Stacks Cryptocurrency No Longer Treated as a US Security by Blockstack PBC

History is a pendulum. It swings back and forth between simple and complex, closed and open, centralized and decentralized. Author, futurist and engineer Daniel Jeffries sees all of history as the oscillation between these extremes.

“Everything in life exists in a state of radical transformation, whether that’s subatomic particles locked in a dance of infinite probabilities as they create and destroy the universe, that single-celled amoebae surging towards complex intelligent life, or the rise and fall of civilizations. Life is always on the move.“

And what happens if we understand this great movement of history?

“If you understand this eternal cycle, you can predict the future.”

Jeffries argued in his talk, “Decentralization and the Great Pendulum of History” during the Hong Kong stop of the Decentralizing the World Tour, that technology goes through this cycle at both the macro level – coming together and falling apart again on a large scale – as well as the micro level, which looks a lot like Kurzweil’s seven stages of technological development.

The Role of Naysayers

Even the naysayers and doomsayers of new technology play a key role in the cycle.

“They’re always there to laugh at and ridicule people who would dare to dream that tomorrow can be different than today.” But the people who imagine that technology will fail are almost always wrong and they only fuel the pioneers.

What the naysayers miss is that iterations of technology fail, but the categories of technology never do. Home Video Recording is a category of technology, while VHS, Betamax, Blu-Ray and DVR are iterations. Each iteration improves on the one before it and before you know it, people can’t live without the technology anymore.

And that means “the real purpose of the naysayers is to drive the entrepreneurs and the dreamers harder to fix those problems, so that they build the next iteration of the technology.”

De/Centralization

Both centralization and decentralization have pluses and minuses, said Jeffries. When it comes to centralized systems they often fail badly to keep data safe. “There is not a single company on earth, or government agency, that has not been hacked,” he said.

An ideal system would have characteristics of both, but right now we’re living in an extremely centralized system.

There are two solutions: Not keep data at all…which will never happen because it’s the business model for so many companies. Or, push that data out to the edges in order to make the work of hackers more difficult.

Forecasting the Future

People who are worried about A.I. taking over don’t understand that humans do abstract reasoning better than anyone else, said Jeffries. We can’t yet imagine the possibilities. “You cannot explain what a web developer is to an 18th-century farmer because it’s built on the back of dozens of different technologies from wires and electricity, computers, browsers. We can’t completely imagine all the wonderful types of applications that are going to come next.”

For more, watch Daniel Jeffries’ full presentation above or read through the transcript below. If you’re looking to attend a Blockstack event in the near future, please visit our community calendar. You can also view the other talks and presentations from Hong Kong here.

Transcript:

00:04 History is a pendulum. It swings back and forth from close to open, centralized to decentralized, simple to complex and back again. It’s an eternal cycle. Everything in life exists in a state of radical transformation, whether that’s subatomic particles locked in a dance of infinite probabilities as they create and destroy the universe, or that single-celled amoeba surging towards complex intelligent life, or the rise and fall of civilizations, life is always on the move. The only constant is change. If you understand this eternal cycle, you can predict the future. You won’t know its exact characteristics, but you know its abstract characteristics. It allows you to pinpoint where you are on the map and understand what’s coming next.

01:18 Technology also goes through this cycle at both the macro and the micro level. At the macro level, it looks a lot like coming together and falling apart, centralized to decentralized, close to open and back again. That’s why we saw Muneeb talking about the mainframe pushes out to the computer, goes back to the cloud, goes back to decentralization. But it also happens at the micro level, and it looks a lot like Kurzweil’s seven stages of technological development. Where we are with the crypto platforms is mostly in the development stage and/or the false pretender stage. So, we have a number of amazing aspects of technology, but it hasn’t reached critical mass because it still has some critical flaws.

02:09 So, out come the naysayers telling us that it’s inevitably going to fail. The naysayers are a part of the cycle as well. They’re always there to laugh at and ridicule people who would dare to dream that tomorrow can be different than today. They are there in every single stage to say this can’t be done, but the thing is, they don’t see the eternal cycle. They tend to mistake an iteration of the technology for the category of technology. Categories of technology do not fail. If you think about home video recording, that is a category of technology. Betamax, VHS, DVD, Blu-ray, DVR, are iterations of the technology. The naysayers look at the iteration Betamax and they say, “This is long enough to record a ballgame, therefore, it sucks, and it’s never going to succeed.”

