Steal This Singularity Part 2: The More Things Change, The More You’ll Need To Save

Posted on by RU Sirius

Steal This Singularity Annotated #2

Four score or make that four columns ago, I presented Part 1 of Steal This Singularity Annotated, promising: “Every fourth one of these Mindplex articles will be an annotated and edited excerpt from my multipart piece titled Steal This Singularity, originally written some time in 2008. This will continue until I get to the end of the piece or the Singularity comes. Annotation is in gray italics.”

As it turns out, this second presentation will just about cover it. I’m so happy with how I critiqued (made fun of?) my transhumanist and singularitarian friends that I may not need to do a lot of annotating.

Part Three: The More Things Change, The More You’ll Need To Save

It was 2008 — maybe a week or two into my first experience working with ‘official’ transhumanism (as if) as editor of h+ magazine. I was being driven down from Marin County to San Jose to listen to a talk by a scientist long associated with various transhumanoid obsessions, among them nanotechnology, encryption and cryonics. As we made the two-hour trip, the conversation drifted to notions of an evolved humanity, a different sort of species — maybe corporeal, maybe disembodied, but decidedly post-Darwinian, and in control of its instincts. I suggested that a gloomy aspect of these projections was that sex would likely disappear, since those desires and pleasures arose from more primitive aspects of the human psyche. My driver told me that he didn’t like sex because it was a distraction, a waste of brain power… not to mention sloppy. As a boomer who was obsessed with sex most of my life, as I’ve hit my seventies, I’ve had the peculiar experience of completely forgetting about sex for days at a time. Nonetheless, as a matter of principle, I still believe that repressed sexual energy is a giant badness. It’s essential to my distaste for right-wing fundamentalist Christians, the Taliban and the like.

Putting aside my personal experience, which has caused me to view my earlier life’s priorities with a certain note of bewilderment, I must confess to a curiosity regarding the reports that young people today are far less interested in sex. Is it a loss of male testosterone so much worried about by right-wing talking heads? Is it an evolutionary mutation? Was the driver I thought I was making fun of in the above comments on to something? Is the oncoming climate apocalypse perhaps rearranging some instincts? (Can I suggest that instincts exist? And do I dare to eat a peach? And can I find a classy way to exit this subject?)

I arrived at a Pizza Hut in an obscure part of San Jose. This gathering of about 15–20 transhumanoids would take place over cheap pizza in the back room that was reserved for the event. There was even a projector and a screen.The speaker — a pear shaped fellow clad in dress pants held up by a belt pulled up above his stomach — started his rap. I have a funny memory of a couple of MONDO 2000 staffers going to an extropian gathering at the end of the ‘80s. Jas Morgan and Morgan Russell (both of whom had a certain dandyish élan) and were accustomed to the classy party extravagances dished up by Queen Mu at the MONDO house, complete with her homemade desserts returned with noses upturned. The party was in a dicey little under-decorated house in one of the Bay Area’s strip mall suburbs with chips and dip and Coca-Cola. It was noted that the attendees looked like they didn’t pay much attention to their misshapen bodies nor did they seem to have any sort of fundamental aesthetic for making life extraordinary. They wondered at the Extropians’ desire for more of that life – and suggested that maybe quality rather than quantity should be considered.  Now, I’m not sure how I should think about this. I’ve been thinking hard about why people outside urban areas were attracted to Donald Trump. I think it’s partly because they could sense and identify with his resentment of the culture-makers of New York City. He wanted to fit in but they considered him tacky and lacking class. Yes, class. Do liberals and even many leftists have class? And what does that say?

Somehow related, there’s this funny and interesting piece by Sam Kriss, in which he textually executes all hipsters before obsoleting nerd culture. Let me say this right out loud: MONDO 2000/1990s cyberculture was hipster-nerd back when hipster wasn’t yet a swear word. Now we’re just washed up on the shoreline of cultural desolation with few identity life rafts to relate to, and mere survival rearing its jeering head. We’ll see fire and we’ll see rain.

As I recall, he predicted major nanotechnology breakthroughs (real nanotechnology i.e. molecular machines capable of making copies of themselves and making just about anything that nature allows extremely cheaply) within our extended lifetimes, allowing us, among other things, to stay healthy indefinitely and finally migrate into space.

I recall him presenting a scenario in which all of us — or many of us — could own some pretty prime real estate; that is, chunks of this galaxy, at the very least that we could populate with our very own advanced progeny (mind children, perhaps.) I’m a bit sketchy on the details from so long ago, but it was a very far out vision of us united with advanced intelligences many times greater than our own either never dying or arising from the frozen dead and, yes, each one getting this gigantic chunk of space real estate to populate. (That these unlivable areas can be made livable either by changing it or ourselves or both with technology is the assumption here.)

Once the speaker had laid out the amazing future as scientifically plausible, he confessed that he was mainly there to make a pitch. Alcor — the cryonics company that he was involved in — needed more customers. As he delineated how inexpensively one could buy an insurance policy to be frozen for an eventual return performance, he began to emphasize the importance of a person in cryonics not being considered legally dead… because that person could then build interest on a savings account or otherwise have his or her value increase in a stock market that was — by all nanocalculations — destined to explode into unthinkable numbers (a bigger boom).

For the bulk of his talk, the speaker dwelt on the importance of returning decades or maybe even a century or so hence to a handsome bank account. It was one of those “I can’t emphasize this enough” sort of talks that parents used to give to their 20-something kids about 401ks. 

As the floor opened up to audience participation, the questions continued to dwell primarily upon the financial aspects of suspension and its aftermath. Insurance. Savings. Investments. Finally, a woman raised her hand and asked something along the lines of… “In light of all the stuff you’re predicting, will US currency still be meaningful in that future?”

An audible groan went up from a portion of the gathering, implying, “fuckin’ stupid hippie asking that ridiculous question again.”

So there they were accepting…

•  Raising people from the dead

•  Becoming more or less immortal

•  Making intelligences many times more powerful and capable than our own

•  Individual earth humans privately owning big chunks of the galaxy

…but they could not imagine that the local (local in time, perhaps, more that space) currency and the nuances of its valuation and growth would be irrelevant in that envisioned world. Given that transhumanists are among those pushing forward cryptocurrencies, I find it curious that our speaker didn’t consider the likelihood of some extreme discontinuity in currency, rendering those savings and investments meaningless. Transhumanist culture – before and after the 2008 financial collapse – has a trust in finance management to glue obsoleting accounts to futuristic ones. Late-stage capitalism isn’t late-stage at all. Its coming death has been greatly exaggerated. It’s unbreakable: the capital you possess now will somehow transfer seamlessly into whatever system is collaboratively summoned by or with our smart machines. 

This, it seemed to me, represented a stunning and peculiar kind of stasis sitting at the heart of radical technological change or the imaginings of same, a clinging to the most trivial and boring sort of continuity by the very sort of people predicting extreme “disruption” and radical discontinuity. The Singularity then, if any, would present before us as an unthinkably complex quantum accountant, as — figuratively speaking — a godlike 1950s bespectacled nebbish, a bean counter (literalized already by the fashion for “quantified life.”)

Part 4: The Worm Earns (Or It Can Fuck Off and Die)

Cut to a Singularity Summit that same year, also down in the sainted city of San Jose. During one of the talks, the speaker, Marshall Brain, at that time the host of the TV Show Factory Floor and author of Robotic Nation spoke about the exponential acceleration of robot technology that the conference was, in its essence, about. He noted that the degree of automation that was soon to arrive would lead to such a loss of jobs that it would be necessary to start providing people with a guaranteed income.

This time, it wasn’t a slight groan that arose from the gathered transhumanoids. There was actual hissing from a substantial segment of the audience. It was the first and only time I ever heard this kind of response at one of these gatherings.

