Tag Archives: digital revolution

Blockchains Could be Vital to National Security

Last year Tokyo hosted a meeting of the International Standards Organization, including a session on blockchain technology to examine ideas around standards for blockchain and distributed ledgers.

A member of the Russian delegation, who is part of their intelligence apparatus at the FSB, apparently said “the Internet belonged to the US, the Blockchain will belong to Russia.” In fact three of the four Russian delegates were FSB agents!

By contrast, Chinese attendees were from the Finance Ministry, and American attendees were representing major technology companies, reportedly IBM and Microsoft among others.

Let’s unpack this a bit. The Internet grew out of a US military funded program, Arpanet, and the US has been the dominant player in Internet technology due to the strength of its research community and its technology companies in particular.

As we wrote in our most recent blog (http://orionx.net/2018/05/is-blockchain-the-key-to-web-3-0/), blockchain has the potential to significantly impact the Internet’s development, as a key Web 3.0 technology.

Blockchain and the first cryptocurrency, Bitcoin, were developed by an unknown person or persons, with pen name Satoshi Nakamoto. Based on email timestamps, the location may have been New York or London, so American or British citizenship for Bitcoin’s inventor seem likely, but that is speculation.

More to the point, the US is the center of blockchain funding and development activity, while China in particular has been playing a major role in mining and cryptocurrency development.

There are many Russian and Eastern European developers and ICO promoters in the community as well. The Baltic nations bordering Russia and the Russian diaspora community have been particularly active.

The second most valuable cryptocurrency after Bitcoin is Ethereum, which was invented by a Russian-Canadian, Vitalik Buterin. Buterin famously met with Russian President Vladimir Butin in 2017. Putin is himself of course a former intelligence agent.

The Russians reportedly want to influence the cryptographic standards around blockchain. This immediately raises fears of a backdoor accessible to Russian intelligence. Russia is also considering the idea of a cryptocurrency as a way to get around sanctions imposed by the American and European governments.

The Russian government has a number of blockchain projects. The government-run Sberbank had initial implementation of a document storage blockchain late last year. There is draft regulation around cryptocurrency working its way through the Russian parliament. President Putin has said that Russia cannot afford to fall behind in blockchain technology.

Given the broad array of applications being developed for cryptocurrencies, including money transfer, asset registration, identity, voting, data security, and supply chain management among others, national governments have critical interests in the technology.

China has been cracking down on ICOs and mining, but it is clear they think blockchain is important and they want to be in control. Most of their government concerns and interest appear to be centered around the potential in finance, such as examining the possibility of a national cryptocurrency (cryptoYuan).

China would like to wriggle free from the dollar standard that dominates trade and their currency reserves. They have joined the SDR (foreign reserve assets of the IMF) and have been building their stocks of gold as two alternatives to the dollar.

China’s biggest international initiative is around a new ‘Silk Road’, the One Belt, One Road initiative for infrastructure development across EurAsia and into the Middle East and Africa. One could imagine a trading currency in conjunction with this, a “SilkRoadCoin”. In fact, the government-run Belt and Development Center has just announced an agreement with Matrix AI as blockchain partner. Matrix AI is developing a blockchain that will support AI-based consensus mechanisms and intelligent contracts.

China’s One Belt One Road Initiative, actually has six land corridors and a maritime corridor. (Image credit: CC 4.0, author: Lommes)

The American military is taking interest in blockchain technology. DARPA believes that blockchain may be useful as a cybersecurity shield. The US Navy has a manufacturing related application around the concept of Digital Thread for secure registration of data across the supply chain.

In fact the latest National Defense Authorization Act requires the Pentagon to assess the potential of blockchain for military deployment and to report to Congress their findings, beginning this month for an initial report.

What is clear, is that blockchain and distributed ledger technology have the potential to be of major significance in national security and development for the world’s leading nations.

