Digital Assets & Society | U.S. Government Is Investing in R&D
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Many of those on the outside looking in don’t realize that within certain corners of the digital asset space, there exists robust systems for funding public goods, those vital pieces of infrastructure like highways, parks, lighthouses, and open-source computer code. Blockchain enables innovative funding mechanisms, and many companies are already dreaming of using this technology to help solve many of society’s great problems.
But lost in this conversation is who does the blockchain serve now, and who is it being built to serve in the future? If it can solve public goods problems, can it also help underserved people and communities?
While web3 rushes forward with testing new ways to capitalize and tokenize, governments are taking a more cautious approach. The United States Office of Science and Technology Policy, for example, recently published a Request for Information seeking input on the government’s digital asset strategy.
In this week’s editorial, Chuck Cummings, who is building Bankless Consulting’s social impact practice, notes that as the U.S. government develops a comprehensive strategy, one question will loom large: Are we building these innovations to help everyone or only some people?
In answering that question, Chuck believes we must monitor four key social equity trends, including how social impact organizations are using this technology to further their mission; whether women and underrepresented communities make use of digital assets; who will represent marginalized communities in the drafting of crypto regulations; and will blockchain technology help to distribute wealth more fairly.
If we take in these considerations now, we won’t just be building the internet of the future, we’ll be building a better future, together.
Digital Assets & Society | U.S. Government Is Investing in R&D
Author: Chuck Cummings, Bankless Consulting Co-founder
The United States Office of Science and Technology Policy recently published a Request for Information which “seeks input to shape a whole-of-government effort on research and development related to digital assets and distributed ledger technology.”
The federal government recognizes that responsible innovation in digital assets could provide significant benefits for the American people.
Those building digital asset technology claim that crypto and other web3 innovations will bring more liberty and prosperity to our lives.
The idealists speak of cutting out greedy middlemen in industries like finance and entertainment, making critical supply chains like food and medicine more transparent, and enabling more people to own valuable things like real estate and intellectual property.
I’m optimistic that digital assets will make the world a better place - but cautiously so.
One question looms large.
Are we building these innovations to help everyone or only some people?
Throughout history, we’ve seen how new technologies - from the cotton gin to the federal highway system to mortgage-backed securities - can help the overall economy while hurting large groups of people.
We have also seen how certain federal policies (such as redlining, accredited investor regulations, and parts of the tax code) have helped privileged Americans build more wealth while the majority of society gets left behind.
It’s a positive sign that the federal government is investing R&D funding to better understand digital asset innovations.
Hopefully this leads to public-private partnerships that leverage the power of the technology in ways that help all Americans.
As America’s public servants research digital assets and look to develop blockchain technologies in ways that can help people, here are four social equity trends to watch:
1. How are social impact organizations using digital assets to advance their missions?
Nonprofits with private funding have more freedom to experiment with new technologies than the publicly-funded government. As the public sector embarks on a research agenda, will more innovators in the social impact sector take action?
Some nonprofits are already utilizing digital assets for fundraising. DAOs are enabling groups of people to own and manage assets that they might not otherwise be able to purchase, such as a community center or a piece of land.
Philanthropic foundations are beginning to use decentralized finance (DeFi) to manage their endowment and disburse funds to their grantees. Verifiable digital identities are emerging as a way to unleash more civic engagement in local communities.
2. Will more women and underrepresented communities use digital assets?
Will DeFi and related technologies remain the domain of risk-takers, ponzi scammers, and tech bros? Digital assets present consumers with an opportunity to improve their financial condition, but only a small part of our society is currently participating in this economy.
The main reason is digital assets high barrier to entry. The user experience for most blockchain applications is pretty bad right now. Trustworthy educational resources are hard to find.
Solving this participation challenge feels like a chicken-or-egg problem. Are onboarding and user experience improvements needed to bring more and different types of people into web3? Or do we need a more broader cross-section of society participating in this ecosystem before the user experience will improve?
More diversity is required to represent the perspectives of all people in the design of new products in finance, entertainment, medicine, real estate, and other industries that affect more than just white guys.
