- Major changes are coming to our banking system…
- AI is transforming our research and innovation…
- FinCEN’s stealth attack on our digital assets…
Yesterday, I had the pleasure of joining Glenn Beck again on his radio show.
Over the course of 40 minutes, we discussed a wide range of topics including quantum teleportation, quantum entanglement, bitcoin, and a potential “FedCoin.” And yes… we even discussed the possibility that aliens have visited Earth. Ha!
It’s always fun to speak with Glenn. His intellectual curiosity and passion for technology always get me excited. If you’d like to see part of my segment on the show, you can go right here.
Perhaps not surprisingly, the hottest topic of discussion concerned the blatant censorship carried out by a handful of large technology companies over the last few weeks.
It wasn’t just the censorship of an individual. These moves affected millions of people, corporations, and applications. Even websites were “removed” from the internet, no longer able to be found.
I wrote about this last Monday in The Bleeding Edge. If you haven’t had the chance to read that issue, it is worth a few minutes of your time to do so. I wrote, “Our strength is in our diversity of thought, and the diversity of our backgrounds. It is what has made the U.S. the largest and most successful economy in history.”
This is why freedom of speech is so important. The big tech “elites” crossed the line, and we’re now all on the slippery side of a dangerous cliff, resulting in the rapid erosion of our freedoms.
Naturally, Glenn’s question was, “What can we do about it? Can we just build another internet?”
This is a very complex and interesting issue. And we do have reason to be optimistic, but it won’t be easy.
Over the last few weeks, we learned quickly that Google and Apple basically have the ability to control the software applications that run on 99%-plus of all smartphones. If they want to censor a software application, they just remove it from their respective app stores. They can even automatically remove the application from our smartphones without us permitting them to do so.
Google (through Google Cloud), Amazon (through Amazon Web Services), and Microsoft (through Azure) control such a large percentage of cloud-based software hosting that they have the power to effectively shut down applications and remove websites from the internet.
Equally frightening is that wireless operators like Verizon, AT&T, T-Mobile and other internet service providers (ISPs) – like our local CATV companies – have the ability to block websites from being accessed. So even if a company moves its website off of the cloud services controlled by Google, Amazon, or Microsoft, the site can still effectively be shut down.
Worse still, all of the above companies often have perverse political, social, and monetary incentives for doing so.
Glenn asked about using a satellite internet platform to circumvent this chokehold that the tech elites have on the country. And it is a possible solution.
Elon Musk has been outspoken against the politically motivated government controls used during the pandemic and this Orwellian censorship. That is why his satellite-based internet project – Starlink, which is part of SpaceX – would likely be censorship-free.
But the big problem is that it wouldn’t scale.
If more than half the country tried to migrate to a satellite-based internet service, it simply wouldn’t work. There just isn’t enough capacity to handle the traffic.
The reality is that we need the fiber-optic networks, hyperscale data centers, internet service providers, and cloud hosting services to push and pull our desired bits all over the world.
What’s the solution? Simply put, the next generation of the internet.
Right or wrong, we spent the last 20 years centralizing the internet in such a way that we gave complete control to a handful of powerful and very rich companies. And they apparently think that they know best about what we should and should not see and read. That power has been abused.
It is now time to take back the internet, rebuild it, and decentralize it in a way that doesn’t have the same chokepoints.
And that’s precisely where blockchain technology comes in to help.
I spoke with Glenn about two projects that are perfect examples. They are a glimpse of the next generation of our internet.
One is Handshake. Most of us wouldn’t have any reason to know this, but the internet’s “phone book” is controlled by one organization – the Internet Corporation for Assigned Names and Numbers (ICANN).
Basically, when we type in a website like www.brownstoneresearch.com, it translates that into a specific numerical address, which takes an internet browser to the right location. And ICANN has the ability to remove that translation so that any website on Earth can no longer be found.
Handshake is an answer to this problem. It dismantles what ICAAN does. Handshake records the location of websites on a decentralized blockchain. That preserves the ability for users to view the content and information that they want. It’s not consumer-friendly yet for the average user, but the tech works.
Another project that I mentioned is Inrupt. It’s the brainchild of Sir Tim Berners-Lee, who was one of the inventors of the world wide web back in 1989 when he worked at CERN. He believes that the internet is broken and has taken a terrible turn. He wants to fix it. And Inrupt has developed blockchain technology that allows consumers to control their online data.
Inrupt has developed “Pods” that contain a consumer’s data. It enables consumers to control who sees that data and who doesn’t. It also preserves that data even if a person moves off of one social media platform and on to another.
It simply isn’t realistic to rebuild the internet and all of its physical infrastructure. It doesn’t make economic sense as it would take too long. And in the end, it would still be prone to the same problems.
That is why these decentralized, blockchain-empowered approaches to returning the internet to what it was intended to be are so critical and so exciting.
Now let’s turn to today’s insights…
U.S. regulators are laying the groundwork for a central bank digital currency…
The Office of the Comptroller of the Currency (OCC) just published a letter notifying national banks and federal savings associations that they are authorized to participate in “independent node verification networks.”
This is big news.
The OCC is referring to nodes in a blockchain. The OCC just gave banks the green light to conduct payment activities and transfer funds using stablecoins.
As a reminder, stablecoins are blockchain-based currencies that are tied directly to another asset, typically fiat currency. For the banks, this means stablecoins that are backed one-to-one by the U.S. dollar.
So the OCC just put stablecoin transactions on the same level as global payment networks like the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system and Fedwire.
This may come as a surprise to many. But it’s very clear to me what’s happening.
U.S. regulators are preparing the national banking system for a central bank digital currency (CBDC). They are laying the framework and building the basic infrastructure for the launch of the U.S. government’s CBDC. Some have referred to this as a “Fed Coin.”
