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Why Private-Owned Drones May Destroy The State Monopoly On Force

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A drone is a tool in an entirely new category. People can’t automatically be assumed to understand even the short term implications of drones. Right now it is primarily state operators that are designing and implementing drones, and even rich and obsessively militarized hyper-powers such as the United States or China are finding out that a pervasive infrastructure of drones is not what it appears to be.

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Drones are essentially like a new ecological system. Once you start implementing automated or robotized systems, the displacement simply does not stop. There are incentives to replace every facet of your goal realization system with more automation. It isn’t just a matter of changing bombing and refueling missions with equivalent drone operations. Before long, even the bombs carried by the drones will become de-facto interactive micro-drones. And that’s where the old metaphors break down.

At this moment, we use humans to do work in the world. All work related choices are constrained by the human physical frame, and by human necessity. That forces all societies in a very limited framework. If we decide to take out people from the hierarchy of needs and services, and replace them with initially equivalent automated entities, the new entities will have an important impact on the embedded supply and service chain in which they are introduced.

For example (and this is relevant to either drones or all forms of governmental, corporate or societal automation) introducing a new service checkout at McDonalds completely changes the essential nature of experience at McDonalds, to such a degree that it immediately endangers the essential business model of McDonalds. Turnover of staff achieves lightning speed and customer loyalty disintegrates. Likewise, if Amazon starts running package delivery through servicing drones, any number of start-ups can do the same and force rethinking why companies work and what they do.

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The Drones Will Make Their Own Decisions

Package delivery droneStaggered refueling with automated drones, which can make their own logistical choices based on tactical data in the area, will confound humans. Drones make decisions, based on the goals that have been programmed in their in their software. In other words, drones will make up their own minds. And you can be sure that the synthetic preferences of the drones will involve bypassing human authority or even relevance.

That has very serious implications for states. States are entities embedded in a large ecology of needs, services, and abilities, which exist by virtue of their ability to dictate terms. The primary function of the state has too often been to keep the relatively poor in a state of placid satisfaction, to cultivate stability for the relatively rich. In other words, the state exists primarily to  maximize the interests of the powerful, using all available resources.

With drones (and automation in general) this equation almost immediately breaks down. Going beyond the fairly obvious conclusion that the currently emerging generations of automation will be very effective in irreversibly destroying jobs, there aren’t many political or financial incentives to retrain unemployed and functionally traumatized people in ways that benefit the actual stakeholders in society.

Also read: The Robots Are Coming to Take Your Job

Humans will not be considered in terms of function, profit or loyalty – but in terms of costs, hassle and potential to sabotage. Automation is simply better in all those regards, and only a very small percentage of remarkably talented people will continue to pass the “Pepsi-test” of societal value as measured by those who actually make decisions.

It’s Technically Easy to Use Drones to Bypass Law Enforcement

State force has always depended on armed and entrenched elites with questionable moral traits. Recently we have seen how the behavior of police forces, in the United States, comes increasingly under scrutiny. The behavior of the police constitutes evidence for the problem of the state – we pretend that the state serves our democratically determined interests but we can see, as plain as the light of day, that the state agenda is a pretty narrow one.

There is a great demand for constraining the actions of law enforcement forces, especially when they victimize people. Every innocent civilian shot dead in some street, in the US or anywhere else, will reverberate in gnawing hunger to hold the force apparatus of the state accountable. Accountability will be ensured for a while with camera drones, but that phase won’t last long. It’s technically easy to mount retaliatory means on drones, or to use drones to bypass the enforcement net that tries to constrain the behavior of people (think for example of automatic and anonymous delivery of illegal goods by drone).

The vast majority of people still thinks that they have been served a fair deal in terms of how the state operates – the Mussolini maxim, “the trains run on time, the supermarket shelves are full.” Most people conclude  that as long as they are fed, comfortable and relatively safe, they should not leave Big Government and Big Business alone.

That will end. A pervasive ecology of drones will allow us to see more and act upon the knowledge gathered, and it will radically reduce the ability of the state to arbitrarily project force to secure its interests. Private citizens will watch and, based on what they see, they will make their own judgment calls, using their own sense of right and wrong, weighing their own needs and projecting whatever force they have at their disposal – with the click of a button.