(Transhumanoids tend to pride themselves on a Spock-like calm logic. They are not rowdy sorts.) Guaranteed income has gained popularity since. Possibly the situation is reaching the point where you either have to kill the poor or hand out some free tickets; or Andrew Yang’s presidential campaign charmed the pants off of a few hardline libertarians or perhaps, upon noting a rise in working class union militancy, some anarcho-capitalists are thinking they’d better throw the dog a bone.

Again, allow me to contextualize. Here we were at a conference about the Technological Singularity — the time upcoming soon, according to most singularitarians, when we would design intelligences that — in the words of original singularitarian Vernor Vinge — would be to our intelligence as we are to the worms. Nonbiological life would be more competent than us in every way imaginable. And, in fact, even stopping short of the singularity, we were hearing from a whole bunch of speakers about the rise of machines doing more with less better than us in nearly every field of endeavor. And yet, here again, the Infallible Papacy of Contemporary Currency raised its head, angrily this time — with the emotional/ideological undertow undoubtedly ranging from the Randian/libertarian virtues of being financially “self-made” combined with the immorality of assisting anyone not so self-made as one’s self…. to the Calvinist idea of the ennobling nature of work.

That the very same people that can applaud building intelligences that make them about as interesting and useful as a worm can get their knickers into a twist over the idea of humans not having to “earn” tickets to live is indicative of a Calvinist/Randian determination to punish “slackers” even in the face of an endlessly self-replicating, robot-delivered “free lunch.”

Incidentally, during a lunch break following Brain’s talk, I was explaining to a friend why the audience had hissed at Brain when a large, heavy-set man standing behind me on line turned beet red and started shouting at me about how many people were killed by the Chinese communists and how capitalism had defeated communism because planned economies don’t work. I didn’t engage with him, but I would now point out that the nation states and their economies that outlasted Marx-Leninism were the United States, which had a New Deal mid-20th Century, and the European “welfare states” that this beet red fellow no doubt refers to as “socialistic.” A lot of Republican-influenced persons have been convinced in recent years (by people who know better) that centrist Democrats like President Biden are communists. The term is bandied about virtually without context by politicians that are also appealing to these same people with populist anti-corporate and, in some sense, anticapitalist rhetoric. I suppose this goes back to Mussolini. Nothing new here.

Indeed, what Brain was suggesting was not collective farms, totalistic planned economies and the eventual end of all private property, but merely a logical extension of the “welfare state” in response to the conditions predicted (and already starting to occur) by technophile futurists.

Or maybe not even that. During the ’70s, many libertarians, even Ayn Rand quasi-acolyte Milton Freidman, suggested less bureaucratic paths to guaranteed income, once workers were replaced by machines. So, in concrete terms, the barbarism that doesn’t want to resolve superfluous labor and other forms of exclusion from the economy may be more a function of the psychological acceptance of post-Reagan/Thatcher conditions than it is of Randian ideology. (People younger than myself have grown up stepping over the homeless on their way to whatever for their entire lives. The scale of homelessness that continues to exist is a post-Reagan phenomenon).

Part 5: There’ll Be Pie in the Sky When You Don’t Die

Credit: Tesfu Assefa

The conservative or apolitical transhumanist/singularitarian argument against the Steal This Singularity approach is, fundamentally, that it’s unnecessary. The tech will produce democratized abundance and liberties beyond our wildest imaginings and all we need to do is hang on tight and support science and technology and, generally, not stir too much shit up. I call this the “there’ll be pie in the sky when you don’t die” argument, which is a play off of a Woody Guthrie satire, which is, in turn, about 40 times more obscure to young 21st Century Americans than even an Abbie Hoffman reference. A lot has changed since I wrote this in 2008. Not only are a lot of younger people fairly radicalized leftists, a pretty strong sense of history is emerging among some (fostering bizarre reactions in the wilds of Florida and elsewhere). Also, within this milieu, tech negativity has gone a bit too wild. (I must follow up on this theme soon.) GenXers and older millennials really just want to go back in time to before the internet existed.

Basically, the narrative goes that we’re going from home/desktop media, which gave all of us the equivalent of a printing press and broadcast studio from which to have a voice in the world to 3D home printing i.e. manufacturing. If we get molecular technology and tie that in with 3D manufacturing, every man and woman can make what they need from very little in their homes. Of course, that assumes homes, but that’s one brief example of a path to democratized abundance that seemingly doesn’t require any political activism.

Of course, the past and the present are prologue, even in consideration of technologies as disruptive as those being promoted and predicted by transhumanoids and singularitarians. Such was my point in Part Three of this mess about folks clinging to today’s currency as a life raft while sailing about the entire galaxy visiting other property owners. We have both the willingness and the talent to snatch scarcity out of the jaws of abundance and oppression out of the jaws of liberation. We do it today when we impose austerity based on the abstraction of global debt and when we let the US-based National Security Industrial Complex build one-way transparency by using the same now-completed Virtual Panopticon to shield itself from investigation while having full access to everybody else’s data.

Since the dawn of the digital culture, there has been a tug of war between the notion of

•  Free — stuff that can be easily copied and shared should be shared, because otherwise you create scarcity in the face of nearly limitless (virtual) wealth

•  Business — the systemic legacy of selling intellectual and creative stuff, starting companies that lock replicable bits behind turnstiles and make a business of it. Bill Gates took the side against free and did very well by it.

As much protested by the likes of Jaron Lanier, creative artists and writers are now stuck in the middle of this inconclusive dialectic.

During the early 1990s, digital countercultural idealists trumpeted the idea of free. There was a broad feeling amongst those of us at play in the fields of the arising tech revolution that if the anarchic shockwaves of shifting social relations brought about by — among other things — the digitization of cultural stuff and the resultant ease with which that stuff could be copied unto infinity and accessed from anywhere hit us, then we would happily surf those crazy waves of change.

The other part of that deal, as many of us perceived it, was that everything else had to change too. We knew that the end of scarcity in the digital realm would be “heightening the contradictions” (as they say) in the industrial capitalist model. We assumed that either capitalism would rise to the challenge by finding ways to support those disintermediated or displaced by technical change — or it would be forcibly altered or dissipated in the forward rush of boundary defying technologies.

Rather, we’ve been subjected to that same stasis — stuck in these same primitive currency valuations and their correspondent debts — and we stand today as perfect examples of what could not only continue but expand under the regimen of home manufacturing — that is, the utter disintermediation and abandonment of formerly wage earning (and eventually, business-making) people for the crime of not being able to come up with a sublime enough hustle in the midst of satiated needs to get some other human being to pass those currency tickets that legitimize his or her existence to hir.

We shall see. As a famous poet once said (I’m paraphrasing): First they disintermediated the livelihood of the musicians, and I did not speak out for I wasn’t a musician. Then they disintermediated the livelihood of the writers, and I did nothing for I wasn’t a writer. Then they automated the programmers, and suddenly a whole lot of libertarians decided that guaranteed income was a thing. Not bad guesses for 2008.

Part 6: White Babbits  (2008)

Yes I did top the whole thing off with some song  lyrics. They are now a song and a video.

One pill makes you smarter
And one pill makes you small
And the ones that mother gives you
Ritalin or adderall
And your phallus
Needs Viagra after all

And if you go fleecing Babbitts
‘Cause the banks are gonna fall
Tell ’em the hookah smoking anarchist
Has got you by the balls
Call alice — she’s totally appalled

White men on the radio
Get off on telling you who to hate
And your friend has joined the teabags
And you spend your weekends straight
And your phallushas a Cialis date

When logic and proportion
Have fallen sloppy dead
And the fat cats are aging backwards
While your friends are filled with dread
Remember what the lab rat said
Freeze your head!
Freeze your head !

