- Google’s frantic reorganization
- Coinbase has a bold new plan to decentralize
- Closure on the Cambridge Analytica scandal
Dear Reader,
The last day of April marked a historic date in the world of high tech. For it was on April 30, 1993 when the “Conseil Européen pour la Recherche Nucléaire” (CERN) put the software for the world wide web (WWW) into the public domain.
Named and designed by Tim Berners-Lee in 1989 as a new system of information management, its original inspiration was the need to automate information sharing between scientists who were spread out between different universities and institutions around the world.
Berners-Lee’s development of the hypertext transfer protocol (HTTP) was the key to enabling a client – like a web browser – to be able to communicate with a server containing information anywhere on the internet. Just like its name, the protocol enabled information to be transferred from one computing system to another.
And it was on that day in 1993 that CERN released the interface to the world wide web, the first internet browser.
Above is an image of the original NeXT web browser running on Berners-Lee’s NeXT computer at the time. Even 30 years later we can see the similarities to web pages today. The graphics may have changed, but it’s easy to understand how the internet evolved from that single point in time.
There are very few people in high tech that have singularly had such a radical impact on the world. Berners-Lee is actually a physicist, which made the creation of the world wide web somewhat of an odd match. And where the technology was created is even more at odds. After all, CERN was founded in 1952 with a mandate to focus on nuclear research. And it’s most well-known today for the Large Hadron Collider (LHC), the world’s largest particle accelerator.
Berners-Lee’s original vision of the internet was to create an open architecture that was decentralized and democratized for everyone to access. And while he has been amazed at the incredible progress with internet technology and the fact that about two-thirds of the world’s population is on the internet, it hasn’t all been good.
He had been disappointed with massive, and heavily biased, gatekeepers that have little to no regard for consumers’ data and privacy. On this point, he believes that the implementation of internet technology has completely failed.
This has been a deep concern of Berners-Lee for quite some time. So much so that in 2009, he developed a construct for a new internet which he shared with the World Wide Web Consortium. This original work became what is now known as the Solid project.
Solid is a radical departure from what we have today on the internet. Today, massive tech companies like Alphabet (Google), Meta (Facebook, WhatsApp, Instagram), Microsoft (LinkedIn, Bing), and so many others surveil us, collect our data, and sell access to that data to generate massive advertising revenues… Of which we receive none…
The idea of Solid is that consumers can securely store and control their own data. Consumers are also empowered to permit their data as they see fit and also determine how that data may or may not be used.
It’s a simple idea, but one that’s hard to implement. It’s also an idea that big tech and governments hate as it erodes their control over the unfettered information that “they” all want access to. That’s clearly a sign that Berners-Lee is onto a good thing.
To advance the mission of Solid, Berners-Lee founded Inrupt in late 2017. It’s a fantastic team with serious horsepower, and we can only hope that they are successful in their mission.
Many don’t know this, but CERN and Berners-Lee “gave” the world wide web to the world for free. It is open-source software without any licensing fees. And this is in a large part why the technology was able to proliferate so quickly over the last 30 years. It’s one of the greatest technological success stories in history, and yet Berners-Lee didn’t make a dime from it other than his salary at CERN.
Despite that, he has done remarkably well for himself. After all, with that kind of notoriety comes all sorts of great opportunities.
I can’t help but wonder if he can replicate his success with Inrupt and Solid in the same way that he did with HTTP and his NeXT browser. While it won’t be easy, there is a path forward. And open-source businesses can be wildly successful these days as evidenced by IBM’s 2019 buyout of Red Hat for $34 billion.
Either way, we’re at a historical inflection point in time. And what happens is far more important than what happened in 1993. Will we be able to regain control of our own data and preserve our privacy as Berners-Lee originally intended for the internet? Or will “they” prevail with bias, censorship, control, and continued erosions of our privacy and freedom?
In this world of convenience that we have become accustomed to, it’s easy to overlook this epic battle that is being waged. But we should all be deeply aware of it. One outcome leads to a restoration of privacy, freedom, open access to information, and opportunities abound. And another leads to censorship, totalitarian control, absolutely no privacy, and severe limitations in how we all choose to live our lives.
Google’s existential crisis…
In yet another major sign that Alphabet (Google) is scrambling to adjust to the realities of new competitive threats that could destroy Google’s core business, the tech giant just announced that it is folding the Google Brain division into DeepMind.
Google Brain is Google’s California-based artificial intelligence (AI) division. And DeepMind is the U.K.-based AI division that Google acquired in 2014.
Regular readers know DeepMind well. This is the company responsible for a host of incredible AI breakthroughs. Its work has been absolutely transformational for the life sciences space. Specifically, the team at DeepMind published a catalog of more than 200 million protein structures last year. Predicting how proteins fold has long been one of the “grand challenges” in life sciences, making the discovery that much more remarkable. After all, it was a group of computer scientists that made the breakthrough.
On the other hand, the Google Brain division has failed to produce much of substance. The division has stood in such remarkable contrast to the amazing string of successes that DeepMind has had over the last several years. So the fact that Google is folding it into DeepMind tells us that Google recognizes the need for a drastic move.
