complete.
Scenario B: CBDCs Will Help Bitcoin As A Payment Tool
On the other hand, there’s the narrative that when CBDCs arrive, they could only open the door for Bitcoin. Major cryptocurrency manager Grayscale Investment recently argued that when launched, CBDCs may “accentuate Bitcoin’s role in the global digital economy.”
This is partly because people would have to become familiar with the digital payment infrastructure, which hasn’t been necessary so far. By educating themselves on the matter, people would be able to find the significant differences between Bitcoin and the government-owned digital currencies.
“Bitcoin is special not because it is digital, but because Bitcoin is a scarce, uncompromising, apolitical currency that is open for anyone to use.”
Scenario C: CBDCs To Help BTC As A Store Of Value
If one assumes that the first scenario comes into reality and Bitcoin stops serving as an electronic peer-to-peer cash system, that doesn’t necessarily mean that it will have no value to society.
Instead of being used to transfer funds from one address to another, BTC may become what many others have argued for years – a store of value.
After all, Bitcoin shares several similarities with the most-widely accepted store of value asset – gold, such as scarcity. The two assets’ price performance has also resembled each other lately. The COVID-19 financial crisis only accelerated their increased correlation.
Even the US Federal Reserve Chair Jerome Powell compared the two and noted that both are a speculative form of a store of value.
Another believer in this thesis is Fidelity’s cryptocurrency arm – Fidelity Digital Asset. In a report compiled earlier this year, the company named Bitcoin an “inspirational store of value.”
So, If BTC is indeed to fail as an online payment resource because of CBDCs, it’s unique setup could prompt it to another, perhaps even a more critical role in today’s (digital) world.
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Number of Bitcoin ‘Whale’ Addresses at Highest Since Fall 2016
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. Source: https://www.coindesk.com/number-of-bitcoin-whale-addresses-at-highest-since-fall-2016
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