Letting Go of the Past for the Sake of the Future

International Business Machines Corporation (IBM) went before the United States House of Representatives on Wednesday, February 14th in the person of Jerry Cuomo, IBM’s Vice President of Blockchain Technologies. Mr. Cuomo warned the House against establishing policies that may have unintended consequences that stymie the innovation and development surrounding blockchain and distributed ledger technologies. Mr. Cuomo added that the “United States leadership position could be in danger.” He lauded blockchain technology as a catalyst for innovation that is ready for government use and that provides accountability, privacy, and security. “Blockchain has the potential to vastly reduce the cost and complexity of getting things done across industries and government,” he said to the legislative body. At the same hearing, Walmart presented real-world evidence of a trial that it used to track mangoes from grove to shelf. The time it took to trace the fruit was reduced from seven days to 2.2 seconds!

 

IBM has been a major supporter of and contributor to the  Linux Foundation’s Hyperledger Project an open source collaborative effort as was the assembly of the Linux operating system. To the project, IBM contributed Hyperledger Fabric, which integrates distributed ledger technology projects using common programming software within smart contracts.

 

IBM and Walmart went before the House a week after the Securities and Exchange Commission (SEC) Chairman, Jay Clayton, called for legislative action on cryptocurrency before the U. S. Senate Banking Committee. Along with the Chairman of the Commodity Futures Trading Commission (CFTC), Mr. Clayton cited their recent moves against multi-million dollar cryptocurrency operations as reasons for bitcoin’s recent pullback from near $20,000. Mr. Clayton further threatened by saying that if Congress does not act, the SEC “may be back with our friends from the Treasury and the Fed to ask for additional legislation.”

 

Resistance to acceptance of cryptocurrency by world governments and major banks contributed more to the recent collapse of cryptocurrency prices on international exchanges than did the intervention of the SEC and the CFTC. China first banned initial coin offerings (ICO’s) for new virtual currencies, and then pressured Chinese exchanges to stop trading them. China’s totalitarian government further intends to block online and mobile access to cryptocurrency services. This action by the Chinese government comes while simultaneously The People’s Bank of China (PBOC) is running trials of its own government-backed cryptocurrency and may be the first central bank to issue its own digital coin. India this month stated that their government "does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system." In January Japan said it would inspect all cryptocurrency exchanges after the theft of $530 million worth of NEM coins. Japan was the first country to institute nationwide regulation of cryptocurrency exchanges. South Korea has shifted to a more lenient stance on cryptocurrency after banning ICO’s and margin trading of cryptocurrency in September of 2017.

 

Major banks including Bank of America, J. P. Morgan and Citigroup have begun blocking cryptocurrency fiat currency purchases via the credit cards they issue. Capital One and Discover already before this enacted such bans, and so,  the top five United States credit card issuers no longer allow the purchase of cryptocurrency. They may be concerned that after bitcoin turned from a rising balloon to a falling rock, the unsecured funds they lent may never be repaid. Liability for possible money laundering schemes may also be one of their concerns. Governments and major international banks may have the most to lose in a cryptocurrency future. They create, control the supply of, charge fees on, and collect taxes in their fiat currencies. Like China, they may not wish to see cryptocurrency progress without a way to participate in its growth.

 

There are also powerful people in control of large corporations who will not consider cryptocurrency as anything but an international waste of time and money. Warren Buffett stated in January, "In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.” Jamie Diamond, the Chairman and CEO of J. P. Morgan now regrets saying in October when bitcoin (BTC $11,251 2/21/18) was trading for $5310, “If you're stupid enough to buy it, you'll pay the price for it one day.”

 

The resistance to acceptance of bitcoin, cryptocurrencies and blockchain technology seems generational in that it comes from members of the depression era, war babies and baby boomers. Tim Draper, born in 1958 and founder of the venture capital firm Draper Fisher Jurvetson, was just asked if he was going to sell his bitcoin. His response was, “Why would I sell the future for the past?” Vitalik Buterin, born in 1994, was 19 when he wrote the white paper that first described what would become Ethereum (ETH $897 2/21/18). Bitcoin was born in 2008 and ascribed to Satoshi Nakamoto, age unknown.

 

Rock and roll music had similar detractors. Frank Sinatra, in 1957, said about it, “It fosters almost totally negative and destructive reactions in young people. It smells phony and false. It is sung, played and written for the most part by cretinous goons and by means of its almost imbecilic reiterations and sly, lewd—in plain fact, dirty—lyrics, and as I said before, it manages to be the martial music of every sideburned delinquent on the face of the earth.” Sinatra went on to perform with Elvis Presley in 1960 and to record "Bad, Bad Leroy Brown" (1974), "Something" (1980), and "Bang Bang (My Baby Shot Me Down)" (1981).

 

We have contenders for the vaunted statuses of Chuck Berry, Elvis Presley and Buddy Holly as early innovators of cryptocurrency, but who will be the Sam Philips (Sun Records), Dick Clark (American Bandstand) or Ed Sullivan that presents the technology to the masses? One candidate may be D. J. Qian, the mind behind the Qtum digital coin (QTUM $30.12 2/20/18), which issued its white paper in 2016 and ended its ICO in May of 2017. Mr. Qian’s newest venture, Fusion, proposes to “tokenize” real world assets and allow anything from stocks to real estate to be traded via blockchain. Like the Linux operating system project, Fusion will be an open code public blockchain that will allow access to third-party developers and be interoperable, scalable and usable. The Fusion white paper, “An Inclusive Cryptofinance Platform Based on Blockchain,” presents itself as a "blockchain of blockchains," and envisions an Internet of Value which will tokenize all things real, material or tangible, as did the Internet of Information digitize all things print, audio and visual.

 

An example of such an upgrade to society already exists in tiny Estonia. E-Estonia includes all members of government and the services that government provides: legislation, voting, justice, healthcare, and banking. An Estonian citizen accesses these services and his personal record of interactions through a chipped identification card. Any person on the planet may become an Estonian citizen and use their services just as if they were living in the country. The government’s data platform, X-Road, is decentralized—a network of individual servers linked through encrypted pathways. “A tenet of the Estonian system is that an individual owns all information recorded about him or her.” Also, “Peeping at another person’s secure data is a criminal offense.” Estonia, in small scale, is the near realization of the future of blockchain and distributed ledger technology. Estonia has been conquered by Russia five times, but now Estonia’s government is backed-up into a server closet in Luxembourg. If they are invaded again, the government can continue to run from an elected leader’s laptop.