This makes it clear that the U.S. government has done an about-face.
The U.S. seemed to lack a sense of urgency regarding CBDCs going back to 2019, when the topic started to pop up.
But when China conducted a test run of its CBDC last October, putting its national digital currency (the DCEP) into citizens’ digital wallets, it must have been a major wake-up call for the U.S. to get serious about its own digital dollar.
As I said in my 2021 prediction series, we won’t see a “Fed Coin” this year. That’s just too fast for the government to move. But we’ll almost certainly see it in 2022.
And that means major changes are coming to our banking system.
We can see now that state-backed (and even company-backed) digital currencies are inevitable. But 99% of investors are so distracted by a “Fed Coin” that they’re missing the bigger picture.
When these new digital currencies do arrive, they will raise the profile of one technology: blockchain. And investors positioned in a handful of blockchain stocks could see triple-digit returns in the years ahead.
I’ve outlined my favorite blockchain investments in a free presentation. You can watch it right here.
Machine learning is turbo-charging innovation…
Sandia National Laboratories just released some pretty incredible research that caught my eye.
This is one of three research and development labs commissioned by the National Nuclear Security Administration. It has been involved in many high-profile research projects over the last few decades. One example has been the development of a process to decontaminate subway systems in the event of a biological weapons attack on the U.S.
And Sandia Labs is now all in on a form of artificial intelligence (AI) called machine learning (ML).
The organization just published research demonstrating how a new ML framework can perform materials science calculations more than 40,000 times faster than traditional computing methods. This is astounding.
This means that machine learning can take research that used to take years to finish and complete it in a matter of minutes or seconds.
And this speaks to how the deployment of AI could dramatically change how quickly research and innovation happen. Gone are the tedious days when humans had to analyze data and make discoveries by trial and error.
Now machine learning handles the entire process. It is like flipping a light switch on to go from classical computing to turbo-charged innovation.
And here’s the most exciting part – any company or organization can implement a similar framework to apply this machine learning model to its own research. That’s why I have been so adamant that technological innovation is going to accelerate at a rate that our brains just can’t comprehend. It is not natural for us to comprehend exponential growth.
In the next few years, we are going to see incredible developments in new optical technologies, new material tech, lighter and stronger aerospace materials, and even battery technology. The possibilities are endless now that we can condense years’ worth of comprehensive research into minutes and seconds.
The developments that come from this will impact every aspect of our lives. And it is all thanks to AI.
For this reason, we can expect AI to be one of the most explosive investment trends of our lifetimes.
FinCEN takes aim at digital wallets…
On Friday, December 18, the Financial Crimes Enforcement Network (FinCEN) tried to “sneak” in a new regulatory proposal on digital wallets. This came just as most businesses were winding down for the holidays.
The new regulation would require companies that provide a digital asset wallet to maintain detailed financial records on any transaction greater than $3,000. This includes documenting what entity the funds came from and who they went to.
FinCEN is a division of the U.S. Treasury. When FinCEN releases these proposals, it welcomes feedback from the impacted industry for 15 days. That’s called the public comment window. It is supposed to be a time when the regulators work with the industry leaders to fine-tune the proposal and make sure it works for everyone involved.
Well, 15 days from December 18 is January 2. Clearly, FinCEN was hoping to sneak this regulation in over the holidays before leaders in the blockchain industry had time to comment on it.
Fortunately, the industry picked up on this quickly and rallied against the proposal. As it should.
This regulation was clearly designed to encumber the blockchain industry and provide the legacy banking system with an unfair advantage.
Let’s think about it…
The banks must keep detailed records on transactions greater than $10,000. Why is the number only $3,000 for digital asset transactions? That’s 70% lower.
This would put undue hardship on the companies that enable consumers to buy, sell, and trade digital assets. In fact, it would be nearly impossible to comply with this new regulation.
For example, let’s say I buy bitcoin through a company like Coinbase, Kraken, or Square. Then I send those bitcoins to another digital wallet. Maybe it’s a hardware wallet that I own. Or maybe it is a digital wallet held by my wife’s family in Japan.
Whatever the case, the company I bought those bitcoins through has no way of knowing where they go after I send them to another wallet. Sure, they can see the transaction on the blockchain. But that doesn’t tell them who the funds went to or where the recipient’s digital wallet is hosted unless it happens to be another wallet on their platform.
And that’s the whole point of cryptocurrencies and digital assets.
These transactions are peer-to-peer. Blockchain technology makes it so we don’t need to trust banks and financial institutions to confirm transactions or custody our assets.
If companies like the ones I mentioned above had to collect detailed information on transactions leaving their platforms, it would defeat the purpose.
The only way they could comply is to freeze the funds until their customers can provide detailed information on who was receiving the funds and where the wallet was held. And who would want to deal with that?
So all this regulation would do is push people away from registered digital asset platforms in the United States. And it would incentivize people to use unregulated wallets and exchanges. That is the exact opposite of what FinCEN wants.
Plus, this would make U.S.-based blockchain companies much less competitive. And that would push business and innovation overseas.
This proposal is terrible in every way.
The good news is that the industry responded quickly. FinCEN’s stealth attack did not go unnoticed.
The industry’s quick response forced FinCEN to extend the public comment period. U.S. lawmakers asked for an extension of 15–60 days to allow the industry to respond.
And rest assured, this is something we are all working against. That includes the Chamber of Digital Commerce, of which I am a member. The Chamber has been very engaged and is pushing for a healthy regulatory framework that will allow innovation in the blockchain industry to thrive in the U.S.
Editor, The Bleeding Edge
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