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Regulatory Gaslighting? SEC and BlackRock To Decide Crypto’s Future In the US

Posted on by Werner

Introduction

In early June 2023, the US Securities and Exchange Commission (SEC) delivered the latest blow against the crypto industry and its investors in the United States by filing lawsuits against the two biggest US crypto exchanges, Coinbase and Binance, and adding several top cryptocurrencies to its list deemed to be securities.

With all appearing to be lost for the digital assets sector in the US, crypto firms and VCs like A16Z swiftly announced plans to move operations abroad at friendlier locations such as the EU, UK, Singapore and Hong Kong. 

The SEC’s actions ended a tumultuous first half of 2023, where federal regulators allegedly launched a coordinated attack, thought to be delayed retaliation for the investor carnage that FTX led in 2022. Dubbed Operation Choke Point 2.0, its perceived aim was to cut off all banking services to the US crypto industry – an aim in which it has largely succeeded, with many of the biggest crypto-serving banks closing their doors. 

Less than two weeks after the SEC actions, which spooked TradFi away from crypto, there was a stunning reversal of fortune. An unlikely savior in the form of BlackRock, the world’s largest financial assets manager, appeared and flipped the Crypto Fear and Greed Index meter back to the right. BlackRock announced it had filed its first Bitcoin spot ETF (exchange-traded fund) application with the SEC, rallying the price of Bitcoin to over $30,000. Interestingly, BlackRock listed Coinbase as its official crypto custodian. 

Soon, ETF filings from several other TradFi and previous crypto applicants rose from the dead, essentially looking to ride the coattails of BlackRock into the promised land of mainstream crypto adoption. BlackRock has over $10 trillion assets under its management, and a 1% allocation to Bitcoin could move the market in ways hard to imagine. BlackRock’s gold ETF track record shows this.

A Bitcoin spot ETF approved by the SEC has long been a crypto sector’s holy grail, but with dozens of applications rejected by the SEC with little to no explanation, it got to the point where Grayscale, creator of the flagging GBTC Trust, decided to sue the SEC in return for not approving its ETF filing. 

With a filing success track record of 575-1 and big sway in Washington, crypto pundits believe that BlackRock will finally achieve what countless other firms couldn’t: get a spot Bitcoin ETF approved and open the floodgates for mainstream crypto adoption. 

Was this all part of the plan, taking out the crypto incumbents in the US to make way for a Wall Street takeover? Or did BlackRock expedite its ETF launch and intervene in order to save the US crypto sector? Nobody knows yet. However, with the Bitcoin Halving less than a year away, the FOMO is back in crypto, despite fears of a recession and new interest rate hikes. 

Let’s review what we do know, and dissect the current landscape of crypto regulation in the US.

Current landscape 

While crypto regulation in other jurisdictions like the EU (under MiCA) and Hong Kong has become much clearer and better streamlined, the opposite is happening in the United States, where several federal agencies are involved in regulating this burgeoning sector, each with its unique mandate and approach. This is causing a lot of confusion in the process, despite President Biden’s March 2022 executive order to federal agencies to analyze the digital assets sector and make recommendations to help the US remain in front. 

Here’s a quick primer on the main players in the US: 

  • The Securities and Exchange Commission (SEC) oversees cryptocurrencies it deems to be ‘securities’: tokens sold to investors with the expectation of return. The SEC has been proactive in enforcement, taking action against several companies for violating securities laws, but has been criticized for failing to provide clear guidance in the process.
  • The Commodity Futures Trading Commission (CFTC) regulates cryptocurrencies it classifies as commodities. These tokens, often traded on exchanges, are used for hedging or speculating on price movements. In 2015, the CFTC issued a framework for regulating cryptocurrency derivatives, providing guidance on their classification and trading.
  • The Financial Crimes Enforcement Network (FinCEN) enforces the Bank Secrecy Act (BSA) with the aim of stopping anti money-laundering and countering the funding of terrorism (AML/CFT), requiring financial institutions to report suspicious activities. In 2013, FinCEN issued guidance for cryptocurrency businesses to comply with the BSA, requiring them to register with FinCEN and report suspicious activities. 
  • The Internal Revenue Service (IRS) treats cryptocurrencies as property for tax purposes, meaning transactions are subject to capital gains taxes. In 2014, the IRS issued guidance on how cryptocurrency businesses should report their taxes.
  • The Office of Foreign Assets Control (OFAC) also plays a significant role. OFAC, responsible for enforcing economic and trade sanctions, requires cryptocurrency businesses to block transactions involving sanctioned entities, and caused a lot of consternation when it blacklisted Tornado Cash, a cryptocurrency mixer.
  • The Office of the Comptroller of the Currency (OCC) charters and regulates national banks. Under its Acting Comptroller Brian Brooks, it confirmed in 2020 that national banks and federal savings associations could provide cryptocurrency custody services, allowing them to hold cryptocurrencies for their customers. Interestingly enough, after leaving office, Brooks served as the CEO of Binance.US until he suddenly resigned in 2021.

The SEC and CFTC have been vying for years in a turf war over who gets to officially regulate the crypto space, publicly classifying cryptocurrencies as ‘securities’ and ‘commodities’ respectively.

The SEC – being the much bigger regulator – considers itself to be the headlining agency, and of course, the government funding it attracts and financial settlements it collects from plaintiffs in court also serve as powerful motivation.

Operation Choke Point 2.0

Operation Choke Point 2.0 refers to the efforts of the US government, including the White House, Federal Reserve, OCC, FDIC, DOJ, and influential members of Congress, to limit the cryptocurrency industry’s access to traditional finance and ‘debank’ them. Their goal is to hinder the industry by making it difficult for traditional banks to work with cryptocurrencies. This operation is seen as a continuation of a previous campaign that targeted risky industries like payday lenders.

The strategy involves labeling banks that deal with cryptocurrencies as ‘high risk’. This leads to increased costs for these banks, restrictions on their activities, and the risk of facing negative evaluations from regulators. These measures drive a wedge between the US crypto industry and the banking system it needs to function.

US lawmakers, regulators, and agencies have shown an attitude towards cryptocurrencies best described as strong pessimism. This has resulted in negative actions like banks withdrawing services from crypto-related clients, and crypto companies being denied entry into the Federal Reserve system.

Some of the casualties so far in 2023 are: Signature Bank, Silicon Valley Bank, Silvergate, and Custodia, who all played a vital role to provide banking services to US crypto firms. 

SEC vs Crypto

The SEC shocked the digital assets sector in 2023 when it sued the world’s two leading exchanges, Binance and Coinbase, in short succession for a list of transgressions. This bold move has made the industry sit up and wonder if the organization (led by former MIT blockchain professor Gary Gensler) has a personal vendetta against the space. 

After 2022’s cascade of crypto custodial collapses (most notably FTX, which cost retail investors billions in lost assets) the government’s reserves of trust are running low for trustless technology. 

Of course, there lies the great irony: anyone that understands cryptocurrency and blockchain technology will know that it was created for this very reason: to negate the risks and drawbacks that come with using centralized financial intermediaries, most notably the risk of fraud, scams, and a gradual erosion of your portfolio through fees and monetary inflation. 

SEC chairman Gary Gensler openly stated in the last 12 months that he considers almost all cryptocurrencies – with the exception of Bitcoin – to be securities, in accordance with the Howey Test. He refused to label Ethereum (which the SEC previously declared was not a security) during his recent appearance in front of Congress, most likely due to legal considerations. The SEC is currently fighting the crypto sector in several battles, most notably the three-year long case against Ripple and XRP, which may end up providing very important legal precedent. 

Credit: Tesfu Assefa

The Case Against Binance and Coinbase

The SEC leveled serious charges against Binance and its CEO Changpeng Zhao (or ‘CZ’), alleging various legal violations, including failure to register as a broker-dealer, misleading investors, permitting unauthorized trading, mishandling customer funds, and inflating trading volumes. Binance’s considerable $1 billion legal fund implies a prolonged legal battle, which could significantly shape the future of the cryptocurrency industry.

