In the short and medium term, technology and inequality seemed to be positively correlated. In the long term, however, things are not as clear-cut. With the right policies and democratic institutions in place, technology could become a catalyst to reduce income and wealth inequality. Historical evidence from last century clearly supports this claim. Will digital technologies of the 21st Century follow the same path?
The long-term is still quite a few years away for digital technologies such as AI and blockchains. In this post, I will look at the world of Bitcoin and explore its links to income and wealth inequality. I will assume the Bitcoin network is a country on its own with defined financial ties to the rest of the world mostly via crypto exchanges and miners.
Last May, the total
In a previous post, I pushed the idea that mining is part of the real sector of the blockchain economy. Unlike financial speculation, mining requires investment in hardware, electricity, space, human resources, etc. This also applies to small miners who undoubtedly will have to defray a lower investment amount but who can join a mining pool to share mining revenues. Also, miners face intense competition which in turn is a reflection of the high level of profitability in the sector.
Mining calculators seem to proliferate in the web. Such sites offer potential mining investors a rough idea of how much they can make on a daily and/or monthly basis given the current price of the crypto being mined and the hashing the investors is willing to purchase. For example, I am told that if I buy Bitcoin
It has already been three months since I last checked the ICO scene. At the time, I suggested ICOs were probably slowing down. New data seems to confirm this but all points to other trends not detected before. Figure 1 presents the latest data
ending on 31 May. 159 ICOs were successfully completed between March and May raising over 4 billion dollars. The data includes the Telegram wh.ich collected over 1.7 billion dollars in spite of not holding a public ICO phase. Telegram can indeed be seen as a statistical “outlier” making last April the most successful month ever. Note that the number of successful ICOs did not increase overall. March matched February with 57 ICO but was much more skinny regarding resources. April and May are fatter but do not exceed the number of ICOs of the previous
Most cryptocurrencies are now over 60% down from their December 2017 peak. While prices are still quite volatile, the trend for the last five months is decidedly downwards. While some still expect a recovery to the glorious days of last year, others see overvaluation all around accompanied by a financial bubble about to burst. Comparisons to the good old dot-com boom and subsequent crash of 20 years ago are cited as empirical evidence of what is coming.
Indeed, the current blockchain boom has similarities with the previous one. But there are also some fundamental differences springing from by the very nature of what we can call the blockchain economy. The first one is the marriage between technology and finance. Not that in the past the financial sector refused to use new technologies.
Blockchain mining cannot catch a break when it comes to environmental sustainability. This is especially true for Bitcoin mining which seemingly has an insatiable appetite for electricity. A recent paper suggests that by 2020 Bitcoin mining will consume as much energy as Australia. While these estimates are not exempt from criticism, mining does not appear to be best friends with sustainable development, at least not for now. An alternative way to look at this issue is to compare Bitcoin’s mining power use to that of cloud-based providers who have now become well-established tech corporations. Such comparison should be made not only in absolute terms (gigawatts) but also in relative fashion by considering, for example, the total population being served by these platforms and networks.
Many observers seem to assume blockchain technology is an immovable monolith. While such assumption does help when trying to explain how the technology works to the general public, this is indeed not the case when it comes to describing the actual status of the technology.
Rapid and agile innovation is one of the core traits of blockchains, backed by impressive human talent with substantial financial resources, addressing not only some of its well-known limitations but also enhancing its core functionality. Blockchain technology is evolving rapidly and the best way to take stock, for now, it’s via frequent snapshots. In fact, keeping track of blockchain innovations could quickly become a full-time job. In any event, the monolith is not only moving. It is indeed flying at the speed of light.
Open source is one of the core traits of blockchain technology propelling its rapid adoption and growth. The source code from the most popular platforms such as Bitcoin, Ethereum, and Hyperledger Fabric is freely available for download by anyone who wants to play with the technology. Granted, users wishing to deploy and use these platforms must have the required technical skills. While average Internet users might not have such capabilities, companies and startups can find internal capacity or hie external expertise to run and manage their preferred blockchain platform.
Free and Open Source Software (FOSS) has been around for almost three decades. Back in the late 1990s, a war of sorts between FOSS and proprietary software commenced, attracting lots of media attention and generating plenty
ICO data for last February is now available and shown in Figure 1 below.
We can immediately see that both the number of ICOs and the total investment volume has decreased. The latter, which amounted to 1.2 billion USD for the month, is 20 percent less than the total for January this year. The same goes for completed ICOs which decreased 21 percent. Among them, only one ICO surpassed 100 million dollars, reaching 150 million. And it managed to distance itself from the runner-up by a cool 100 million.
Figure 2 confirms the decline in total monthly investment but shows that the median declined only slightly or about 1.2%.
Even so, the median investment per ICO is still above 16 million dollars.((The average is much higher but probably not significant as the statistical distribution
I was invited to Canada to discuss my blockchain technology paper. Here are my opening remarks at the panel organized by Government Affairs and IDRC.
Speaking about a seemingly complex subject such as blockchains poses a challenge not only for me but also for you, the audience. More so when the time is scarce. It is probably not the same challenge, however. So perhaps the best way to start this conversation is to take a step back and start with technological innovation. Technological innovation has been around longer than you and me, for sure. But what has changed nowadays is the frequency in which innovation is happening, especially since the dawn of digital computing and electronics.
The Internet is no doubt the best example here. Initially conceived with government support and public
Recent events seem to suggest the cryptocurrency bubble is finally starting to deflate. Bitcoin, Ethereum and most of their crypto cousins are significantly down while regulators in several countries are finally beginning to take action on the ground. Nobel laureate economists are also speaking up against the digital currency, arguing that the new currency is not capable of fulfilling the three core functions that define money.
Does this mean that ICOs are on the way out?
If we look at the latest ICO data,((Data was obtained from tokendata.io. Sample size includes 1032 ICOs completed by the end of 31 January 2018. 485 or 47% percent did not report any funding. The total number of successful ICOs is thus 547. The DAO ICO is not included as it is considered a failure. Hdac, quoted by some