Snippings

 

You can probably remember your first taste of the meta verse back in the early days of second life. Who can forget such a compelling vision of the future as Wells Fargo’s “Stagecoach Island” or the hope for the future of the human race apparent in one of the online poetry reading sessions that I went to where avatars milling around in a mine craft style forest glade listened to utopian expositions on the interconnectedness of everything and the sunlit uplands that await us all once we are truly connected.

One thing that sticks with me from that time is a demo I saw at a financial institution that shall not be named. Not because I want to protect their image as valiant pioneers trailblazing across the newly minted territories but because it was a long time ago and I’ve completely forgotten who it was. Anyway I remember using a mouse to navigate my virtual self into a virtual bank branch where I found a virtual bank employee who proceeded to virtually annoy me by droning on about some credit card offer or other when I was trying to move money from one account to another (or whatever mundane bank activity I was engaging in). It was in colour and in 3D, but in every respect the experience was even worse than the web-based online banking they were using at the time. Now, of course, I realise that this was simply a reflection of the paucity of imagination amongst technologies such as myself. If you want a vision of the future, you need artists, not programmers who specialise in optimising parallel processing in graphics cards.

The central catastrophe of this scheme autism skua morph is is that as a customer I don’t want to go into a bank branch at all. I don’t care whether it’s a real bank branch or a virtual bank branch I just don’t want to go there. Embedded finance has delivered a much better version of the future where I go to do something I actually do want to do and via the miracle of Apis and micro-services the boring banking stuff gets done out of my field of view. I pull up my app and order a takeaway and it shows up at my door and somehow the payment gets done but I pay no attention to it and don’t care about it.

Similarly a supermarket video of meta verse shopping that was doing the rounds on Twitter a day or two ago displayed a similarly blinkered perspective. The consumer pushes a virtual shopping basket around a virtual supermarket while being shadowed by a sinister supermarket employee/political officer who chirpily steps in to advise on which wind by to go with the meat that you just purchased. No matter how nice the graphics are and no matter how skilfully the AI can make it seem to me that I’m being shepherded from shelf to shelf by Clint Eastwood or Sergio Aguero, the experience is dead. Real or unreal, I don’t want to go to the supermarket. I want to select some recipes from some suggestions and have the shopping service in the background source them and arrange delivery.

What’s important here is the distinction between virtual reality and hyperreality, between a digital simulation of the world and the construction of a world that existed only in the imagination. I’m not smart enough or visionary enough to know what the meta verse shopping experience should look like but if it is me putting on a headset to flog around the aisles of a virtual supermarket then that’s never going to gain traction. Why create something that is worse than the options we already have in front of us just so that it can be done in 3D?

Generally speaking, the idea that we will want to do things in the virtual world that are the same as the things that we do in the real world is ridiculous.

 

 

The words real and virtual no longer usefully describe the spaces available to us, the superposition of the mundane universe and the machine multi-verse.

In Marian Salzmann’s thought-provoking 22 for 2022, she talks about the sale of an NFT for cryptocurrency:

“In exchange for all those tens of millions of dollars, the buyer received a certificate of authenticity (guaranteed by blockchain) but not the work authenticated by it. Payment was in cryptocurrency, making the whole thing virtual. Did it really happen?”

This made me think: do we need some new words? We’ve inherited the words “real” and “virtual”, but they don’t seem to work properly in our soon-to-be disunited universe and metaverse.

Transactions that take place somewhere in the matrix, where I exchange bitcoin for a JPEG of the chimpanzee sunglasses are just as real as the transactions that take place in the supermarket around the corner from me. The transactions are all real but some of them take place in a mundane ecosystem, by which I mean an ecosystem that includes at some point physical being, and some of them take place in a virtual ecosystem, by which I mean an ecosystem that does not demand (or perhaps even imagine)

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Many of the BNPL users interviewed by Which? did not think of BNPL schemes as a form of credit. Instead, participants described the schemes as a ‘way to pay’ or a ‘money management tool’, rather than a credit provider.

From HM Treasury urged to crackdown on BNPL as consultation closes.

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In one of my favourite books “Money Tales” (Economica, 2007), Alessandro Giraudo looks at the emergence of paper financial instruments and tells how the great medieval trade fairs of Europe were gradually replaced by financial fairs where no actual trade took place except in money.

He explains that even after the main continental trade routes had shifted away from the north-south axis that had depended on the Champagne commodities fairs, the fairs continued to function as an international clearing house for paper debts and credits, as they had built up a system of commercial law, regulated by private judges and quite separate from the feudal social order.

Order was maintained without “police” because of the absolute necessity to maintain a “good name”, prior to the later third-party enforcement of legal codes by the nation-state.

Hello. New instruments but no new institutions, new technology beyond traditional law enforcement and a private reputation-based scheme that grew up to facilitate commerce where previously gold and silver had been the oil that greased the wagon wheels. It’s almost as if identity had become the new… no, let’s not get distracted

Giraudo goes on to tell how over time, the power of the Genoese bankers rose and they shifted the fairs from France down to Piacenza, near Milan. The Genoese had established the function of the banker as a money merchant and separated this function from that of the “merchant banker” with holdings. Imagine how the idea of paper replacing gold and jewels and spices must have seemed to the institutions of the time! Fairs in which no goods were exchanged but money was!