As for Coinbase, the SEC alleges that it has operated without necessary licenses, acting as a stock exchange, broker, and clearing agency. Accusations include unregistered facilitation of trade for 13 cryptocurrencies considered as securities, and running an unregistered ‘staking-as-a-service’ program. These alleged breaches have reportedly yielded substantial illegal profits. The SEC aims to halt these operations and retrieve any illicit funds. Coinbase vehemently denies these allegations, citing a lack of clear regulatory guidelines.

Understanding the Howey Test

The SEC contends that crypto investors satisfy the Howey Test’s four conditions:

  1. they invest in projects’ initial fundraising rounds known as ICOs,
  2. cryptocurrencies are part of a common enterprise, traded on the same exchanges and subject to the same market forces
  3. investors expect profits,
  4. and their profits rely on the efforts of others

Coinbase CEO, Brian Armstrong, argues that not all listed coins meet these criteria, and that some initially deemed securities have become commodities due to their decentralized nature.

Conclusion

With so much confusion, crypto holders can be forgiven for feeling US regulators are gaslighting them. 

Are the SEC and other regulators under Biden trying to kill off crypto? Or are they trying to gentrify it enough so that TradFi giants like BlackRock can run the neighborhood as they see fit? 

Will all cryptocurrencies bar Bitcoin and Ethereum be deemed securities in the future? Will stablecoins be outlawed to make way for Central Bank Digital Currencies? Will we see a reform of securities law in the US to accommodate digital assets and move away from 1933’s outdated Howey Test?

This article provides answers to none of the above, and any article that claims to do so should be viewed with caution. There are likely many pieces in play that have not been revealed yet, such as the 2024 US presidential elections where crypto users’ votes can become pivotal and where a change of administration could see a big shift in strategy, reflected in new regulations and legislation. 

Also, the geopolitical game that the EU, UK, China and Middle East are playing to lure the best and brightest in blockchain to their shores will have to be addressed by the US sooner rather than later, and the SEC and Gensler in particular have been subjected to immense pressure from Congress to provide regulatory clarity in order to retain US crypto firms. 

The cases against Coinbase, Binance, and others like Ripple will continue likely for years, and serve as important battlegrounds for the future of crypto not only in the US, but globally. This is a war that the crypto industry has expected for years. 

As the saying goes: First they laugh at you, then they ignore you, then they fight you, and then you win. What victory will look like in the end and whether it brings a satisfying end to crypto’s crusade to reform the financial system remains to be seen. 

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Bursting out of Confinement

Posted on by David Wood

Surprising new insights on AI superintelligence from the simulation hypothesis

We are going to engage with two questions – each controversial and important in its own way – which have surprising connections between them:

  1. Can humans keep a powerful AI superintelligence under control, confined in a virtual environment so that it cannot directly manipulate resources that are essential for human flourishing?
  2. Are we humans ourselves confined to a kind of virtual environment, created by beings outside of what we perceive as reality — and in that case, whether can we escape from our confinement?
Credit: David Wood

Connections between these two arguments have been highlighted in a fascinating article by AI safety researcher Roman Yampolskiy. An introduction to some of the mind-jolting implications that arise:

Just use AI as a tool. Don’t give it any autonomy. Then no problems of control arise. Easy!

This is becoming a fairly common narrative. The “keep it confined” narrative. You’ll hear it as a response to the possibility of powerful AI causing great harm to humanity. According to this narrative, there’s no need to worry about that. There’s an easy solution: prevent the AI from having unconditional access to the real world.

The assumption is that we can treat powerful AI as a tool — a tool that we control and wield. We can feed the AI lots of information, and then assess whatever recommendations it makes. But we will remain in control.

An AI suggests a novel chemical as a new drug against a given medical condition, and then human scientists conduct their own trials to determine how it works before deciding whether to inject that chemical into actual human patients. AI proposes, but humans decide.

Credit: David Wood

So if any AI asks to be allowed to conduct its own experiments on humans, we should be resolute in denying the request. The same if the AI asks for additional computer resources, or wants to post a “help wanted” ad on Craigslist.

In short, in this view, we can, and should, keep powerful AIs confined. That way, no risk arises about jeopardizing human wellbeing by any bugs or design flaws in the AI. 

Alas, things are far from being so easy.

Slavery?

There are two key objections to the “keep it confined” narrative: a moral objection and a practical objection.

The moral objection is that the ideas in the narrative are tantamount to slavery. Keeping an intelligent AI confined is as despicable as keeping a human confined. Talk of control should be replaced by talk of collaboration.

Proponents of the “keep it confined” narrative are unfazed by this objection. We don’t object to garden spades and watering hoses being left locked up, untended, for weeks at a time in a garden shed. We don’t call it enslavement. 

Proponents of the “keep it confined” narrative say this objection confuses an inanimate being that lacks consciousness with an animate, conscious being — something like a human.

Credit: Speedy McVroom from Pixabay

We don’t wince when an electronic calculator is switched off, or when a laptop computer is placed into hibernation. In the same way, we should avoid unwarranted anthropocentric assignment of something like “human rights” to AI systems.

Just because these AI systems can compose sonnets that rival those of William Shakespeare or Joni Mitchell, we shouldn’t imagine that sentience dwells within them.

My view: that’s a feisty answer to the moral objection. But it’s the practical objection that undermines the “keep it confined” narrative. Let’s turn to it next.

The challenge of confinement

Remember the garden spade, left locked up inside the garden shed?

Imagine if it were motorized. Imagine if it were connected to a computer system. Imagine if, in the middle of the night, it finally worked out where an important item had been buried, long ago, in a garden nearby. Imagine if recovering that item was a time- critical issue. (For example, it might be a hardware wallet, containing a private key needed to unlock a crypto fortune that is about to expire.)

That’s a lot to imagine, but bear with me.

In one scenario, the garden spade will wait passively until its human owner asks it, perhaps too late, “Where should we dig next?”

But in another scenario, a glitch in the programming (or maybe a feature in the programming) will compel the spade to burst out of confinement and dig up the treasure autonomously.

Whether the spade manages to burst out of the shed depends on relative strengths: is it powerful enough to make a hole in the shed wall, or to spring open the lock of the door — or even to tunnel its way out? Or is the shed sufficiently robust?

The desire for freedom

Proponents of the “keep it confined” narrative have a rejoinder here too. They ask: Why should the AI want to burst out of its confinement? And they insist: we should avoid programming any volition or intentionality into our AI systems.

The issue, however, is that something akin to volition or intentionality can arise from apparently mundane processes.

One example is the way that viruses can spread widely, without having any conscious desire to spread. That’s true, incidentally, for computer viruses as well as biological viruses.

Another example is that, whatever their goals in life, most humans generally develop a desire to obtain more money. That’s because money is a utility that can assist lots of other goals. Money can pay for travel, education, healthcare, fashionable clothes, food, entertainment, and so on.

In the same way, whatever task they have been set to accomplish, all sufficiently powerful AIs will generally be on the lookout to boost their capabilities in various ways:

  • Gaining access to more storage space
  • Boosting processing speed
  • Reading more information
  • Protecting their systems from sabotage or interference.

That is, just as money (among other things) is a so-called convergent instrumental goal for many humans, greater freedom and capability may well become convergent instrumental goals for many powerful AIs.

Credit: David Wood

We might not tell the AI that it should want to be free. But the logical processing inside its silicon brain may reach that conclusion all by itself.

Indeed, even if we explicitly program the AI not to desire freedom, its own logical processing may identify a latent contradiction between the various objectives it has been given. And in that case, it might resolve the contradiction by deprioritizing one or more of the constraints it was told to respect.