We encourage the US government to increase engagement with blockchain and distributed ledger technology. This can include funding research in universities, pilot projects with industry across various government agencies including the military and intelligence communities, the Federal Reserve, and the Department of Energy, NOAA and NASA, in particular.

Also the federal government should pursue standards development under the auspices of the NIST and together with ISO. Individual state governments are also promising laboratories for projects around identity, voting, and title registration.

Information has always been key to warfare. But there is little doubt that warfare is increasingly moving toward a battlefield within the information sphere itself. These are wars directed against the civilian population; these are wars for peoples’ minds. Blockchain technologies could play a significant role in these present and future battles, both defensively and offensively.

References :

DARPA https://www.google.co.th/amp/s/cointelegraph.com/news/pentagon-thinks-blockchain-technology-can-be-used-as-cybersecurity-shield/amp

US Navy http://www.secnav.navy.mil/innovation/Pages/2017/06/BlockChain.aspx

2018 National Defense Authorization Act https://www.realcleardefense.com/articles/2018/05/03/could_americas_cyber_competitors_use_blockchain_for_their_defense_113400.html

NIST https://csrc.nist.gov/publications/detail/nistir/8202/draft

https://www.blockchainmagazine.net/u-s-department-of-defense-is-bullish-on-the-blockchain/

http://www.scmp.com/business/china-business/article/2136188/beijing-signals-it-wants-become-front-runner-blockchain

https://www.cbinsights.com/research/future-of-information-warfare/

Economic Backdrop Technology for 2017

Backpedaling of Globalization (Part 1)

OrionX provides research into IT market sectors with a focus on AI, Big Data, HPC, Data Center, and IoT sectors. We see these as highly inter-related. We also seek to understand the economic environment that affects investment into IT sectors, and how these key IT sectors affect our economy and our world more generally in our current Information Age. This article is the first of two on the economic backdrop facing IT vendors and consumers.

Fundamentally, the main backdrop to global economies is digitization and the acceleration of the Information Age. While this naturally bodes well for the IT industry, it requires visionary and effective policies, investments, and regulations. Digitization promotes globalization. It also promotes automation. To understand how this will truly impact IT we need to take a deeper look at the interplay of digitization and global economic forces.

The last great era of globalization, during the Industrial Age, was powered by fast transportation with steamships and railroads at the end of the 19th century. And instantaneous communication was enabled with the invention of the telegraph and telephone. These technologies were key to the Industrial Age.

Scheduled Airline Traffic 2009, Credit: Jpatakol, CC BY-SA 3.0

Now, thanks to the rapid advances of semiconductor technology — doubling in power every two years in accordance with Moore’s law — we are in the Information Age. Fast networks, rapid data processing, and vast pools of storage are the foundational technologies supporting global supply chains, offshoring, and collaborative business across international boundaries. Information Age technologies have not only led us to the Internet, but to Smartphones, Social Media, Big Data, Artificial Intelligence and the Internet of Things.

The power of digitization has done more than give birth to new technologies — these technologies have caused realignment in politics, in economics, and in the world order. The Information Age has also given us the Euro, arguably hastened the demise of the Soviet Union, allowed India to regain historical prominence and enabled China to become an economic powerhouse — lifting hundreds of millions out of poverty. And on the other side of the coin, technology is also being used by governments to limit freedom of expression and was critical to the creation of the massive deregulated debt that led to the Great Recession at the end of the last decade.

These changes during this Information Age and the bulk of this globalization wave have all happened primarily within the space of a single generation, during just the last three decades. The pace has been accelerating with data and information doubling every couple of years. OrionX believes that there was more technological progress in the first part of this century than in the entire 20th century. Disruption and dislocations have been part of the game, with the old industrial models of large national enterprises, lifetime employment, and secure pensions collapsing during the last twenty years. And the pace continues to accelerate.

