Almost all predictions turn out to be wrong,; however this fact does not stop people from making predictions. They come thick and fast during the turn of the year. For example one team from a major bank, predicts that bitcoin will reach a value of $146,000 in the long term. In this particular case, it was done by drawing an analogy to gold, which is a familiar asset, and then predicting the total market cap of bitcoin to mirror the price of gold. Predictions like this are based on a modeling exercise with multiple levels of indirection. There is no way that such a precise figure could be right, it is “baloney” to use the words of our freshly minted president.
The future is unknown, thanks to the messiness of the real world and the unpredictable waves of causation that ripple across it. As in the case of bitcoin, in order to predict a value for an asset, modelers often look for more liquid proxies with a pedigree, map an asset to that proxy and base the prediction of the price of the asset on the predicted price of the more familiar and liquid asset.
Correlations and analogies can get out of whack during times of financial stress and rebalancing. Moreover, the modeler’s mind intervenes in the choice of a proxy and in the correlation story. Even knowing of confirmation bias and loss aversion and other insights from behavioral economics, price predictors cannot avoid these pitfalls. Thus, many of these predictions tell us more about the predictor than the asset.
Instead of making predictions for the new year this article aims to look at themes for the coming decade and beyond. These themes and general drivers are used to talk about current and possibly future developments for blockchains sometimes referred to as multi-party systems (MPS) or distributed ledger technology (DLT). The main feature of these systems is creating a mutualized source of truth among multiple parties. Since the landscape is vast, the article is divided into two parts. The first part deals with general themes, the second will focus more on technical themes including regulation and monitoring technology and other aspects.
Covid-19: Testing, Data & Vaccines
The start of the pandemic was rife with rumors about the source, the extent, infectivity rate and the virulence of the disease. Trust was in short supply. In the US, data became a hot potato and the CDC (Centers for Disease Control) itself changed its sharing policy and data formats bowing to political pressure. It is important to standardize the type and format of the data to be collected as well as ensure that the right agencies are reporting it at the local level. Ideally such a would have been a great use case for multi-party systems, since there are multiple decentralized parties involved in reporting from the trenches of the fight; hospitals, congregate settings, local agencies, doctors offices, clinics etc. Let us be better prepared for the next challenge.
For individuals, at this stage in the pandemic, the most important items to possess are a verifiable way to present their testing status which is ephemeral, or to present a credential that proves that you have had a vaccine. Since any usage of this credential is going to be controlled by multiple jurisdictions, standards are being established for interoperability between jurisdictions. The vaccine credentials initiative as well as the common trust network are working on this problem in a cross jurisdictional way. everyone seems to have joined this struggle as Covid-19 is top of the mind for the entire globe. There is a comprehensive effort by MIT that touches on almost all aspects of pandemic management. Many of these efforts take ideas from the Verified Credentials group and a host of other technologies including DLTs to be used in a privacy preserving way to be a global witness.
That climate change is real is disputed; nowhere as vigorously as in the US. The data tells the real story, a record of rising average annual temperatures worldwide with regional maxima fueled by local conditions. Intensely hot European summers, fires sweeping across Australia, California, Tasmania, starving polar bears adrift on prematurely calved floes all pushing the world toward a point of no-return. Action is needed on a global scale. Now that the US is rejoining the Paris accord, there seems to be more momentum behind climate action and clean energy.
One of the enduring themes is the use of a market place for encouraging climate action, which are real world efforts to reduce carbon emission or reduce existing carbon in the atmosphere. These real world efforts have to be audited by a set of trusted intermediaries. When such work is outsourced to individual auditing enterprises, there have been many instances when such data has been falsified or not checked properly. A combination of hardware devices and a decentralized set of participants can increase trust in this data. Distributed ledger technology is one of the backbones of the operating system of climate action tracking.
There are two distinct streams that can use this data. One is to create more trustworthy data for ESG trading. Of course the other components of ESG may also be helped with more trustworthy data on such a mutualized source of truth as a blockchain. The other stream is to issue tokens for carbon emissions which can be bought by emitters to mitigate their actions that may be subject to a cost. Such tokens could use blockchains for trading, especially if there is an on-chain link to the primary climate action data also accessible from the same framework.
Mission Economy by Mariana Mazzucato says that transformation of society can happen through ambitious projects, undertaken by the state. No one in the Chinese government had heard of Mazzucato’s book before they embarked on projects to transform digital infrastructure and project Chinese power through the Belt and Road initiative. Most people have heard of China’s Central Bank Digital Currency Project called DC/EP or Digital Currency Electronic Payments, aimed at transforming the Chinese payment infrastructure, wresting control back from private payment systems like Alipay and Wechatpay which had become monopolies controlling 60 to 80% of all digital payments in China. Not many would have heard of BSN or Blockchain
This is not to say that the US should emulate the statist Chinese system. The involvement of the government in significant transformational projects has made a difference in the success of various initiatives even in the US at small and large scales such as the Apollo mission to the moon and the creation of the Internet itself. Further when China anxiety abounds, the US could take a page or two from the Chinese playbook with a unique US twist that involves the private sector significantly. This seems to be already afoot with the Central Bank Digital Currency work that the Fed is undertaking with private partners. Work on standards and a national strategy for blockchains and multi-party systems will continue as these involve co-ordination across enterprises and across countries.
In the current iteration, dlt frameworks are being built inside AWS, Azure and other clouds which have created BaaS (Blockchain as a Service). This is a continuation of the Platform as a Service(PaaS) philosophy. Several well known dlt platforms are supported under a turn-key arrangement with support on the higher levels of the stack such as administration of nodes including deployment of smart contracts, and identity management. There is a growing collection of standards aimed at specific platforms like ERC-20 for Ethereum and even some that are platform agnostic. Other software service providers like IBM and Oracle
This conclusion is not a true conclusion since Part II of this set of articles will concentrate on more technical themes including the remaking of Financial Markets by Blockchain technology. Ambient technology made easier through the use of smart contracts as well as other automated observer technology to read, digest and report on data, either into the platforms or out of the platforms. the dangers of such developments including privacy threats and mass surveillance.
Read here about Ethereum price.
And here about markets data.