And all this will start happening a lot sooner than most people assume. The next few decades may not be very easy.

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Bitcoin

Power Consumption for Bitcoin Mining Is Now Ranked 61st in the World

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Bitcoin Miners
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Bitcoin prices have been towering in the past couple of weeks. This is cause for celebration for users who have heavily invested in the cryptocurrency; but, it appears the value of bitcoin is not the only thing that has hit the roof in 2017. Bitcoin mining energy consumption has also reached new heights.

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A research study conducted by PowerCompare—a U.K.-based company for energy comparison tariff—found that the average power used to mine bitcoins this year has already gone beyond the annual energy consumption for some 159 countries. In particular, the global average power spent on bitcoin mining has far outstripped the energy consumption in Ireland and a couple of African countries.

This new study was based on data from Digiconomist, whose current estimation of power used to mine bitcoin hovers around 30.14 TWh annually. This figure is way above Ireland power consumption that currently stands at 25 TWh yearly.  In fact, recent research from Dutch Bank ING found out that one bitcoin transaction consumes sufficient electricity to power an average household for a whole month.

At this rate, if bitcoin miners were a single country, it would be positioned 61st in the world based on power consumption, comparable to Slovakia and Morocco. PowerCompare has already predicted that if the trend continues, bitcoin mining will expend the entire world’s electricity by February of 2020!

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Why bitcoin mining is increasing power consumption levels

What makes bitcoin mining an energy black hole?

Apparently, it is the computational requirements that process the complex cryptographic problems that miners must solve to be rewarded with the cryptocurrency. Just like other notable cryptos such as Ethereum and Litecoin, Bitcoin depends on miners to validate transactions performed in their respective blockchains.

To verify transactions, miners are required to solve complex mathematical problems, which on becomes increasingly difficult as more and more miners join the mining bandwagon. The more byzantine the cryptographic problems, the more the processing power that is needed to solve them.

In the case of bitcoin—the most popular cryptocurrency—a multitude of miners now make it absolutely necessary to use ASICs (Application-Specific Integrated Circuits) which consume considerable amounts of electricity. At present, ASICs have been designed to provide far more efficient computations, both in terms of the hash rate and power consumption when compared to CPU or GPU mining.

But the ASICs haven’t really resolved the hurdles of power consumption.

Ideally, the use of ASICs meant that the total time required to validate new blocks drastically reduces too. This hasn’t happened because of the way the bitcoin protocol was conceived. Apparently, the mining difficulty in bitcoin ensures that the total time taken for generation of new blocks must be kept constant.

As a matter of fact, the Bitcoin network automatically alters the difficulty level for bitcoin mining to ensure the discovery of new blocks every 10 minutes by miners based on two factors. First, there is the global block difficulty that forces valid blocks to have a hash value that is below the target to ensure the difficulty level is maintained.

Second, the number of miners that are actively participating in the mining process has been soaring, meaning the difficulty level has remained constant for a while now. Also, the mining difficulty automatically adjusts after every 2016 blocks on the Bitcoin network. Depending on how many users were actively mining – together with their combined hashpower—and the time it takes to find the 2016 blocks, the difficulty can either go up or down.

As the mining difficulty increases, miners should acquire more powerful hardware to accommodate for the adjustment which again increases the computational electricity. It is also worth noting that there is no maximum mining difficulty that has been set for the Bitcoin network. There is a possibility that the mining difficulty will continue to rise until all the Bitcoins are mined have been mined by the year 2140.

This means that power consumption in Bitcoin is not likely to decrease in the near future.

Challenges of mining Bitcoins

Here are some challenges of Bitcoin mining:

#1: Environmental hazards

The massive growth of cryptos has set up an exponential demand for processing power. The inordinate amounts of power required to mine bitcoins make it an environmental hazard since much of the earth’s electricity is still generated from greenhouse-gas-generating fossil fuels. This implies that bitcoin mining could be contributing to the climate changes and global warming.

