New Money

A panel on the current and emerging trends in digital money.

Author, broadcaster and futurist Mark Pesce assembles a group of deeply experienced experts, across economics, business,s and engineering to consider the impact of the digitisation of money on society, economics, business and culture.

Web Directions Summit Day 1

While panels are rare at Web Directions, when Mark and John talked about the topic of new money they decided to have Mark assemble a panel.

NOTE: this is an exceptionally loose capture, I usually wouldn’t attempt to capture a panel at all! There is a lot of content missing as many ideas were discussed too fast to capture accurately enough to post. For best results, watch the video when it comes out on Conffab.

Mark opens with an oppropriate tale from the crypt… the Libra manifesto that “we believe in a global currency…” …but do we really believe all that?

In Australia we perhaps don’t. But we have increasingly eschewed physical money, and more people have phones than credit cards. There is a gap between what people should be able to do and what they can do.

Because Libra.

Zuck became a billionaire on social sharing. If Zuck gets sharing money right, he becomes a trillionaire.

We now have to wonder, how do we put this new money to work?

Mark hosts our panel:

  • Nicholas Gruen (NG)
  • Aimee Maree Forsstrom (AMF)
  • Damian Jeffree (DJ)
  • Samuel Brooks (SB)

Web Directions Summit Day 1

DJ: existing currencies create their own barriers. They rely on central banks people can rely on and trust. For emerging nations with smaller economies this is often not true – it’s a bad design.

Mark: What do digital currencies bring to emerging economies?

AMF: to Aussies the idea of branchless banking might seem weird, but having bank branches is a luxury. We also think of bank accounts as normal, but famously M-Pesa took off in Kenya in 2007 and is now used in ten countries and a 30m user base. It has completely changed the movement of money; and it’s believed 2% of people were lifted out of poverty just by having access to m-pesa. So imagine facebook having a currency, with two billion users. This can be very freeing to many people.

Mark: (reminder of micro and macro economics) If we’re about to get cryptocurrencies what happens?

NG: we get a microeconomic miracle worker and a macroeconomic wrecking ball. Since the internet came about we have a reordering of public and private goods. We think public good comes from the government and private from companies… but Libra is from Facebook, not a government. Changing transaction costs changes culture. In trying to make as much money as possible, which is normal business, they’re destroying our culture and politics. Media itself was already doing this, political sound bites in america had already dropped to just 8 seconds long over a few short decades. The silicon valley buzzword was “scale”. Build something, plug it into the internet and boom! scale.

Mark: (the slow speed of Bitcoin making it unsuitable for on the spot transactions)

SB: web scale largely meant scaling data transfer which was good; but it’s not so good for currency. Bitcoin isn’t just slow it’s unstable. The way Libra and others are trying to fix this is to reorganise the tradeoffs, injecting more trust so they can make things faster. 3-4 second transaction finality, not 20 minutes. Libra is also backed by relatively stable assets, so the Libra acts as a repository receipt.

Mark: so it’s doable, small countries need it, it’s technically possible… so what are the questions of design? The design of the money and the tools people will be using.

DJ: money sits at the base and financial systems build on top of that. The risk appetite is zero, things have to be secure as it is possible to make it. Also needs to be stable. You need this base to build on with an acceptable risk level.

Mark: equivalent of stuffing money in a mattress, but knowing the money will be worth the same when you pull it out.

SB: cryptocurrencies can be autonomous in nature, which probably isn’t advisable the first time we do this.

Mark: …money with bugs?

SB: yes! The decentralised governance of Bitcoin is still really an experiment, and it has largely failed – it has been forked a couple of times.

NG: you can’t trust a monetary system where people have discretion. You need rules.

AMF: there’s technical design and UI design. Without the UI adoption doesn’t work. m-pesa is quite clumsy, which is why it hasn’t taken off in countries with more stable banking systems. When we talk about blockchain basic decisions can make a massive difference, like whether you can do recursive operations. We don’t yet know how Libra will work, to that level. Those choices will make a massive difference to how things are designed on it. m-pesa is a digital currency, not a cryptocurrency; it’s not borderless but fees vary by region.