The finance and wealth based only on paper astonished the traditional Italian bankers, and those of rest of northern Europe too, but they all had to adapt to the new reality so as not to be overtaken swept aside by this technological revolution.

Those Paicenza money market fairs went on to become the largest in Europe from the end of the 16th and into the 17th centuries with bankers from Flanders, Germany, England, France and the Iberian peninsula converging four times a year to meet with the Genoese, Milanese and Florentine clearing houses. The clearing houses put down a significant deposit in order to participate in the fairs and in return they fixed the exchange and interest rates on the third day of the fair (this was when interest rate fixing wasn’t the thing it is today). In addition to the bankers, there were also money changers who also had to put down a deposit (smaller) to present letters of exchange, and there were also there were also representatives of firms and brokers who participated in the trading.

During such fairs, the participants tried to clear all of the transactions in such a way as to limit the exchange of actual coins, so it was net settlement system. Any outstanding amounts were either settled in gold or carried forward to the next fair with interest. This was the first structured clearing system in international finance and it lasted until 1627, when the Spanish Empire went bankrupt (again) causing serious losses to the Genoese bankers who were its principal financiers (and sadly for them had no access to a taxpayer-funded bailout).

(Spain’s gold and silver from the Americas never translated into a strong financial services sector and trade-led economic growth. When Philip III had become King of Spain and Portugal in 1598, Spanish commentators were complaining that instead of being used to stimulate industry and business, the treasure from the Americas had created an attitude that held productive work in contempt, while foreigners – Genoese, Dutch, Germans – ran Spain’s trade and finance to their own profit.)

As a result of Spanish default, the financial centre of Europe shifted to Amsterdam, where The Bank of Amsterdam had been set up in 1609. It was owned by the city and fully backed by gold and silver. It was, as the Financial Times notes, a highly trusted institution. As Adam Smith wrote of it, “no point of faith is better established than that for every guilder, circulated as bank money, there is a correspondent guilder in gold or silver to be found in the treasure of the bank”. This meant that Amsterdam had a very efficient system for inter-merchant transfers (ie, account-to-account transfers at the bank) and was developing new and innovative instruments including futures and options.

(Later still, Europe’s money markets moved on to London, but that’s another story.)

Why am I retelling this tale. Well, Giraudo observes that while geography and politics have a strong influence on the location of financial centres, the deciding element has always been the capacity to invent and use new financial techniques, and above all to create a dynamic sense of innovation. This is where, in my opinion, London and New York still excel and why they remain powerful financial centres.

But what if that capacity to invent new financial techniques is in the future better exploited in Kenya or the Far East or on the Internet? What if financial innovation slips its mundane anchors and begins to float free on the tides of cyberspace? In London, in the UK and in Europe we have to make sure that we have a regulatory climate that supports innovation in financial services in the new economy, not one that attempts to prop up the old one.

In April, the UK Treasury unveiled a host of measures it said would show that Britain is open to cryptocurrencies and blockchain technology (which are not, in my opinion, synonymous with innovation in financial services, a much wider spectrum) and the Chancellor, Rishi Sunk, said that “It’s my ambition to make the UK a global hub for crypto asset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country”.

What could these measures be? As the examples of Genoa and Amsterdam teach us, we need both a digital money infrastructure (ie, stablecoins) that is quite separate from the infrastructure for digital assets that might be used for speculation and we need and a digital identity infrastructure to support the ownership and trading of both.

I’ve said a few times that I think the Internet of Things is where mobile was a couple of decades back. Some of us had mobile phones, and we loved them, but we really didn’t see what they were going to turn in to. I mean, I was always bullish about mobile payments, but even so… the iPhone 6s that’s next to me right now playing “
Get Out Of Denver ” by Eddie & the Hot Rods out through a Bluetooth speaker is far beyond anything that I might have imagined when dreaming of texting a Coke machine to get a drink. We’re in the same position now: some of us have rudimentary Internet of Things bits and bobs, but the Internet of Things itself will be utterly beyond current comprehension.

Specialized elements of hardware and software, connected by wires, radio waves and infrared, will be so ubiquitous that no one will notice their presence

From 
The Computer for the 21st Century – Scientific American

That was Mark Weiser’s prediction of the Internet of Things from 1991. It seems pretty accurate, and a pretty good description of where we are headed, with computers and communications vanishing from view, embedded in the warp and weft of everyday life. What I’m not sure Mark would have spent much time thinking about is what a total mess it is. Whether it’s wireless kettles or children’s toys, it’s all being hacked. This is a point that was made by Ken Munro during his epic presentation of smart TVs that spy on you, doorbells that give access to your home network and connected vibrators with the default password of “0000”  at Consult Hyperion’s 19th annual Tomorrow’s Transactions Forum back in April. I’d listen to Ken about this sort thing if I were you.