Will blockchain companies make efforts to diversify their product development teams? Can the crypto industry attract more diverse workers to shape the contours of this technology?
3. Who will represent the interests of marginalized communities when crypto regulations get written in Washington?
With digital assets, it’s hard to find anyone who is speaking up for the needs of the underserved in our society. This is a huge opportunity for social equity, as lower income people could gain the most from the economic disruption that digital assets can bring.
The Biden Administration and Democratic leaders in Congress have not used their platform to encourage crypto regulation that levels the playing field for all Americans. By not taking action, are Democrats limiting the upside for the middle and lower income communities that elected them to power? Or are they purposefully slowing the pace of innovation in the name of social equity?
Republicans now control the agenda in the House of Representatives. Will they use their power to shape digital asset regulation in a way that levels the playing field for all Americans?
4. Will web3 technologies distribute wealth more evenly across America’s economic classes?
An uneven amount of the wealth generated from web1 (public Internet) and web2 (smartphone applications) has been concentrated in the Bay Area and Seattle. This week, Bloomberg reported that Amazon is taking, on average, 50% of sales from sellers in its marketplace.
In line with the web3 principles of decentralization and community ownership, many digital asset startups are distributing ownership equity in their companies to users. Some are also promising to give creators a larger share of revenue compared to web2 platforms like YouTube, Instagram, and the App Store.
How will this burgeoning battle between web2 and web3 business models impact wealth distribution across geographic areas and economic classes? Time will tell.
The Start of the Story
The story of digital assets is just beginning. If we want crypto, DAOs, NFTs, the metaverse, and DeFi to make a positive impact in the real world, then we need to be thoughtful about how we are building these things.
This is a great time for the federal government to invest in research to better understand how this new technology can impact our society.
Chuck Cummings is building Bankless Consulting’s social impact practice to help organizations implement web3 technology for real world impact. He also serves as the Strategic Advisor to the Do Good Institute at the University of Maryland. Chuck lives in Baltimore and likes to ride his bike.
Upcoming Events
Are you ready to witness the future of finance? Join us for a conversation on one of the biggest opportunities of web3, as we explore the replumbing of traditional financial infrastructure. Real-world asset tokenization is one of crypto’s most promising areas of growth and it's poised to explode in 2023 and beyond. Imagine the ability to represent traditional assets like real estate, gold, bonds, and loans in digital form that can be easily traded on a blockchain. Experts predict the tokenization market could reach $24 trillion in the coming years, and Avalanche is at the forefront of this trend.
Don't miss our upcoming Twitter Spaces on February 23rd at 12:30 PM EST. We'll be joined by Morgan Krupetsky, the Director of Business Development for Institutions & Capital Markets at Ava Labs, as we take a deep dive into the groundbreaking KKR-Securitize deal. This landmark transaction saw digital asset company Securitize Capital tokenize an interest in a massive $491 billion KKR healthcare fund on the Avalanche blockchain — making it one of the most impressive examples of institutional tokenization to date. Get ready to learn more about the near-unlimited potential of asset tokenization and how it's shaping the future of finance!
Web3 Business Developments
Curated News on Recent Blockchain Adoption and Innovation
How Mastercard, Goldman Sachs And Other “TradFi” Titans Are Using Blockchain To Rewire Global Finance
Author: Nina Bambysheva and Michael del Castillo
Mastercard is currently working with banks and merchants to introduce tokenization, which replaces traditional credit card numbers with unique digital records for each transaction, enabling the use of digital wallets. The company is working to tokenize various assets and track them on multiple public and private blockchains.
“You can tokenize anything. I think we’re going to have a world where everything will be tokenized and will be passed around in a safe fashion.”
Michael Miebach, Chief Executive Officer of Mastercard
Major financial institutions, including BlackRock, JPMorgan, and Fidelity, have supported this new technology due to its high level of trust. Consumers want to trust the technology they are using, trust that their data is secure, and trust that the company behind it is not taking them for a ride. The CEO of Mastercard believes that the recent controversies surrounding cryptocurrencies will actually help the adoption of this new technology as more mainstream players enter the market and regulations are put in place to address potential risks.
