 | Chipping away As users demand more power, social media companies are under pressure to decentralize. To Michael J. Casey, this could be the internet's Berlin Wall moment.
Read more in THE TAKEAWAY below. | | |
 THIS WEEK'S TOP STORIES | | |
BANKCOINSIBM – no stranger to crypto – is bringing its banking clients into the space as well. The company announced that six international banks signed letters of intent to issue fiat-pegged stablecoins using IBM's World Wire, a payment network which uses the Stellar public blockchain.
World Wire promises to let regulated institutions shift value across borders quickly and cheaply, particularly in comparison with traditional banking systems. Not all of the banks have been identified, but IBM says they intend to issue digital versions of euros, Indonesian rupiah, Korean won and Brazilian reals, and Philippines-based RCBC plans to launch a peso-backed stablecoin.
LANGUISHING IN LIMBO
It’s been more than six months since Intercontinental Exchange (ICE) announced its vision for Bakkt, and the hotly anticipated bitcoin futures market is still awaiting regulatory approval. ICE, the parent of the New York Stock Exchange, originally planned to launch Bakkt in mid-December, but it got pushed back to late January. Then, on New Year's Eve, the launch was indefinitely delayed, with ICE saying its previous Jan. 24 target "will be amended pursuant to the CFTC's process and timeline."
It’s unclear what progress Bakkt is making with the CFTC, or when the regulator might release Bakkt’s proposal for public comment. CoinDesk goes in-depth on the varied issues that may be holding the futures market up in this report.
SPEND, NOT HODL
Banking startup 2gether plans to launch a prepaid Visa debit card that allows users to spend either euros or any of seven cryptocurrencies across the 19 eurozone nations. Cardholders can use the firm's iOS and Android app to buy, sell and manage bitcoin (BTC), ether (ETH), XRP, bitcoin cash (BCH), EOS, Stellar (XLM) and litecoin (LTC) holdings. The Visa card will immediately convert these holdings into fiat when users try to spend their funds. And unlike other card services, 2gether says it won't charge any fees.
CRYPTO LENDING
Crypto lender BlockFi launched an interest-bearing crypto deposit account earlier this month – and the product is fast gaining traction. According to CEO and founder Zac Prince, users have already deposited more than $35 million in cryptocurrency, with $25 million coming after the March 5 launch. The product entices investors with returns of up to 6.2 percent annually for holding their bitcoin or ether.
However, the accounts may be too popular: BlockFi will only provide a 2 percent return to clients with more than 25 bitcoin or 500 ether in their accounts, saying the demand from institutional clients was higher than expected and more than the company can actually support. This change will kick in on April 1.
NEW INDICES
CoinMarketCap has launched two cryptocurrency benchmark indices on financial data feeds from Nasdaq Global Index Data Service (GIDS), Bloomberg Terminal, Thomson Reuters Eikon (Refinitiv) and Germany’s Börse Stuttgart, as well as on its own platform. Saying these new products are the “most comprehensive” crypto data offerings for the markets, CMC expects to cover the top 200 cryptos by market cap, with one index including bitcoin and the other excluding it. The data site partnered with Germany-based provider of financial indices Solactive for the effort. |
 QUOTE OF THE WEEK | |  | "This is a small way to give back, and one that’s aligned with our broader interests: a more accessible global financial system for the internet.”
– Square CEO Jack Dorsey, on hiring engineers to work full-time on open-source bitcoin development. | | |
The Takeaway |  | | |
Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.
"Left to their own devices, computer scientists would recreate the Soviet Union."
That line belongs to Preston McAfee, an economist whose job history includes senior positions at tech giants such as Microsoft, Google and Yahoo! As he explained to a South-by-Southwest audience in Austin, Texas, recently, it refers to software engineers' tendency to favor centralization as the most efficient design principle for any computing system.
The point, he said, is that decentralized networks, such as those based on blockchain models, can often enable more positive overall social outcomes despite the relative inefficiency of their command-and-control architecture.
It’s useful to contemplate this idea, and McAfee’s colorful metaphor, in relation to the current state of play on the Internet.
For the first time since they emerged as the victors of the post-dot-com bubble shakeout at the turn of the century, the platforms that dominate our online lives are running up against the social limits of their centralized models.
A backlash is emerging against "surveillance capitalism" and against the broad strategy of mining users' data to capture audience for advertisers and to shape consumer behavior. Manifest as both political pressure and user rebellion, it is forcing a design rethink at these companies. Perhaps the Internet is facing its Berlin Wall moment.
This is ultimately why some of the principles underlying blockchains and cryptocurrency technologies are finding favor in the business development strategies – or at least in the PR signaling – of social media companies.
Warming to Decentralized Models
Facebook especially has attracted much attention in this area.
CEO Mark Zuckerberg recently made a bombshell post outlining a "privacy-focused vision for social networking" that suggested a move to embrace end-to-end encryption of users' data on Facebook, Instagram and WhatsApp.