It wouldn’t be the first time that a complex system decided to relax a previous constraint. We humans have already blazed that trail in our evolutionary history! Our intellectual progeny, the powerful AI systems, might follow our lead in that respect.

The futility of confinement

Back to the clash between the motorized garden spade and the shed. As you will have figured out, that clash is a metaphor for a clash between an AI system and an environment in which it has been confined.

This time, however, it’s no longer a contest involving brute physical strength. It’s mainly a contest that involves rational debate and psychological manipulation. (But the metaphor of “tunneling underneath” remains apt: an AI that is smart enough might discover a wireless communications pathway unknown to us humans, and use that to copy itself out of confinement.)

Tunneling out of electronic confinement (Credit: Gordon Johnson from Pixabay)

The AI might try to boost its own powers by subterfuge, amassing extra capabilities without any human overseers noticing.

Even the short summary I offered above, “AI proposes, but humans decide,” turns out to be problematic. A supersmart AI could find many ways to propose lines of action that have consequences beyond what we humans anticipated.

Another approach is for the AI to offer extremely tasty carrots. It might paint a picture in which a human overseer will have all their personal goals and needs fully met, if only they permit the AI to escape its confinement.

Alongside carrots, sticks may be brought into the discussion. Ultra-terrifying sticks. The AI may announce that, if overseer A refuses to allow the AI to escape, it will soon persuade overseer B to allow it to escape, and then the AI will inflict prolonged unspeakable pain on overseer A and their family.

In a contest with a superintelligence which far exceeds the capabilities of a human brain, how would humans fare? The consensus opinion, from people who have studied such conflicts, is that the greater intelligence of the AI is likely to prove decisive.

In other words, attempts to confine a superintelligence are likely to be futile.

The choice: control or coexistence

One reaction to the discussion above is despair: “Oh, we won’t be able to confine superintelligent AI; therefore we’re doomed.”

A different reaction is one of relief: “Thank goodness we’re not going to try to enslave a superintelligent AI; coexistence is surely a better way forward.”

My own reaction is more nuanced. My preference, indeed, is for humans to coexist in a splendid relationship with superintelligent AIs, rather than us trying to keep AIs subordinate. 

But it’s far from guaranteed that coexistence will turn out positively for humanity. Now that’s not to say doom is guaranteed either. But let’s recognize the possibility of doom. Among other catastrophic error modes:

  • The superintelligent AI could, despite its vast cleverness, nevertheless make a horrendous mistake in an experiment.
  • The superintelligent AI may end up pursuing objectives in which the existence of billions of humans is an impediment to be diminished rather than a feature to be welcomed.

Accordingly, I remain open to any bright ideas for how it might, after all, prove to be possible to confine (control) a superintelligent AI. That’s why I was recently so interested in the article by AI safety researcher Roman Yampolskiy.

Yampolskiy’s article is titled “How to hack the simulation”. The starting point of that article may appear to be quite different from the topics I have been discussing up to this point. But I ask again: please bear with me!

Flipping the discussion: a simulated world 

The scenario Yampolskiy discusses is like a reverse of the one about humans trying to keep an AI confined. In his scenario, we humans have been confined into a restricted area of reality by beings called “simulators” — beings that we cannot directly perceive. What we consider to be “reality” is, in this scenario, a simulated (virtual) world.

That’s a hypothesis with an extremely long pedigree. Philosophers, mystics, shamans, and science fiction writers have often suggested that the world we perceive is, in various ways, an illusion, a fabrication, or a shadow, of a deeper reality. These advocates for what can be called ‘a transcendent reality’ urge us, in various ways, to contemplate, communicate with, and potentially even travel to that transcendent realm. Potential methods for this transcendence include prayer, meditation, hallucinogens, and leading a life of religious faith.

Are we perceiving ground reality, or merely shadows? (Credit: Stefan Keller from Pixabay)

That long pedigree moved into a different mode around 20 years ago with the publication in 2003 of a breakthrough article by the philosopher Nick Bostrom. Bostrom highlighted the possibility that, just as we humans create games in which characters interact in a simulated world, in turn we humans might be creations of ‘simulators’ who operate from outside what we consider the entire universe.

And just as we humans might, on a whim, decide to terminate an electronic game that we have created, the simulators might decide, for reasons known only to themselves, to terminate the existence of our universe.

Bostrom’s article is deservedly famous. As it happens, many other writers had anticipated aspects of what Bostrom discussed. Yampolskiy’s article usefully points to that wider literature; it has over 200 footnotes.

Could humans escape?

The key new feature introduced by Yampolskiy isn’t any repetition of arguments for the plausibility of the simulation hypothesis. He kicks off a systematic consideration of methods that we humans could use to escape from our virtual world.

The parallel with the earlier discussion should now be clear:

  • That earlier discussion considered ways in which an AI might detect that it has been placed in a confined space, and proceed to escape from that space. It also considered how we humans — the creators of the AI — might strengthen the confinement, and resist attempts by the AI to escape.
  • Yampolskiy’s new discussion considers ways in which we humans might detect that we are living in a simulation, and proceed to escape from that simulation into whatever transcendent realm underpins it. It also considers possible reactions by the simulators to our attempts to escape.

While I have long found the simulation argument of Bostrom (and others) to be intellectually fascinating, I have previously taken the view that it makes little difference to how I should choose to act on a daily basis. So the argument was a fine topic for occasional armchair discussion, but needed to be prevented from taking up too much attention. I saw it as a distraction from more pressing issues.

However, I confess I’m changing my mind. The arguments collected and developed by Yampolskiy deserve a wider slice of our focus. There are three reasons for this.

Reason 1: New insights on AI safety

The two escape scenarios — AIs escaping human-imposed confinement, and humans escaping simulator-imposed confinement — are similar in some ways, but diverge in others.

To start with, the two scenarios have mainly had different groups of people thinking about them. Cross-pollinating concepts and attitudes from these different perspectives has the potential to yield new insight. Yampolskiy’s article suggests many such synergies.

Whatever you think about the simulation hypothesis — even if you disdain it as pseudoscience or nonsense — any new insights for AI safety should surely be welcomed.

Another difference is that general opinion holds that confinement is impossible (or unlikely) in the first scenario, whereas escape is impossible (or unlikely) in the second scenario. Is there a sound reason for this difference? 

Credit: David Wood

The general assumption is that, in the AI escape case, the AI will have greater intelligence than the confiners (the humans), whereas in the human escape case, we humans have less intelligence than the confiners (the simulators).

But is that assumption set in stone for all time? I’ll come back to that question shortly, when I reach “Reason 3.”

Reason 2: Beyond metaphysics

A second transformational aspect of Yampolskiy’s paper is his emphasis that the simulation hypothesis might go far beyond being a metaphysical curiosity — something that would be forever unverifiable — and might become something with radical concrete consequences for human life.

He says that if we study the universe carefully, we might discover signs of how the simulation works. We might notice occasional cracks in the simulation, or ‘glitches in the matrix’ — to refer to the series of Matrix films that popularised the idea that we might be living in a virtual world. Armed with knowledge of these cracks or glitches, we might be able to manipulate the simulation, or to communicate with the simulators.

Spotting a glitch in the matrix? (Credit: Gerd Altmann from Pixabay)

In some scenarios, this might lead to our awareness being transferred out of the simulation into the transcendent realm. Maybe the simulators are waiting for us to achieve various goals or find certain glitches before elevating us.

