• Blockchain investors have a reason to be optimistic
  • Your next Super Bowl commentator could be an AI
  • The U.S. unmasks the culprits of the largest hacks…

Dear Reader,

The World Health Organization announced a new name for the coronavirus outbreak – COVID-19 – which stands for coronavirus disease 2019. So we’ll stick with that one going forward.

I wish I had good news to share, but the numbers simply continue to get worse. More than 45,000 cases are confirmed with more than 1,100 deaths, and only about 5,000 people have experienced total recovery.

But the latest talk isn’t about those numbers. In fact, the real discussion is about the lack of accuracy in the numbers.

Medical experts are questioning the accuracy of swab tests, which produce a lot of false negatives (i.e., the results indicate that patients don’t have COVID-19 when they really do). The Western medical community is calling for the use of chest scans instead of swab tests.

If these experts are right, the numbers are far worse than anything that we’ve seen…

I’m at a small conference this week at the U.C. Berkeley School of Law with executives from all over the world. And there is a lot of discussion about how much COVID-19 is affecting travel plans.

The economic repercussions are obvious. If we curtail travel and business, things simply don’t get done. It isn’t just about supply chain impacts.

And I just saw a research report suggesting that the first-quarter smartphone sales in mainland China could drop by 50% due to the COVID-19 outbreak. That’s a massive drop in the largest smartphone market in the world.

As always, I’ll keep tracking this trend for readers. But for now, let’s turn to our insights…

Some positive regulatory news for blockchain technology…

Finally, we got some good regulatory news for the blockchain industry and blockchain investors.

Securities and Exchange Commission (SEC) Commissioner Hester Peirce just proposed a three-year safe harbor period for early stage blockchain projects that want to issue a digital token to raise capital to fund the project.

This would give blockchain project startups three years to prove that they are offering a utility token rather than a security.

Top blockchain project Ethereum is a great example of why this is important…

When the Ethereum blockchain launched its native token, ether (ETH), the SEC would likely have considered it a security per its guidelines. If the SEC had been aware of what was happening, Ethereum’s founders would have had to register ether as a security with the SEC.

That’s a time-consuming and expensive process, and it would have likely killed the Ethereum blockchain. That’s because its adoption would have been a fraction of the size – only accessible to accredited investors at the time of the capital raise.

But as Ethereum matured, it became clear that no single entity owned the project. The world saw that ether was essential to the operation of smart contracts and decentralized applications on the Ethereum blockchain.

In other words, the token’s primary purpose was as a necessary utility for the Ethereum blockchain to function. It was not primarily an asset for trading and speculation. Because of this, the SEC does not consider ether a security. Thus, it does not need to be registered as such.

So Peirce’s proposal would allow blockchain projects three years to develop their technology, test it, and eventually launch a blockchain – just like those who developed the Ethereum blockchain. Only after those three years would they need to prove that their token was a utility token and exempt from SEC securities registration requirements.

While this proposal has not been adopted yet, this is probably the most promising regulatory news that I’ve seen in the last two years.

The SEC has kept a heavy hand on the regulation of capital formation in the blockchain industry. And we’ve seen an incredible flight of capital as a result. Tens of billions of dollars have left the U.S. to work on blockchain projects in more welcoming regulatory environments overseas.

That’s something those of us at the Chamber of Digital Commerce would like to change (catch up here).

Peirce’s proposal isn’t a cure-all. But it’s a great start to solving this problem. And it has implications for investors…

A more welcoming regulatory environment will help early stage blockchain projects get off the ground. And that means more investment targets for technology investors like us.

This company is using “deepfakes” for good…

Journalists and reporters won’t like this new development…

Synthesia, an early stage company out of the United Kingdom, is using the artificial intelligence (AI) behind “deepfakes” to create AI-driven news reporters.

As a reminder, deepfakes are AI-created media that’s been manipulated in some way. For example, this technology could create a fake speech by a politician, which would then be put out on social media. The AI could make the speech and facial expressions sound and look exactly like a real speech.

As we’ve discussed before, this is a major problem when used to deceive people.

But Synthesia is putting a positive spin on this technology. And for the company’s first test run, it created an AI-powered sports commentator.

Synthesia trained the AI on existing footage of sporting events. The AI analyzed the commentary of a real sports commentator in order to apply the deepfake technology.

Then Synthesia fed real-time data from an English Premier League football match to the prototype, prompting it to report on what was taking place in the match. The result was an AI-powered sportscaster who looked and sounded just like a real person.

What’s the benefit of an AI sportscaster?

AI sportscasters would have instant access to all statistics in the history of every sport. They wouldn’t need to memorize predetermined stats like their human counterparts do.

And an AI can work 24 hours a day at almost no cost. That’s a big incentive for media companies to adopt the technology.

Synthesia partnered with news agency Reuters to create this sports commentator. That shows how seriously major news outlets are interested in this technology.

So it is very likely that this is the future of not only sports reporting but all news reporting. These AI-powered newscasters could work all day long and produce valuable content that people want to receive in real time… at nearly zero cost.

As a bonus, AI-driven news reporters could help take the spin and bias out of news reporting as well. After all, a properly trained AI would recognize if a competing news agency was reporting a story with false facts and data…

The perpetrators of the Equifax hack are officially charged…

We wrote about the big Equifax hack last year. This was one of the largest data breaches in history. Through the breach, hackers gained access to the social security numbers and credit card details of 147 million Americans. That’s about 60% of the U.S. adult population.

I’m not exaggerating when I say that nearly everyone reading The Bleeding Edge, myself included, likely had our information stolen through this hack.

Most embarrassing for Equifax… The breach was possible because the company had not upgraded its server software to correct security vulnerabilities. That’s what created the access for the hack. Equifax’s lax approach to security will cost the company up to $700 million in fines to settle.

But Equifax will likely welcome the news that the hackers have been identified.

Attorney General William Barr just announced that four Chinese intelligence officers have been charged with counts of wire fraud, economic espionage, conspiracy to commit computer fraud, and other offenses. All four officers work for the People’s Liberation Army of China.

And the Equifax hack isn’t the only breach linked to Chinese agencies…

China’s intelligence teams have been linked to the hack of the Office of Personnel Management, the 500 million-record Marriott hack, and the U.S. health insurance provider Anthem hack.

I’m just speculating, but I’m pretty sure that these infiltrations were part of the trade negotiations between the two countries. The Chinese government was likely trying to gain leverage over American officials.

It is unlikely that these hackers will be extradited to the United States for trial. But this will be a point of leverage in future trade negotiations between the U.S. and China.

While these developments certainly have diplomatic ramifications, it is also a stark reminder for corporations and governments to follow best practices for cybersecurity… which includes updating software.

I’m certainly on the lookout for cybersecurity investment opportunities for my readers.

Regards,

Jeff Brown
Editor, The Bleeding Edge

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