#2: Stumbling block for mass adoption

The bitcoin cryptocurrency was conceived as a decentralized, peer-to-peer and trustless currency free from regulations of government agencies and financial institutions such as banks. Unfortunately, the adoption rate is discouraging. This can partly be attributed to the high energy consumption costs.

A recent study conducted by researchers from the HINUI (Hamilton Institute at the National University of Ireland) found that the cost of Bitcoin mining on the commodity hardware at present far exceeds the price of the rewards. In fact, Bitcoin mining has now been left to the big players who have the money to buy expensive ASICs with some of them leasing their hardware to small players in the so-called cloud mining.

#3: Rise of illegal piracy

In order to work around the hurdles of power-intensive requirements of bitcoin mining, some users have resorted to using dirty tricks to obtain the computational power from other people’s machines. A recent study published by Futurism found that Pirate Bay has covertly been testing a Javascript mining app on their website which allocates a huge volume of their visitors’ CPUs for purposes of mining the cryptocurrencies.

While the website in question was developed to help users in illicitly downloading files such as games, movies, and music, the JavaScript app hijacks the users’ CPUs to mine cryptocurrencies which is illegal.

Conclusion

The rise of bitcoin values is a cause for celebration in the crypto universe. It means that the entire global community is beginning to appreciate the value of cryptocurrencies in the world economy. However, mining energy consumption is soaring at an alarming rate. The quicker we find mechanisms to make bitcoin and other cryptocurrency mining electricity use “greener,” the better it would be for the Blockchain technology that is often heralded as the next internet.

Featured image courtesy of Shutterstock. 

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Op-Ed

Cryptokitties Made Us Realize These Biggest Industry Challenges

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You may not be in the loop but Cryptokitties have just surpassed the major distributed cryptocurrency exchange such as EtherDelta to become the largest smart contract on the Ethereum network by gas consumption. As of writing this, the Cryptokitties are accounting for slightly more than 14% of the Ethereum’s transactions in over 1,500 blocks according to ETH Gas Station.

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This is a staggering volume of traffic for an online game that, on the surface, appears quite bland. But the popularity of this cryptocollectible has underscored one of Ethereum biggest downsides which were never envisioned: lack of scalability. According to Etherscan, Ethereum transactions have increased six-fold since the game’s release on 28th November 2017.

Already some investors are raising concerns that this frivolous game is crowding out more genuine and serious business users in the network. But how exactly have Cryptokitties phenomenon congested the Ethereum network?

Well, in “Cryptokitties Made Us Realize These Biggest Industry Challenges” we dive deeper to explore how the Cryptokitties phenomenon has contributed to Ethereum’s scalability challenges. Let’s jump in.

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Challenges of Cryptokitties

Here are some challenges the Cryptokitties phenomenon presents for the Ethereum ecosystem.

#1: Scaling challenges

While the sensations of Cryptokitties is great for Ethereum adoption, the pressure it has placed on the Ethereum blockchain means that developers have to work out a scaling solution. The traffic is making it extremely difficult for users to play the game, and many transactions such as buying and selling of cats are taking a lot of time to process with some demanding multiple attempts.

All of these intricacies are related to the Ethereum blockchain’s throughput limit that is set at roughly 15 transactions per second. Until the throughput limit is expanded, Cryptokitties have to contend with the current 15 seconds which is shared among other popular smart contracts as well. There’s no doubt that Cryptokitties has become popular within a short time and raising the bar for gas auctioning in Ethereum.

With Ethereum protocol soon hitting its capacity, research into new scaling options to help the distributed technology scale is needed soon. But this scaling issue isn’t the only problem Ethereum protocol has to contend with.  Cryptokitties is just one viral game that hasn’t even spread across the tech universe. In fact, it was just launched a couple days ago (28th November)!

If Cryptokitties (one viral game) can slow down the entire Ethereum network, what will happen when the blockchain grows to accommodate real-world apps? Obviously, a long term solution is required. The Ethereum community can’t afford to have scaling challenges whenever a great smart contract hits the decentralized web.