03:04 It’s inevitably wrong because they’re projecting indefinitely into the future, but the real purpose of the naysayers is to drive the entrepreneurs and the dreamers harder to fix those problems so that they build the next iteration of the technology so they serve a very specific purpose. These decentralization technologies are not going away. They’re inevitable and to understand why, you just need to cast your mind back to the beginning of the Internet, and then trace its evolution up to where we are today.

03:38 The early days of the Internet were a wild and open wonderland of infinite possibilities. I’m still old enough to remember what it was like to hunt for music on tiny little FTP sites that were inevitably broken. Then, there was a consultant that came into the office and told me about this little application called Napster that always worked and you could get all this music. I thought he was crazy, but then I spent all night in the company office downloading as much music as possible on the company T1. Now, I know piracy is bad, I’m an artist myself, so I respect it, but everything has duality in life.

04:17 The innovation of a decentralized system is that every leaf node can spawn another leaf node. We can’t fully control it. Napster was the thing that pushed an old [inaudible 00:04:30] industry to innovate. It told them that we didn’t want to consume music in this way. We wanted to consume not CDs but this new form. Spotify and Apple Music and Pandora are all a direct descendant of that. That’s what a dynamic system is. If you think about the Internet itself, TCP/IP is designed to be decentralized. It was designed to withstand nuclear strikes so we could route around one part of the country just sort of disappearing, but something happened on the way to paradise. The Internet became more and more centralized.

05:06 I used to use a meta-search engine to pull from 12 different search engines. Now, I just use Google like everyone else. I do because they do a better job than everyone else, but they also now frame our view of reality. We don’t know what they’re leaving out, and there’s no competition. All of that decentralized TCP/IP has failed. All of our digital bits flow through giant communication hubs. The NSA has boxes of them to suck up all of our data that all of our digital lives flow through. We didn’t even need the government to turn the Internet into a surveillance state. We happily did it for them.

05:43 There’s a famous example in Person of Interest where Harold Finch, the brilliant scientist, is trying to get everyone’s data by force and he can’t figure it out, so he just builds a thinly disguised version of Facebook and everybody willingly gave it to him. That’s what we’ve done. The old world propaganda masters would be jealous of how easy it is to get our data. They didn’t need guns. The Internet is basically a honeypot, and the business of the Internet is surveillance.

06:14 That’s really where we are today. We now have extreme centralization. Decentralization is dead, but if decentralized is dead, long-lived is centralization. When something becomes too extreme, it starts to flow back in the other direction. That’s part of the eternal cycle. Centralization in and of itself is actually not bad. Decentralized things and centralized things both have pros and cons. A balanced system actually has decentralized and centralized characteristics, but we don’t have a balanced system. We have an extremely centralized system.

06:52 The perfect example is one we saw just earlier was Equifax. Equifax managed to lose … They’re one of three companies that process all of our sensitive, personal information. They managed to lose the data of half of the United States. Now, were they punished? Did they go out of business? Were they replaced by a better company? No. They actually made money. they own satellite companies that monitor your credit report, and you’re paying them now for their incompetence. We can’t rip them out of the system. That is the danger of an extremely centralized system. They are still trusted. Most people think trust is a fixed thing, but trust is a moving concept. We say “I trust this company”, but what do you really trust? The company is filled with people, tens of thousands of people. Those people are transitioning in and out. Their business model is rising and falling. New managers come in. They make terrible decisions and they’re no longer trustworthy.

07:53 If a man’s faithful for 20 years and then he cheats on her, burned up all that trust overnight. Trust is a moving concept. In an extremely centralized system, we cannot rip cancerous nodes out of the system. They are still trusted. This is ridiculous. The second example of why extreme centralization fails us is the rise of the public cloud. Now, don’t get me wrong, the public cloud is an amazing technological marvel. AWS, Google Cloud, Azure, these are all gigantic data centers, and they’ve made it easier for many people to concentrate on their applications.

08:31 When I was a kid, you’d rack and stack and build your own servers and put them in any of tens of thousands of data centers. Now kids today don’t have to worry about that. They can just concentrate on their app. Everything is centralized into these few data centers. Let’s just imagine for a second if Amazon went out of business. Now, I know you can think this is impossible, right? Of course, Bear Stearns had $395 billion under assets in 2008, and they were bankrupt in two months. Amazon has $290 billion in assets. Now, it’s not a perfect 1:1 comparison, because Bear Stearns was leveraged 35:1 and made some horrible decisions. Amazon has a thriving business, but that doesn’t mean they can’t make bad decisions and suddenly go under.