That’s because the explosion of generative AI caught Google completely flatfooted. The significance here is that generative AI represents the next generation of internet search. If Google can’t catch up, its Google Search business is in serious trouble.
So Google is putting its faith in DeepMind CEO Demis Hassabis. His task is to integrate generative AI to keep Google’s search and advertising business competitive.
What’s ironic about these latest developments at Google is that seven Google engineers wrote the seminal paper on generative AI back in 2017. Google had the “key” back then, but it didn’t do anything with it. Worse yet, six of those seven engineers left Google to create their own AI-focused businesses, several of which use generative AI.
That’s what allowed OpenAI to rise to such dominance with the release of ChatGPT. And Microsoft was quick to invest heavily in OpenAI, to Google’s detriment, in order to leverage the tech for its own products. What a strange twist of fate!
So Google had both the tech and the vision… but completely missed the boat. Now they are making radical changes in an effort to catch up.
But this latest move doesn’t come without risk. DeepMind’s Hassabis is one of the most accomplished AI researchers in the world. He led DeepMind to incredible breakthroughs. But he hadn’t been interested in commercialization of his technology. He wasn’t building the technology for profit, but to solve interesting and challenging problems.
And now Google has asked him to do the opposite. He is tasked with building AI purely for profit, and specifically with the ability to collect user data and monetize for advertising revenues. I can’t help but wonder if that will motivate him… or bring about a departure that would be devastating for Google.
Coinbase’s moves to protect itself against U.S. regulators…
Last week we looked at some comments that Coinbase CEO Brian Armstrong made.
He was talking about how the U.S. regulatory climate has been incredibly hostile towards the digital asset industry. Because of this, Coinbase may need to relocate outside of the country.
As we noted, Coinbase is the most buttoned-up digital asset exchange from a regulatory standpoint. It made regulatory compliance a priority from day one. Yet, it has recently become a target of the Securities and Exchange Commission.
This has caused Coinbase to be prudent and consider a move offshore to protect its own business. And it has taken another interesting step worth knowing about, a new project called Base.
Base is a decentralized blockchain that will exist outside of the U.S. regulatory environment. And it’s built to facilitate two things: decentralized exchange and decentralized applications.
When we say “decentralized,” that refers to the fact that Coinbase itself won’t have control over the transactions or the applications that run on the Base blockchain. This is in stark contrast to Coinbase’s core business as a regulated centralized exchange.
These two things sound like starkly different businesses that wouldn’t go together. But there is an interesting angle here. Because of the business that Coinbase has already built, Base has the potential to become something akin to a regulated decentralized exchange. For many blockchain purists, this doesn’t make any sense; but there is interesting potential in the idea.
Coinbase already has immense infrastructure around onboarding customers in full compliance with regulatory requirements around the world. It implements “know your customer” (KYC) and “anti-money laundering” (AML) processes with its customers. Therefore, it would be easy to “turn on” this infrastructure for Base as well.
The reality is that working with decentralized exchanges requires additional effort and exposes investors to additional risk. This can actually limit the utilization of a decentralized exchange. But if Coinbase could position itself as a regulatory-compliant on-ramp to decentralized applications, I believe that there would be a large market for institutional capital.
This would enable institutional capital to access the decentralized world through Coinbase. It would create on/off ramps to decentralized apps in the same way that Coinbase acts as an on/off ramp between fiat and digital assets.
And in the highly unlikely event that Coinbase were to go under, Base would still exist as a standalone, decentralized platform.
The Facebook-Cambridge Analytica scandal is finally resolved…
Longtime readers may remember the Cambridge Analytica scandal from years ago.
The scandal itself occurred in 2018. At the time, it was discovered that Facebook sold personal data on more than 80 million users to Cambridge Analytica without their consent. This data was then used to inform targeted political ads in 2016.
Well, a class-action lawsuit against Facebook/Meta has been going on ever since. And Meta just settled for $725 million.
At first glance, this sounds like a massive settlement. One would hope that it’s enough to deter the company from engaging in this kind of behavior again. But it won’t…
If we look at the financials, Meta is sitting on $37.5 billion in cash on the books. And the company will generate roughly $23 billion in free cash flow this year.
That means Meta will hardly notice this $725 million settlement. The company will make over 30 times more than that just this year alone.
For those interested, anyone who used Facebook at any point from May 2007 through December 2022 is eligible to file a claim to participate in this settlement. This would entitle them to their portion of the $725 million payout.
That may sound enticing, but there’s a nuance here we need to be aware of. Let’s say just half of the 80 million Facebook users impacted by this scandal file a claim. If we do the math, each person will receive about $18 in compensation. That’s it. But there’s no way to know exactly what the payout will be until all of the claims are in.
This speaks to the fact that this settlement is largely for optics. It’s not going to hurt Meta. Nor is it going to net Facebook users any serious compensation for their violations of privacy. For a company like Meta, the settlement is simply seen as the cost of doing business.
Regards,
Jeff Brown
Editor, The Bleeding Edge