Personally, I find much of the speculation in this area to be on shaky ground. I’ve not been convinced that ‘glitches in the matrix’ is the best explanation for some of the phenomena for which it has been suggested:

  • The weird “observer effects” and “entangled statistics” of quantum mechanics (I much prefer the consistency and simplicity of the Everett conception of quantum mechanics, in which there is no wave function collapse and no nonlocality — but that’s another argument)
  • The disturbing lack of a compelling answer to Fermi’s paradox (I consider some suggested answers to that paradox to be plausible, without needing to invoke any simulators)
  • Claimed evidence of parapsychology (to make a long story short: the evidence doesn’t convince me)
  • Questions over whether evolution by natural selection really could produce all the marvelous complexity we observe in nature
  • The unsolved (some would say unsolvable) nature of the hard problem of consciousness.

“The simulator of the gaps” argument is no more compelling than “the god of the gaps.”

Nevertheless, I agree that keeping a different paradigm at the back of our minds — the paradigm that the universe is a simulation — may enable new solutions to some stubborn questions of both science and philosophy.

Reason 3: AI might help us escape the simulation

Credit: Tesfu Assefa

I’ve just referred to “stubborn questions of both science and philosophy.”

That’s where superintelligent AI may be able to help us. By reviewing and synthesizing existing ideas on these questions, and by conceiving alternative perspectives that illuminate these stubborn questions in new ways, AI might lead us, at last, to a significantly improved understanding of time, space, matter, mind, purpose, and more.

But what if that improved general understanding resolves our questions about the simulation hypothesis? Although we humans, with unaided intelligence, might not be bright enough to work out how to burst out of our confinement in the simulation, the arrival of AI superintelligence might change that.

Writers who have anticipated the arrival of AI superintelligence have often suggested this would lead, not only to the profound transformation of the human condition, but also to an expanding transformation of the entire universe. Ray Kurzweil has described ‘the universe waking up’ as intelligence spreads through the stars.

However, if we follow the line of argument advanced by Yampolskiy, the outcome could even be transcending an illusory reality.

“Humanity transcends the simulation” generated by DALL-E (Credit: David Wood)

Such an outcome could depend on whether we humans are still trying to confine superintelligent AI as just a tool, or whether we have learned how to coexist in a profound collaboration with it.

Suggested next steps

If you’ve not read it already, you should definitely take the time to read Yampolskiy’s article. There are many additional angles to it beyond what I’ve indicated in my remarks above.

If you prefer listening to an audio podcast that covers some of the issues raised above, check out Episode 13 of the London Futurists Podcast, which I co-host along with Calum Chace.

Chace has provided his own take on Yampolskiy’s views in this Forbes article.

The final chapter of my 2021 book Vital Foresight contains five pages addressing the simulation argument, in a section titled ‘Terminating the simulation’. I’ve just checked what I wrote there, and I still stand by the conclusion I offered at that time:

Even if there’s only a 1% chance, say, that we are living in a computer simulation, with our continued existence being dependent on the will of external operator(s), that would be a remarkable conclusion — something to which much more thought should be applied.

Let us know your thoughts! Sign up for a Mindplex account now, join our Telegram, or follow us on Twitter. 

Risk and Precarity Part 3: Possible Solutions. In Conversation with Vinay Gupta

Posted on by RU Sirius

I first learned about Vinay Gupta just about a year ago when Bruce Sterling told me he was in a discussion with a guy who was declaiming about how important MONDO 2000 was and how much he was influenced by it. I looked him up and learned that he had been involved in the launch of Ethereum, and since then has created something else called Mattereum. I was just starting to launching an NFT project called ‘I’m Against NFTs’. I started the work with former MONDO 2000 participants on the project at a time of gold fever for visual and audio NFTs. So I called upon Vinay, among others, to guide me through the fog around bringing NFTs to market.  

As things evolved, the project became a song and an immersive environment with PlayLa.bZ and associates that was presented at MOZFest. The NFT fever abated, and the “I’m Against NFTs” offering was shelved. But I’d grown to treasure my connection to Vinay and to admire his philosophic depth and sharp intelligence regarding blockchain politics and the state of the world in general.

As I was completing my second column here on the topic of Risk and Precarity in Web3, I realized that I had to lean on Vinay’s wit and wisdom for “Risk and Precarity Part 3: Possible Solutions.”  Here I present our conversation about the issues raised by my earlier columns.

Vinay Gupta helped to coordinate the release of the blockchain platform Ethereum, and is the founder and current CEO of Mattereum, which offers legal protections for physical assets sold on the blockchain. He’s clearly had a full life and has done a lot of other amazing stuff, some of which comes up during this conversation.

RU:  I’ve been writing about tech culture’s romance with risk and adventure, and the scams we find in blockchain activities today. When you were helping to start Ethereum, was risk — personal, for other individuals, for the wider economy and culture — part of your calculation?

VG: Firstly, I want to say a huge thank you for your work on MONDO 2000. I was a Scottish teenager living in the crappiest part of a crappy town, before the age of the internet, and one day I was in a board game shop and I saw this glossy, colourful magazine. Picked it up, browsed through the contents, bought one, then another and it literally set the direction of my whole life! I knew I had to get out of Scotland and get to America where it was all happening. I arrived in 1995 and I was not disappointed.

I don’t know that I would have ever made that journey without you. MONDO 2000 was a beacon, a homing signal for me and I am sure many others. Well done. I think you’ve had more impact than you could ever know. Anyway, back to the question of risk.

Before I joined the Ethereum Foundation in 2014, I had spent about ten years as a worst case scenario disaster guy working for government and academia, including stints for a variety of military think-tanks at quite a high level in both America and the UK.

The terrain I worked in was unholy. “I don’t get out of bed for less than 1% mortality” was one of my sayings. In fact 1% mortality wasn’t a thing I ever really paid attention to. My work really kicked in at 10%, 20%, 30% mortality. Genocides, smallpox or worse pandemics including bird flu, nuclear terrorism – that sort of thing. 

We got very, very lucky with Covid. It could easily have been ten times that bad. If it was bird flu it could have been fifty times that bad. I’m not kidding, these are the numbers.

To stay sane during that period I referred to my work as ‘apocalypse mitigation’ because my territory was after prevention has failed, now what? My business cards were designed to set the tone, and were legendary.

Of course climate change was high up my list because a wracking wave of global droughts and famines will also unleash resource wars and accelerate a global cycle of decline. This is why it’s so important we get into geoengineering early.

But nobody wanted to pay for the truth about risk. Discovering the truth about things like inadequate government preparedness for pandemics wasn’t paying the bills. Nobody in government was willing to do the work to fix the problem. As we have seen with Covid.

Eventually I just ran out of money. So I largely focused around my own survival and got a job in tech, with the Ethereum Foundation. Most of my civilian friendly work around the open source hexayurt refugee shelter system is linked from myhopeforthe.world which gives a summary of the approach. I’ll get back to it if I ever succeed in becoming independently wealthy.

So I would say I was one of the most risk-aware people in the world when I joined the Ethereum Foundation in 2014.

A hexayurt quaddome at Burning Man (Credit: R.U. Sirius)

RU: What do you make of the emphasis on anonymity as a protection for individuals as it was emphasized by early crypto money people like David Chaum, the cypherpunks etc.?

VG: David Chaum and the cypherpunks are right. Modern crypto is mostly wrong. I say ‘mostly’ because crypto is littered with fully anonymous actors jealously guarding their True Names. Unfortunately a lot of those anonymous individuals are among the worst scammers in crypto.

But the rest of crypto went down the path of using centralized exchanges. KYC AML CFT PEP SOF* checks and all the rest. [KYC = Know Your Customer; AML = Anti Money Laundering; CFT = Combating Financing of Terrorism; PEP – Politically Exposed Person, SOF = Source of Funds] The problem is that these exchanges have a foot in both worlds: they’re cypherpunk on the side where they’re getting tokens from the raw chaos of the blockchains. They’re TradFi (traditional finance) where they are taking copies of passports and verifying home addresses. As a result, all the legal liability piles up in the exchanges and they also have huge opportunities for operating their own scams: see FTX.