#2: Divergent opinions about Ethereum growth

Just as is the case with the bitcoin scaling problem, we’re starting to see cracks in the Ethereum blockchain community as each side takes diametrically opposing sides about how to scale the network. For some time, bitcoin has been experiencing near or sometimes full blocks with transactions taking nearly 20 to 40 minutes to be validated on the blockchain.

Some Ethereum enthusiasts are already suggesting that miners should increase the so-called gas—a measure of computational effort in Ethereum—limit (just as is the case with bitcoin’s block size limit).  Ideally, the gas limit determines the kind of operations such as the addition of numbers, calculation of hashes or even sending transactions that you can compute in Ethereum.  Each operation has a fixed set of gas attached to it.

By setting the gas limit, we’ll be capping the maximum amount of gas which can be included in Ethereum block. With a maximum of gas in place, the block size and the speed of the network will be greatly be impaired. Ideally, this proposal is hinged on the philosophy that developers shouldn’t decide on the ideal gas limit but market actors such as the miners, the applications, and the investors.

As you are aware, the block size and speed of the network are at the core of Ethereum protocol. Altering any of them completely does away with Ethereum’s vision. Also, Ethereum miners are unlikely to agree to this proposal as it has its own undesirable effects. As of writing this, the Ethereum network uncle rate is already peaked at over 30% compared to the network DoS (Denial of Service) attacks.

This implies that at present, every third block gets orphaned. Now raising the gas limit is most likely going to make the current mining situation even worse. Without considerable enhancements on how large blocks will be processed using current implementations and decentralized in the network, increasing the gas limit isn’t feasible just yet.

While high-end systems will still be able to validate the heavy blocks within several 100 milliseconds, low-end systems are already gobbling up few seconds to validate their transactions and distribute the block.

#3: Other ICOs are at a risk

The Ethereum gas market is an unknown equation that allows users to increase gas and ensure that transactions such as the sale or breeding can take place in time. At present, Cryptokitties cautions users of keeping an eye on gas consumption, to avert high prices. An acutely high gas price would, in fact, expedite the transaction but make it flop completely.

The lackluster performance and gas speculations may make users abandon the Ethereum network completely. Bitcoin has been attracting speculative investments lately because of the unprecedented high prices that have been hovering north of $15,000. Now the presence of Cryptokitties and their network demands places hundreds of ICOs implementing their projects on Ethereum network at risk.

The specifics of the cryptographic computation may imply that smart contracts will never quite work to the levels anticipated by investors in the ICOs. This means that these ICOs are likely to fail because of the scaling challenges presented by Ethereum network.

Bottom Line

It’s no secret that Ethereum—and its smart contracts—has literally revolutionized applications. However, the launch of Cryptokitties has raised more controversies regarding the future of Ethereum protocol. The Ethereum protocol was once viewed as a perfect replacement for Bitcoin. But at these rates of network jamming, users are becoming cynical.

While I am not a futurist, one thing is certain: there are tell-tale signs of Ethereum fracture. Amidst all the hype and uncertainties about the scaling problem, it’s only proper for you to continue speculating before investing in Cryptokitties.

Featured image courtesy of Shutterstock. 

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Market Overview

Uncertainty in Saudi Arabia as Dozens of Princes are Arrested

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Just a few days back we were impressed by the steps taken by the Saudi Crown Prince Mohammed bin Salman. He played a major role in allowing women to drive and in allowing women to attend sports events from next year. He, then, announced the construction of a hi-tech city ‘NEOM’, which was a move to generate additional income for Saudi Arabia and wean the economy away from its dependency on oil.

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Key observations

  1. Crown Prince Mohammed bin Salman cracks down on corruption
  2. Dozens of Prince, former ministers, business executives and government officials arrested
  3. A move widely looked as consolidation of power
  4. Uncertainty has increased
  5. We withdraw our previous recommendation of buying the ETF KSA

We expect crude oil prices to rally in 2018, which should benefit the oil-rich Kingdom in the short-term. As both the short-term and the long-term picture started to improve, we expected Saudi Arabia to make a quick recovery. In order to benefit from this, we had recommended a long position in KSA iShares MSCI Saudi Arabia Capped ETF, which has a significant exposure to Saudi Arabia. However, the events of the last few days have forced us to reassess our call.