After AWS Deal With Ava Labs, Web3 at ‘Inflection Point’
Author: Ben Strack
Amazon Web Services (AWS) and Ava Labs are partnering to simplify and accelerate the adoption of blockchain technology for enterprises, governments, and institutions. Jeff Hasselman, the global head of web3 at AWS, has been working with large banks and entertainment companies that are exploring their own web3 initiatives.
The partnership aims to provide a straightforward path for these companies to develop their digital assets. Ava Labs created the Avalanche blockchain, while AWS offers a cloud infrastructure platform that serves hundreds of thousands of businesses worldwide. The partnership will support Avalanche's infrastructure and decentralized application ecosystem, making it easier for individuals and institutions to launch custom blockchain subnets. The ultimate goal of the partnership is to enable the launch of custom subnets with just a few clicks.
“All of the orchestration that needs to go underneath the subnet architecture, and all the supporting services that make them work, require a very strong, flexible partner who has high availability, elastic scaling and high throughput systems. By deepening our integrations and a lot of the automation on top of AWS, we’re really abstracting a lot of the complexities associated with getting your application to market.”
Nick Mussallem, Head of Product at Ava Labs
Rihanna NFTs Enable Holders To Earn When This Song Plays
Author: Shalini Nagarajan
Rihanna's hit song "Bitch Better Have My Money" was recently sold as non-fungible tokens (NFTs), and the collection quickly sold out after the announcement. The song's producer collaborated with European crypto startup AnotherBlock to sell a fraction of his streaming rights to the song through 300 NFTs, each priced at $210, which gives the collectors ownership of a small percentage of the song's streaming royalties.
NFTs are becoming increasingly popular in the music industry, as royalties are one of the best use cases for digital collectibles. Other musicians, such as The Chainsmokers and Diplo, are also tokenizing their music, and several platforms for selling song rights as NFTs, such as Royal, Sound.xyz, and Catalog, are gaining popularity.
‘Deposit Tokens’ Could Trade On DeFi Like Stablecoins
Author: Sebastian Sinclair
JPMorgan has been actively involved in blockchain development and implementation for several years and has been exploring various use cases for blockchain-based solutions. In a recent joint study, JPMorgan and Oliver Wyman stated they believe that bank-issued “deposit tokens” are a safer option for major institutions looking to transfer value across chains compared to stablecoins. Stablecoins are currently the preferred method to transfer value, but JPMorgan and Oliver Wyman believe that they would fall short of meeting regulated banking needs.
“Deposit tokens” function similarly to traditional deposits held by licensed financial institutions, but exist and operate onchain. The bank views deposit tokens as a secure and stable form of money that can operate at scale and be supported by the issuer’s regulatory framework. JPMorgan believes the rise of DeFi protocols may result in the creation of liquidity pools for deposit tokens and, if they persist and serve a practical purpose, they should reflect the deposit tokens fungibility as financial assets. Deposit tokens would be supported by the issuer’s regulatory framework, capital and liquidity requirements, and contingency funding access, as well as more traditional consumer protection policies.
Matching Crypto Wallets to Twitter Accounts: Web3 Marketing Takes Off
Author: Ben Strack
Addressable is a new tool aimed at transforming web3-focused marketing to allow executives to better understand their audience's demographic and purchasing history by matching crypto wallet holders to their social media accounts. The app currently matches 17 million crypto wallet holders to their Twitter accounts, and plans to expand to Instagram and TikTok.
The tool aggregates data to maintain the privacy of wallet holders and social media accounts, while providing marketers with a full view of the conversion rate from social media and the blockchain. Addressable's users include DeFi protocol Bancor and web3 game developer platform Immutable, who have seen improved results with their target audience due to the app's ability to accurately provide the right audience.
One of the case studies was on The Bored Ape Yacht Club, whose 10,000 NFT collection has a million followers on Twitter. Using Addressable, marketers were able to identify 5,900 wallets that held a Bored Ape NFT, which were then matched to 5,100 Twitter accounts. This allowed marketers to send out a promoted tweet to a specific and targeted audience, rather than "shouting to the void". The app provides a full view of the conversion rate from social media and the blockchain, including the number of social media engagements and token purchases.
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