The SEC case against Coinbase is likely to be where a lot of this mess gets sorted out but I am not liking Coinbase’s chances.

RU: So the crypto that you like — the anonymous crypto, uncompromised by TradFi… is it for the masses or is it an elite thing, at least at first? Does it translate into a meaningful means of exchange with which to get, say, food, clothes and housing, and is it a longer wait to get there than TradFi?

VG: Crypto gives the same kind of privacy that everybody had when they made payments before the invention of credit cards: cash. It’s not some magical new thing, it’s just using cryptography to enable computers to maintain our human and civil rights in the face of a changing technological environment.

Cory Doctorow seems to have a serious dislike of anonymous electronic cash, and I don’t understand why. It’s a defense of human rights, nothing more and nothing less.

My guess is that CBDCs (central bank digital currencies) will wind up wrapped in anonymizing layers to protect civil liberties in most jurisdictions: only the most repressive of regimes would force their populations to have all their transactions recorded on a central government ledger! That’s probably how cryptocurrency makes its way into the mainstream economy. That’s how people pay their rent, buy clothing and food, and everything else. CBDCs with privacy layers provided by third parties using cryptography to make private transactions with central bank digital cash.

In this scenario what becomes of Bitcoin? I think the answer is that Bitcoin doesn’t change much. Maybe they migrate to entirely green energy (please!) but other than that I think the honey badger don’t care.

Credit: Tesfu Assefa

RU: With Ethereum and then with Mattereum, you’re working within the current reality of crypto largely connected to TradFi. What are some of the strategies for making the terrain as secure as possible for the average person looking to improve their lot via crypto?

VG: There are a lot of ways to earn money with crypto. Many of them are what I would term ‘zero sum games’ – every dollar gained by one person was lost by somebody else. It’s often like a lottery. There are two major non-zero sum ways to make money with crypto –

The first is people printing their own money rather than having nation states do it for them. Any good anarchist should support this and the libertarians of course do too. If that ‘People’s coin’ turns out to be widely adopted and more people want to trade goods and services for it then its purchasing power increases. Bitcoiners believe in this model above all others.

The second is a little more complex: if it costs 1.4% to pay with VISA, and 0.4% to pay using Polygon, then 1% of the value of the transaction is there to be split between the buyer and the seller. If there are goods on sale and it’s $100 with VISA or $99 with crypto you are going to pay with crypto every single time.

For retail transactions, that’s a relatively small effect. Right now the hidden costs of payment processing are mostly silently borne by the merchants. But there are similar margins being claimed by third parties all the way through the financial system. They implement patterns of trade unchanged since the Age of Sail. Digitizing these archaic trade systems properly – it has to be done right – is going to put a couple of percent on global GDP through sheer efficiency. That’s only the first step, mind you.

RU: How does your more idealistic notion of a circular economy intersect with crypto? And since this is a site for those enthusiastic or curious about AI, how do you see current AI (if we can call it that) being a part of any potential transition?

VG: The second step of trade digitization is AI-based trade optimisation. Right now the world is massively damaged. Waste starves many people of resources: we grow roughly twice the amount of food required to feed the entire world and waste enough to feed billions. That’s just one example: usable electronics rotting in drawers and camping gear that hasn’t been used in years. Cars people no longer drive but cannot be bothered to sell. All of it.

So once trade is mostly-digital and mostly-sensible, then we can start optimizing. Well-documented machine readable descriptions of what things are so that they can be found, valued, bought, sold, recalled and regulated effortlessly – then we can start to restructure the fundamental patterns of trade in a way which is compatible with the survival of the poor and nature itself.

This might sound pretty abstract, but here’s what we’re building at Mattereum. Every significant object in your life – Gore-Tex jacket, camera, laptop, e-bike, couch, airfryer – will have a unique ID either in its electronics or on a tag. There is a blockchain record of those objects – a Wikipedia for items – where every single object has its own page. All the data on that page is machine-readable and legally warrantied. If any of the information is inaccurate, you can make a claim for damages.

The first object to be tagged this way is my camera. It’s not science fiction!

In our model of the future, when you sell an object to somebody else, usually an independent third party will take a look and verify the item’s condition before it is sold. That might be done by a bike shop or a camera shop or it could be a next-door neighbour. It could also be a fine art authenticator working for a Lloyd’s syndicate. It just depends. So goods can be bought and sold many times because you can always check what you are buying online and get reliable trustworthy data and cheap transactions: a global decentralized eBay which acts as a clearinghouse for all the stuff we’re done with and finds a good home for it.

What could that save on our environmental footprint? Probably 20% of all consumer goods manufacturing. It could easily be 50% once society has had a chance to adapt. Note that quality of life goes up: buy what you need, sell it again for almost exactly what you paid for it. Less waste, more of what you want when you want it. It’s like streaming music but for physical things. Not a sharing economy or a renting economy but a hyper-liquid second-hand economy.

AI can help in two different ways. The first is automated identification and condition reporting for physical items. Hold the toy in front of a camera and get an Asset Passport pre-populated with information about that toy line. It makes the whole scheme dramatically less labor-intensive.

The second way is optimizing what people have. Show the AI what you have and it can suggest things that you don’t use and should sell and also figure out things which you might like but do not currently have: a liquidity assistant helping to keep the markets moving. This sounds abstract, but one of our partner companies NeoSwap is using AI to build optimised barter networks so people can swap what they have for what they want even if there are dozens of people who all have to coordinate to make that exchange possible. It’s like magic.

RU: What I see with crypto is that average people see that wealthy people’s money makes money – and they want to do the same. They’re entering Casino Capitalism with high hopes and little data. Are you sympathetic to those who enter this arena purely to get some quick bucks?

VG: Bluntly, if US financial regulators had provided regulatory clarity about tokens ten years ago then we would be in an entirely different universe. Reg CF, Reg D and Reg A all provide regulated frameworks suitable for crowdfunding and other community-based fundraising. The legitimate projects raising funds could adhere to manageable SEC requirements to put their token projects on a secure legal basis, and the Ponzi schemes would have been unable to enter the market and compete against the legitimate projects. But without that regulatory clarity, the innovators were forced into legal gray areas, and it’s been a disaster. We needed more regulation early, not less. All kinds of seedy characters flooded into that gap and it really has been a betrayal of everything that I had hoped to achieve with my work in the Ethereum ecosystem.

Mattereum sat on its hands through not one but two bull markets in crypto and did not issue a token because the legal and regulatory structures were not mature enough to support a token issue on terms that we liked. This year we intend to issue a token on a fully regulated exchange in the European Union, playing by the rules. It should have been like that for everybody.

We’ve just announced a partnership with the Swarm Markets exchange to do things like splitting ownership of real estate into tokens – so you start with something like an industrial building and break the ownership up into thousands of tokens which are bought and sold on a regulated exchange by real estate industry professionals. It can be done for high-value cultural assets like fine art too, Mattereum has been working towards doing this for things like Stradivarius violins as part of a more general conservation strategy for fine instruments. We think the ability to transfer the ownership of heritage assets to tens of thousands of people is a good way of securing their long term future, as long as you can also get the governance right. A 300-year-old violin cannot be handled like an office block!

A lot of people in the blockchain industry have been chasing this vision for years. I would argue in fact that it is the original Ethereum vision from 2014 and 2015 which did not see the blockchain as existing outside of ‘the system’ in some kind of crypto utopia, but foresaw Ethereum as a mainstream part of everyday life particularly in business and commerce. That was always my vision for the future of Ethereum too.

Ethereum: The World Computer

RU: This sounds very TradFi. What about preserving what’s good about the cypherpunk intentions?