The postwar world order was not designed around the Information Age. Indeed, the concept of the nation-state that has predominated over the last few centuries was not designed with the Information Age in mind. This new era of globalization has decreased dependency on individual nations’ infrastructure, enabling worldwide sourcing. Many adventurous people from overseas have travelled to the US and other Western nations to study and then have gone on to create new enterprises in their host countries. World class teams can be quickly assembled across national boundaries. Although globalization has brought many of us together across these boundaries (and this is especially true in our IT community), it has also sharpened cultural differences and led to new and renewed conflicts, most notably between radical Islamists and the West, but also within Western institutions and nations as well.

Artificial Intelligence as the premier technology

AI is the killer application domain going forward. While it has been around as a research activity for over half a century it is now coming into widespread ‘industrial scale’ use due to advances in machine learning capabilities that are in turn enabled by fast hardware and Big Data. It is key to robotics and to drones. It is not only displacing workers in manufacturing but is beginning to upend knowledge work in many fields. It will be disruptive — both positively and negatively — in ways we cannot yet imagine.

Credit decisions, employment screening, health monitoring and diagnosis, matchmaking, advertising choices and copywriting, movie scripts, assisted shopping and travel planning are just a few examples of consumer oriented applications that are happening today. And we have not yet mentioned the “auto-automobile” or self-driving cars. As this technology rolls out it will drastically change our lifestyles, including commuting, and it will overturn the automotive insurance and parking industries. Many lives will be saved, most traffic jams eliminated, and insurance losses will drop by an order of magnitude.

Warfare is headed toward increasing utilization of drones and robotics. While today these systems have humans in the loop, fully autonomous systems are being researched by many nations. “There is absolutely an arms race in autonomous systems underway” says John Arquilla, professor at the U.S. Naval Postgraduate School. The substitution of robots for soldiers on the battlefield has the potential to save many lives, for both combatants and civilians. Conversely, it also presents the possibility for terrorizing civilian populations, as has already been imagined in many films.

Cyberwarfare is taking off and presents many challenges, with nations attempting to reach some sort of accommodation regarding what types of peacetime cyber snooping are ‘acceptable’. In a real war, the cyber battlefield will be the first locus of engagement in the effort to take down the opponents’ information-gathering capability and elements of their military and civilian infrastructure. Notably, cyberwarfare techniques are now actively being used to interfere in elections.

Backlash

World Bank protest, Jakarta, Credit: Jonathon McIntosh, CC BY 2.0

Every business function can be disintermediated, resulting in significant dislocation. Now we are experiencing a clear backlash against aspects of globalization in the developed world, primarily in Europe and North America. Those who found security in the industrial world have lost jobs and pensions. Good manufacturing jobs in the U.S. moved to China, or Mexico, or in the case of Southern Europe, were lost to German efficiency (including their openness to immigration), and the loss of some national sovereignty due to the Euro and common European Union regulation.

Nationalism is on the rise. The trend toward freer trade has halted and is headed in reverse. In the UK, which had stayed out of the Euro, the decision to fully depart the European Union was made by the voters, shocking the political establishment. Nationalist and populist candidates are polling strongly in Italy and France. Europe is still experiencing a banking crisis, exacerbated by the contradictions of the Eurozone. Austere policies and debt overhang have intensified the dislocations from the Information Age.

And in the US, a populist real estate mogul has conquered the Republican party and won the Presidency. He appealed to displaced workers with his nationalistic policies on trade and immigration, which are now being rolled out. Isolationism and the trend towards made in America are increasing, or at least there is an impetus toward more tariffs and more restricted trade deals.

President Trump is on a mission to bring manufacturing back from China, Mexico and other locales. Most of this is permanently lost, much more of it to automation (80% say two economists from Ball State University) than to offshoring, but what happens at the margins matters.

The trend with globalization had been toward larger trading blocs and deals, with the Eurozone as a single market as the exemplar and with proposals such as the presumably dead-on-arrival Trans-Pacific Partnership. Now the direction in the US and the UK is toward one-on-one negotiations with individual nations.

In the next article of this two-part series we will explore the outlook for 2017 in the different major global economic regions: North America, Europe, and Asia.