AMF: We need to think a lot about Katja’s talk about trust. Do these currencies have trust?

Mark: Zuck is really interested in all the data generated by those transactions; and this is what China’s government is interested in as well. It allows you to completely track peoples activities and it will be part of their social credit system.

Mark: we need transactions, we need ledgers.

NG: money started with tokens and ledgers…

Mark: …and you’d bake them in clay and they were immutable!

Mark: who holds the data; who accesses it; what can you learn about people from that data; and what the impacts are?

DJ: you can tell everything about people from their purchase data, it’s incredibly important to control this data.

Web Directions Summit Day 1

Mark: what controls do we need to put on this?

SB: you need to consider the privacy of the individuals; think about how data is being collected; what are the commercial sensitivities you are revealing; and what information asymmetries are being created. There are emerging privacy protection systems which may be applicable to cryptocurrencies.

Mark: so it’s theoretically possible to create a cryptocurrency that doesn’t give everything away?

SB: yes, it will always leak some information, but you can stop a lot of it.

NG: there was an argument against central administration as the central brain can’t know enough. There was another argument that we should not afford privacy to businesses, their books should be open. There are ideas that markets are good an governments are bad; but governments need to play a much more enabling role. There is a submerged city of public goods which don’t exist yet, because it costs too much to set it up. 23 And Me is the killer app here – it gives a partial analysis of your genome. The creator was from America so thought about it as a private good; but it would have been massively more valuable as a public good set up with a public/private partnership.

Mark: Facebook has announced a digital credential system will go with Libra. But that’s revokable. Presumably China’s system will be the same. So your money could suddenly be beyond reach because you don’t control your identity. Can we design systems that control identity without giving up control? Can we enable everyone to use these systems with financial safety?

SB: current cryptocurrencies make it technically possible to control your trading identity…

Mark: …but the UI is horrible. Libra makes it much easier, much sleeker. Is this the faustian bargain?

SB: interfaces are getting better. We’re getting better at balancing control and convenience.

NG: it’s long been clear the internet needs a strong identity management system. This has fallen to companies like Facebook and Google instead of governments.

Mark: do these need to be front and centre for the developing world?

AMF: one of the key things about m-pesa is it works both online and offline. You can use it in rural areas without connection. That’s something we don’t think about in Australia. Remember when we used to talk about apps needing to work offline?

Mark: that’s suddenly front of mind in California with the wildfires and blackouts.

AMF: we need to think about things that are different in other nations. Buying a pride flag may be a crime. There may not be any civil law protecting free speech. These systems could be incredibly harmful in ways we don’t think about.

Mark: will there be one currency to rule them all, or will we see lots of them? Does it mean anything to someone in Bangladesh?

DJ: One winner seems unlikely. There will be real fights on this. Imagine a small nation being offered a deal to enter the trading system of a bigger nation, via the currency. This stuff needs to come through the front door; and the Chinese government will do that. They are likely to offer deals that have plenty in them to entice the smaller nation.

Mark: what do we need to keep front of mind as we work with new money? What questions do we have to ask from people selling them?

DJ: money is power! You need to see in any monetary proposal where that power is flowing to and who holds the levers of power.

AMF: as always first and foremost we have to think of humans, and our most vulnerable humans. We have to think not just how it will affect us but how it will affect others. Governments and systems can change, so how can these systems be used against people in future as well?

NG: money is public good – that’s fundamental, but you have to operationalise that. We’ve done that to date with a central bank appointed by government and independent to some degree. There was a democracy that was fighting oligarchy, not with elections but with juries. With monetary policies that sounds crazy, but prime ministers do it – they form small groups who know about monetary systems, to inform policy. Many of Google and Facebook’s biggest political problems could be addressed if they appointed a citizen’s council; and they had a veto over new ideas.

SB: as engineers and designers we face a world with more options to provide payment solutions to our users; where we can not just transfer money but program value. It’s important for us to do our homework understanding the negative side effects of the collection of that data.

@mpesce