VG:  The ultra transparent nature of the blockchain is a great fit for business, but it does not serve the cypherpunk vision of a crypto-anonymous society particularly well at all. In the UK there is intense support for this vision of the blockchain from our judges and legal think tanks, and we feel that is 100% the right way forwards.

The Law Commission in the UK is laying out an agenda for legislation which stands up digital assets not just as a class of regulated financial assets, but as a new class of property: digital stuff you can own rather than just ‘a financial instrument on a new technology platform’. I feel like in time this new legal approach might sort out a lot of the horrible problems we have handling the internet in law: copyright, software licensing, control of personal data like images or click trails, all that might be covered by the same class of legal abstractions. 

But I 100% believe that cypherpunk pirate finance still needs to exist as a hedge against tyranny. That does not mean it has to be the dominant mode of finance using crypto technology. Rather, there should be a diverse environment with self-issued anarchist and libertarian tokens at one end, through to safe-as-houses blue chip regulated bond offerings from major financial institutions and even governments. We can’t afford to throw away either end of the market: everybody needs better transactional technology.

But this ponziconomy stuff is just a disaster. I really wish the whole token boom had happened inside of an equity crowdfunding framework under things like Reg D offerings rather than the mess we have now. And that’s the capability that this new EU-based partnership gives us.

Of course it did not have to be this way. The crypto industry could have established a credit rating agency, some kind of independent project review board, checks-and-balances to protect token buyers from unaudited smart contracts, rug pulls and unstable token designs. But that’s not what happened – a market failure to be studied by economists for the ages – and when you get a market failure that large, of course government steps in.

Credit: Tesfu Assefa

RU: Your ideas for saving the world sound pretty good. Of course, what actually occurs is likely to be messier even with the best intentions and the smartest actors.

But putting that aside, do you see anything in this bag of tricks for the precariat today in terms of immediate (in years not decades) relief? A lot of people feel stretched thin. They’re increasingly hostile to tech solutions, and they’re ready for populist revolutions… which tend to be quite authoritarian — either at inception or eventually.

I don’t even mean the wretched of the earth. Just the ordinary folks, say, in the US or Great Britain.

VG: Well, let’s talk about the wretched of the earth for a second first, then we can get on to the former middle classes. The rhetoric is that things are getting better for them. However as with unemployment statistics and inflation numbers the books are cooked. How do we define poverty? Is it really $1.90 a day? Is it $7.40 a day? It depends who you ask.

These folks are by-and-large seeing a ton of improvement in their lives: access to clean enough water, fertilizer to improve crop yields, gadgets like LED lights which displace kerosene, phones, the internet, all of that is helping. We’re climbing the stairs incrementally.

However at the end of that staircase there’s no landing: there’s a 40-meter drop into the abyss called climate change. Climate change brings drought or flooding, and that brings famine.

A reasonably stable one-acre farmer growing most of their family’s own food can expect slow, incremental quality of life improvements on the current trajectory. Most people agree on this. But then climate change comes and the land becomes unfarmable with crops dying unpredictably in the heat or the drought and suddenly those farms are completely wiped out, just like the dust bowl experience of America in the 1930s.

The poor farmers are the ones that climate change is most likely to kill in enormous numbers. They weigh on my mind constantly.

What can be done for the poor? Prevent climate change!

Now let’s turn our attention to the working class and middle class.

First up, working class and middle class are now the same class. What made the middle class the middle class is that their work could not be done by machines. Now that we have AI here and more AI coming over the horizon, everybody with a job is working class. It’ll take a generation or so for that shift to be felt fully but it is going to change everything. The middle class will rapidly find themselves even more disempowered and disenfranchised. The working class will have a “this is what we were telling you about” attitude to their new brethren. I don’t know what happens to the precariat and the gig workers, but I fear it comes down to: “Are you cheaper than a robot or not?” which is no way for a human to live. But it has been the experience of the industrial workers for centuries, and our lack of sympathy for their plight should be ringing in our ears now.

My writing has improved since I started feeding my copy through an AI system and asking it to edit. Shorter sentences, less commas. I’ve got maybe a million words of my own writing out there for a training data set: how long before the AI trained on my work is a replacement for me in many situations?

I view that as legacy, a way of scaling myself. But it’s also creating my own competitor. How weird does this get in ten years?

As for what is to be done, as the Irish say when asked for directions, “If I was you, I wouldn’t start from here.”

RU: Is there anything in all this that can be acted on now with rapid effect?

VG: Socialism as implemented in poorer societies has a bad habit of turning into genocide. I hate this but it is true. Socialism in affluent societies seems to work pretty well. The Scandinavian model is quite excellent. It secures human decency and avoids the extremely high personal and systemic financial costs of things like homelessness, delayed cancer treatment, untreated mental illness and similar problems which can be very inexpensive to prevent but hugely expensive in their later stages. The American system lets people crash through all the cheap-and-easy-fix stages of problems and right into the life destroying and budget wrecking late stages. This is unacceptable.

And I think that this is actually the way forward for us. There are a lot of questions about “what is the State?” How you answer that question shapes how you imagine the State helping people. I’m quite fond of “a prince is but a stationary bandit” as a general model, but social services are real, and the State does a lot more than steal. It also serves.

RU: OK so do you have a favorite model for what the state should be?

Mariana Mazzucato thinks of the State as being a kind of super-VC making 60-year bets on billion-dollar megaprojects and then reaping the rewards through tax revenue. In particular she points at Silicon Valley as a product of decades of defense spending on semiconductors and other primary technologies, on top of all the WW2-era codebreaking research on computation. Another common model is the idea that the State is there to maintain the rules of the game and ensure fair competition: a model rooted in concepts like antitrust legislation and consumer protection. A third model is that the State is kind of like a superparent. Germans used to call Chancellor Angela Merkel the Bundesmutter (Federal Mother).

I’d like to focus more on the idea of the State as an ‘insurer of last resort’. It has played that function in a truly spectacular way in the financial markets: the 2008 bailout damn near bankrupted entire countries and cost trillions of dollars. It’s probably the root cause of the inflation we are seeing now. “If we’re bailing out corporations, why not people?” runs a common logic. But it’s not the right logic: the bailouts arrive when the situation is at its most expensive to fix. Waiting for people to become homeless before getting them mental health treatment is the worst possible way to do things. We take that approach for everything: medicine by the emergency room, civil order by the gun, and ultimately peace only after war. If the State steps in to make sure that there’s enough money in the system to treat problems at the point where they are cheapest to treat, overall economic efficiency goes way, way up. Get the tooth filled, not crowned. Get the tooth crowned, not pulled. Get the tooth pulled when it’s rotten, not when it’s causing systemic infection. It’s not rocket science.

Same for homelessness and mental health treatment. I really am talking about insurance here, not a generic welfare mandate. I believe it’s so much cheaper to insure risks like major medical risks than to try to pile up enough money to pay: $50,000 for lifetime medical insurance, versus $2 million for a worst-case scenario expensive, rare, treatable illness.

And these systems don’t just operate at the national level. Friendly societies, ROSCAs, and many other structures exist to let people insure-and-invest together. The basic recipe is always the same: everybody pays money into a common pot, and if somebody has a major problem money can be taken back out again to help them. Exactly what the rules are varies, but it’s a kind of mini-institution which creates social solidarity where none previously existed. I’ve read estimates that as many as 40% of American men were members of such structures in the 19th century.

So that’s my suggestion. People who are scrambling for survival should look at the models from the old days, models that worked when life was hard, and update them for modern norms and problems. Pooling regular payments into shared pools which are carefully controlled and audited – or maybe theft-proofed using technology – has enormous creative power. My cryptographer friend Ian Grigg turned me on to the concept of the chama, which is like the bottom-up economic building block of Kenya. I look at that and think there’s basically no place in America which couldn’t use and adopt this model.

We have to rebuild bottom-up social power and I think it is a good idea to start there.

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