09:19 That crisis would be worse than anything that you could ever imagine in 2008 because tens of thousands of companies are depending upon them. Netflix and all these companies that you use all the time. There would be a domino effect that would take down all these companies, and they would go down quickly because they wouldn’t be able to scramble fast enough to get their information out of there. So, the answer to this is to build a centralized layer over the top. That’s what companies, like our beloved Blockstack, is doing and Ethereum and others who are out there working on this problem.

09:47 You build a meta layer that surfs over the top of all of these systems. It does not depend on any of them. It federates the power across them, and it makes them more resilient and robust. What are really the benefits of this? The biggest benefits are the fact that we can’t actually keep centralized data safe. There is not a single company on earth, or government agency, that has not been hacked. Not one major company or government agency has not been hacked. Go look at information [inaudible 00:10:20] in the data breaches, and you’ll see that they’re there. We cannot keep that data safe. The only answer is to not keep that data at all, but we will never be able to pry that data out of the hands of these companies because it’s their business model. The second is to then push that data out to the edges. The cloud becomes the fog. Then, the hackers have to hit all the different leaf nodes, and it’s much harder.

10:42 Why did the bank robber rob the bank? Because that’s where the money is. Why do hackers hit Google? Because that’s where the data is. One of the biggest benefits of decentralization that I see coming is the fact that we can abstract up the stack. To understand why that’s important, you just have to understand a little bit about mud huts and hammers and nails. We used to build things with mud huts. It took a lot of effort. It didn’t scale. You could only build one-story structures, but when somebody comes along and build a hammer and nail and standard 2′ x 4’s, or whatever. You can now build much more complex structures, multistory structures, suddenly you get stone masonry. You can build temples that stretch up to the gods. Eventually, you’re building these curved skyscrapers in the Cyberpunk Skyline outside in Hong Kong.

11:30 What’s happening is you are abstracting and automating an earlier solution. That means you can concentrate up the stack. We do this at all kinds of levels. Everyone who’s worried about artificial intelligence taking over and humans not being able to do anything don’t understand that humans do abstract reasoning better than anyone else, better than anything else on the planet. In fact, we don’t know anything else that does it. If I get cut by a sharp stone, I abstract the concept of pain and sharpness and when I see a knife, I don’t need to know that it’s going to hurt me. I already know that it’s going to hurt me.

12:07 When we develop these things, we begin to move up the stack. TCP/IP itself was an abstraction, was abstracted how we move information. It doesn’t matter what that information is, whether it’s crypto kitties or cat pictures on Instagram, or encrypted data on Telegram, or streaming video over Netflix. What happens is you get these new technologies and people don’t know what they’re gonna do with them. Your only companies fail, everybody laughs at them, but eventually, you form a template for how these things are built. Building web-scale technologies. The problem is, of course, that everybody starts building on that template and they start building redundant technologies. So, today everybody builds their own login systems. It’s a complete waste of resources. How many people have something in their phone keep track of all their passwords that they can’t remember for all of their logins?

13:00 Tomorrow’s companies will benefit because we’ll do things like abstracting identity, storage and all the things that they have to do, and you’ll simply consume the profile. When decentralized Uber comes along, you’ll give them that profile, that universal profile that you have. When decentralized Lyft comes along to compete with them, they’ll incentivize you, probably through some type of reward cryptocurrency to send your decentralized profile over to them, and they can concentrate on building a better application on the top of it. The answer to why does grandma need a decentralized application is she doesn’t need a decentralized version of Instagram, she needs a version of all the applications that we cannot possibly imagine that come when we build and automate further up the stack.

13:46 You cannot explain what a web developer is to an 18th-century farmer. Everybody who’s worried about all the jobs failing, all these types of things, we can always see all the things that are going to go away, but not all the things that are going to be created. You can explain a web developer to an 18th-century farmer, ’cause it’s built on the back of dozens of different technologies from wires and electricity, computers, the browser. We can’t completely imagine all the wonderful types of applications that are going to come out of this.

14:21 The cloud has been a wonderful thing. It’s gonna be a wonderful thing right up until it’s not. In 5 to 10 years, everyone’s gonna wake up and realize that they’re horribly dependent on proprietary infrastructures that they have no control over. The answer to the internal cycle is a healthy dose of the opportunity. It’s a Chinese proverb–since we’re in Hong Kong, seems apropos that when something fails to an extreme, it develops in the opportunity direction. Again, we have the pendulum, swings back and forth. Evolution. The fractal of life is always surging forward and the more things change. The only constant has changed, but the more things change the more they stay the same.

15:09 Thank you, everybody, for your time.

The Pendulum of History: Daniel Jeffries Predicts the Future