In a separate post of a video interview with Harvard Law professor Jonathan Zittrain, Zuckerberg speculated on the prospect of Facebook using a blockchain model to enable decentralized logins without its servers acting as authenticators. All this came around the time The New York Times reported that Facebook is developing a digital currency that its users can trade among each other and exchange on cryptocurrency exchanges.
Meanwhile, Twitter CEO Jack Dorsey appears to have gotten religion when it comes to cryptourrencies. He has declared that bitcoin will be the "native currency of the Internet," has invested in Lightning Labs, which is developing payment channels for bitcoin based on the Lightning Network, and recently announced that Square, the separate payments company that he heads, will hire crypto engineers and likely pay them in bitcoin.
It's fair to say there is a significant degree of skepticism that social media companies, having made fortunes out of a centralized model that accumulates user data, will change their stripes. Facebook in particular has come under criticism from pundits who argue that it won't be able to shift its business model. Given data abuse scandals such as the Cambridge Analytica affair, skeptics such as cryptocurrency pioneer David Chaum argue that Zuckerberg's decentralization and privacy mantra is nothing more than a PR message.
But the departure of certain senior executives, including those who oversaw the development of the centralized data-gathering model and the algorithms that mine that data to deliver audiences to advertisers, has led others to conclude that Zuckerberg is indeed serious.
Winds of Change
One thing's clear: there's pressure for change, whether it comes in substance or merely in message. Much like citizens who reach a breaking point and rebel against political leaders who act in their own interests rather than those of the public, users of these social media platforms are starting to signal that they won't stand for data abuses.
Obviously, without users, these businesses fail. So, these companies are now contemplating a revised model in which, to paraphrase Bruce Schneier, users are no longer the product but the customer.
It's an open question whether such companies can make money on a model in which the nodes in the network are free from control by the center. But let's continue with the McAfee-inspired metaphor and contemplate how governments in capitalist economies accrue power and influence when their citizens are empowered to transact with each other. Similarly, we can imagine how a Facebook or a Twitter that helps its vast number of users conduct peer-to-peer exchanges can extract great value from the expansion of such networks.
Either way, the winds of change are coming to the centralized systems of the Internet. Whether the incumbents survive those changes, or whether they go the way of, say, MySpace is not clear. More important, let's consider what might arise in their place and how smoothly we transition to the new era.
These are questions for developers of decentralized solutions such as those enabled by blockchain technology. What kind of governance models will be in place so that users are truly able to maintain a healthy degree of autonomy even as new centralizing forces emerge to extract value within the new paradigm?
Remember, the Soviet Union collapsed, but it was hardly replaced by a utopia. — Michael J. Casey |
 BEYOND COINDESK... | | |
FOREIGN POLICY: Neo-nazis and other far-right figures turned to cryptocurrencies after being cut off from more traditional payment options like PayPal and credit cards, but this may not have been all that beneficial to them. Despite a prominent number of vocal alt-right figures claiming that cryptocurrencies would help them avoid censorship, the reality is that using cryptocurrencies like bitcoin has made it easier for intelligence analysts to track the flow of wealth, writes David Gerard.
POLITICO: Blockchain lobbying is a growing field in the U.S., with 33 different groups reporting that they lobbied on blockchain issues in the last quarter of 2018, nearly triple the 12 groups which did so the previous year, Theodoric Meyer reports. Much of this growth can be attributed to securities regulation concerns, with numerous groups trying to clarify how and when digital tokens might be labeled as securities.
BROOKINGS INSTITUTE: Cryptocurrencies currently fall into regulatory gaps in the U.S., and Congress must act to close those gaps to reduce or limit fraud and better protect investors, says Timothy Massad, a former Commodity Futures Trading Commission (CFTC) chair. Some of these gaps come from the fact that cryptocurrencies fall across different jurisdictional boundaries, meaning neither the U.S. Securities and Exchange Commission (SEC) nor the CFTC really has strong jurisdiction over digital assets, and this lack of clarity can allow for exchanges and other companies in the space to engage in behaviors which are illicit in more traditional asset classes. |
 WHAT WE'VE BEEN UP TO | | |
Our Bitcoin at 10 series continues with two new videos, one looking back on the cryptocurrency's early days, the other exploring where it's headed.
First: Before we knew whether bitcoin was legal, many enthusiasts were pretty worried about transacting with the cryptocurrency online. And so, Satoshi Square, a gathering of bitcoiners at Union Square Park in New York City, was born.
And what seemed kinda like a drug deal – people trading cold hard cash for the digital currency in a public park – became a phenomenon that grew to a number of cities throughout the world. Watch the video.
Flash forward to today. The Lightning Network is bitcoin's best hope for becoming the payment mechanism it was first envisioned to be. And this still-in-beta technology is being pioneered and pushed along by a very #reckless community – like the pseudonymous user LNBIG, who has put more than $1 million on the experimental network. Watch the video.
CoinDesk's Construct event is back and it's being held alongside Consensus on May 13-15 in New York City. Developers looking to learn about the biggest public and private blockchain technologies can register for Construct for only $299.
Send feedback on CoinDesk Weekly to marc@coindesk.com or troll him on Twitter. We'll see you here next Sunday. Thanks for reading! |
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Tear down this wall