The Rise of the Crown Prince

Prince Salman, also known as MBS was an obscure figure just a few years back. However, since his father King Salman ascended the throne, he has quickly risen in stature. In June of this year, the King named Salman as the crown prince and removed the then existing Crown Prince Mohammed bin Nayef of all his duties by a royal decree.

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This move cleared the way for MBS to ascend the throne if the octogenarian King Salman abdicated his throne. With power in his hands, it was expected that the new Crown Prince will implement his Vision 2030 plan with ease. However, last week, MBS made an aggressive move to consolidate his power further.

On Saturday, the King formed a new anti-corruption committee with the Crown Prince as its head. Within hours of its formation, the committee arrested 11 princes, 4 former ministers and hundreds of high ranking officials on allegations of corruption. They are being housed at Riyadh Ritz-Carlton, which has been closed for outside public.

The Saudi Council of Ministers said that the arrests were ““based on specific evidence of criminality and acts that were intended criminal transgressions and resulted in unlawful gain.”

However, experts believe that with this move, the Crown Prince wants to purge all rivals and fire a warning shot at any other possible dissidents.

Will this move ensure that Saudi Arabia stays corruption free?

Unlikely. In Saudi Arabia, the royal clan is more or less above the law. The sources of their income are never revealed and for years they have enjoyed government patronage in various businesses.

Even the current purge is unlikely to reach the royal family members who are loyal to MBS.

In fact, in 2016, MBS had purchased a 440-foot yacht priced more than $500 million. Neither has he disclosed the source of his funds nor will be asked about it.

The recent anti-corruption drive will only shift the power from his rivals to the members who are close to the Crown Prince.

Young Saudi population in support of the anti-corruption drive

The Saudi millennials are likely to support the arrests. They have long despised the unwritten immunity extended to the royal family.  The current move offers a confidence that no one is above the law and it will benefit the nation in the long-term.

Absence of opposition is not a positive development

The Crown Prince has stated that he will steer the nation towards a moderate version of Islam, unlike his predecessors who have followed the hardline. With most of his rivals arrested, decision making can become faster and will help MBS to push aggressive reforms.

However, the involvement of Saudi Arabia in Yemen, the aggressive confrontation with Iran, and the boycott of Qatar have all been inappropriate decisions taken by MBS. With no opposition in future, he may make a blunder that can be detrimental to the nation and also to the region.

Investors are Likely to Be Wary

Vision 2030 can be successful only with the support of the private sector. With some of the top businessmen like billionaire Prince Alwaleed bin Talal, chairman of investment firm Kingdom Holding; Amr al-Dabbagh, chairman of builder Red Sea International; and Nasser bin Aqeel al-Tayyar, founder of Al Tayyar Travel arrested, their businesses are likely to be affected.

Additionally, the foreign investors are unlikely to be interested in projects until this whole drama comes to an end. This can delay many existing projects.

The royal unity will be tested

For the past many decades, power has been divided among the various branches of the Saudi royal family. This has kept them together.

However, the recent purge is unlikely to go down well with the royal clan. Though voices may be silenced now out of fear, it is likely to rear its head sometime in the future. A bloody coup or power struggle can’t be ruled out.

We don’t want to invest in uncertainty

Considering the uncertainty, we would like to withdraw our recommendation to invest in the future growth of Saudi Arabia. The risks far outweigh the potential benefits. We shall keep a close eye on the developments and reassess our call if things change for the better. For now, please don’t invest in the ETF KSA.

Will the Princes park their wealth in cryptocurrencies

Thousands of bank accounts have been frozen in this anti-corruption drive. Saudi Arabia’s attorney-general Sheikh Saud Al Mojeb has said that the current exercise is only Phase one. So, we may expect more such drives in the future, especially if MBS faces any opposition to his decisions.

The combined wealth of the persons who have been arrested totals more than $33 billion. The remaining members of the royal family and wealthy businessmen are likely to remain on the edge. Considering the situation, it is reasonable to expect at least some money to find its way into cryptocurrencies.

Featured image courtesy of Shutterstock. 

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