Regulations and their impact on blockchain and the crypto industry at large
The outbreak of the financial crisis during 2007-2008 brought forth a set of important questions with regard to the future of the economic and financial system in the world. Politicians and public figures were quick to assert that the financial industry needs more supervision and regulation and that any attempt to deregulate is bound to fail and might even cause a chain of unmitigated disasters. However, not everybody was ready to accept such a viewpoint. At that time a bunch of programmers and enthusiasts decided to embark on a completely different system embodied by interconnected ledgers called the blockchain. Unlike large digital entities that relied upon the centralized databases the blockchain was a diametrical opposite of that. Since nodes in blockchain are widely distributed it rendered into impossibility any attempt to impose centralized control over the system. This offered relief to people who were disenchanted and disfranchised from the financial services.
Fast changing, innovative and revolutionary nature of the blockchain created dilemmas for regulators who are not able to catch up with the pace and intensity of changes. On one hand, it links to the world-wide-web, on the other hand, it claims a legitimate role as a means of payment which could be able to replace existing alternatives in the face of nationally-sanctioned currencies. This turned into the source of huge concern for the governments who are used to control and manipulation over the monetary policy and effectively regulate aggregate savings and the value of the national currencies.
Therefore, the first intrinsic reaction of the governmental as well as globalist institutions is to discourage and discredit any deployment of value or use of the blockchain-based cryptocurrencies since, according to them, it might not be able to stabilize itself and thus might prove as an overly risky asset class. Basically, if you can’t control it then it must be something evil. Such a knee-jerk reaction on behalf of the existing power structures is not surprising at all given the impunity and scale of control that they have acquired over the last several decades. However, as I mentioned previously, the crypto and blockchain, in general, are linked to the world-wide-web through a distributed system of nodes, and therefore it is practically impossible to regulate or control their supply and movement across the borders. Subsequently, it significantly changes the balance of power not in favor of centralized power entities.
The practical impossibility of the regulation does not mean the crypto industry should be let off the hook. Indeed there are mechanisms where crypto developers themselves can implement them to avoid unpleasant outcomes which may taint the future of the blockchain industry. So, in order to proceed successfully one has to be able to convince large communities of stakeholders that not all crypto entities are equal. Some crypto-powered enterprises are determined to ensure greater benefits for the society while others might have a damaging impact upon the social fabric.
For instance, let’s not forget that the solid majority of mining pools are located in the PRC. For somebody that may seem like a cause of no concern since almost rational and selfish actors who are interested in maintaining the value of the crypto entities would try to preserve the integrity of the system. However, not everything might go in line with the game-theoretical model of the utility maximization theory. After all, in the PRC where the government uses advanced tools of surveillance and control no single company or group is exempt from potential infiltration and domination. Thus, it may set up a dangerous precedent with likely negative outcomes not only for the free world but also for the crypto industry itself. Therefore, for the sake of defending the positive features of the blockchain industry one needs to envision mutually beneficial coordination between accountable governments and the crypto industry itself.
After all, regulations might be necessary to contain an ascendance of undesirable elements through the blockchain industry. However, there is a need for a much more prudent stance on behalf of the governments to secure the integrity and national security on one hand but also to encourage risk-takers and entrepreneurs to embark upon the uncharted and underexplored crypto industry.
The major goal of the regulatory framework should be about the protection of private property rather than simply securing statist interests. In that sense, the notion of sanctity and inviolability of private property should be considered as the major imperative for the regulation.
Government and the interested parties within the crypto community may even form a kind of synergy with the purpose of combatting illiberal forces. As the crypto industry will gain more power and prominence it may push the government to adopt a more pro-voluntary stance and relinquish coercive measures since those measures will simply lose their utilitarian worth.
To achieve such an outcome the governments should disentangle regulations of securities from the cryptocurrencies. Moreover, the monopoly upon currency control and emission should be ended altogether before it will be necessitated by the robust and exponential growth of the crypto economy itself.
Regulations are not always limited to state interventions into economic and property structures. They also could be openly detrimental as well. For instance, several countries such as the PRC, Venezuela, IRI, Russia and so on are using regulations to openly encroach upon the basic liberties of their citizens to directly control their choices and lives.
So, cryptocurrencies with their focus on the protection of individual identities may present a problem for their totalitarian vision of the future. The most important contribution of the EOS, in this case, could be a help for self-organizing civil societies to resist statist incursion upon people’s lives and liberties. Moreover, digitized assets may help to protect property rights even more effectively against the ascendant totalitarian structures.
Civil society is the crucial entity of any free society since it is a voluntary association of individuals who determined to resolve their problems through private initiative.
Why private initiative is important? Because it is a major driving force behind all the innovative changes since almost every single innovation comes out of the private sector. Crypto and dapps could be lubricants for a private initiative where the government would not be able to intervene and force upon individuals any kind of policy.
As noted before, any attempt to regulate the crypto by the governmental apparatus through the administrative means will be an object of failure, therefore, totalitarian governments across the earth will try to control cryptocurrency emissions by different means. For instance, the fact that large parts of mining pools of bitcoin are to be located in China may prove problematic since after gaining control over the large pools of emission the CCP might simply manipulate or even try to centralize the block production process. It explains why Bitcoin is no longer a helpful tool for active decentralization. Moreover, it is not a secret that the mining process of bitcoin leads to a waste of a huge amount of electricity as the Proof of Work becomes a more energy-consuming euphemism for the block production process. That’s another why the CCP might simply easily oversee the mining of the bitcoin. Bitmain a perfect example of how the Chinese companies are leading producers of necessary technological features for the mining. Among them, Bitmain (a producer of mining chips) is the most remarkable case.
China is the biggest investor in AI technologies. Indeed, according to the MIT’s Technology Review, Chinese companies such as Baidu, Tencent, Alibaba, and Huawei have invested more into Artificial Intelligence-related technology than the other companies combined. For instance, Baidu helped to establish and fund 47 AI companies, while Tencent and Alibaba funded 37 and 31 companies respectively. Many of those investments are situated at the outside of the realm of control and belong to the sphere of consumer businesses. However, the fact that almost all of those companies are tightly controlled and mentored by the CCP already should give us enough reason to be suspicious of their potential desire to control and dominate the market via techniques of face recognition and machine learning which are indispensable elements of the mass surveillance technologies as well. It also explains a deep skepticism and hostility of the Chinese government towards the western norms of privacy and encryption standards. Massively held protests in Hong-Kong recently proved every potential Chinese-built application for the consumer use can also be used for far more nefarious ends such as the desire to set up 24/7 surveillance over activists and protesters.
<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Protestors in Hong Kong are cutting down facial recognition towers. <a href="https://t.co/bTvb8uis7V">pic.twitter.com/bTvb8uis7V</a></p>— Jordan Sather (@Jordan_Sather_) <a href="https://twitter.com/Jordan_Sather_/status/1165327628825284610?ref_src=twsrc%5Etfw">August 24, 2019</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
In that sense, the Chinese philosophy of the AI is a complete ideological antidote of the future which is envisioned by the crypto activists. As renowned libertarian billionaire-activist Peter Thiel put it: “Crypto is libertarian while the AI is communist”. Those words might sound like hyperbole, however, under closer scrutiny, it is not hard to understand why AI contradicts the crypto philosophy. In addition to that, AI as a tool has been praised and propagated throughout the left-wing and social-democratic forces across the Western world. According to them in a perfectly equal society, all-powerful AI will control and redistribute goods and the property thus essentially abolishing class, hierarchy, and social status. For some people it may sound like a truly utopian future, however, in reality, it would be nothing less than the disaster with viciously destructive outcomes for the creative class.