Speaking during a Q&A session for the upcoming CRN Security Summit, Ken Munro, founder of Pen Test Partners, claimed that security standards are being forgotten in the stampede to get IoT devices to market.

From 
Security standards being forgotten in IoT stampede, says expert | CRN

We’ve gone mad connecting stuff up, just because we can, and we don’t seem concerned about the nightmare in the making. I gave a talk about this at
Cards & Payments Australia . The point of my talk was that I’m not sure how financial services can begin to exploit the new technology properly until something gets done about security. There’s no security infrastructure there for us to build on, and until there is I can’t see how financial services organisations can do real business in this new space: allowing my car to buy its own fuel seems a long way away when hackers can p0wn cars through the interweb tubes. I finished my talk with some optimism about new solutions by touching on the world of shared ledgers. I’m not the only one who thinks that there may be a connection between these two categories of new, unexplored and yet to be fully understood technology.

Although I’m a little skeptical of the oft-cited connection between blockchains and the Internet of Things, I think this might be where a strong such synergy lies.

From
Four genuine blockchain use cases | MultiChain

The reason for the suspicion that there may be a relationship here is that one of the characteristics of shared ledger technology is that in an interesting way it makes the virtual world more like the mundane world. In the mundane world, there is only one of something. There’s only one of the laptops but I’m writing this post on and there’s only one of the chairs that I’m sitting on and there is only one of the hotel rooms that I’m sitting in. In the mundane world you can’t clone things. But in the virtual world, you can. If you have a virtual object, it’s just some data and you can make as many copies of it as you want. A shared ledger technology, however, can emulate the mundane in the sense that if there is a ledger entry recording that I have some data, then if I transfer the data to you, it’s now yours and no longer mine. The obvious example of this in practice is of course bitcoin where this issue of replication is the “double spending problem” well known to electronic money mavens.

The idea of applying the blockchain technology to the IoT domain has been around for a while. In fact, blockchain seems to be a suitable solution in at least three aspects of the IoT: Big Data management, security and transparency, as well as facilitation of micro-transactions based on the exchange of services between interconnected smart devices.  

From 
IoT and blockchain: a match made in heaven? | Coinfox

 The idea of shared ledgers as a mechanism to manage the data associated with the thingternet, provide a security infrastructure for the the thingternet and to provide “translucent” access for auditing, regulation, control and inspection of the thingternet strikes me as an idea worth exploring. That’s not to say that I know which shared ledger technology might be best for this job, nor that I have any brilliant insight into the attendant business models. It’s just to say that shared ledgers might prove to be a solution a class of problems a long way away from uncensorable value transfer.

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This suggests there are unique determinants behind the high demand for euro banknotes, other than the development of the activity of the domestic economy (NGDP) and distinct from factors influencing other monetary assets/liabilities (M3).

From The paradox of banknotes: Understanding the demand for cash beyond transactional use:

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So does pot contribute to GDP? It does in Canada but not in the United States!

Neither Canada nor the United States include prostitution in GDP although the Netherlands does. The United States has higher GDP per capita than either the Netherlands or Canada but if we included pot and prostitution our GDP per capita would be even higher and would better reflect our true standard of living relative to these other countries!

From Does Pot Contribute to GDP? – Marginal REVOLUTION:

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When Francois Reihani opened La La Land Kind Café in Dallas three years ago, he knew immediately that it would be cashless.

“The main reason was for sanitary purposes,” Reihani said. “I’m a bit of a germaphobe, and cash is a very dirty thing. I wanted to keep it away from where we prepare food and drinks.”

Fewer than two miles away at the edge of Dallas’ nightlife neighborhood of Deep Ellum, Sky Rocket Burger had a different reason for refusing cash earlier this year. The place had two break-ins when the register was taken both times.

A nearby pizza joint, Serious Pizza, a common late-night spot wedged into a string of bars, has also switched to cashless payments in part to move the line of club goers along at a quicker pace.

From Cash is no longer king in the U.S., but will it ever go away? | American Banker:

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When New York fines the ice cream seller Van Leeuwen $12,000 for not equipping its stores to accept cash, thereby violating the city’s ban on cashless businesses, you have to wonder what the dynamic is. Presumably if the persecuted purveyor found it cost effective to accept cash instead of electronic payments, then they would. But presumably they made a calculation along the lines of the cost of a register and the wasted counter space and the cost of taking notes and giving change and the cost of the float and shrinkage and the employee time to count, bag and deposit cash is greater than fees for accepting cards.

If cash was cost effective for them, they would take it. It isn’t, so they don’t. If you force them to take it, then you are raising their costs.

A ban on cashlessness is, essentially, a tax. The city wasn’t offering to cover the cost of accepting the cash.

There are a variety of reasons as to why someone in New York might not have access to an electronic means of payment and there is no need to list them here, other than to note that for some people who do not have a bank account, the alternative of prepaid cards can be costly.

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AmEx noted that China’s bank cards in circulation rose to 9.03 billion, of which 91% are debit cards

From How are AmEx’s prospects in China shaping up? – Kapronasia:

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the share of nails in GDP dropped back from 0.4 percent of GDP in 1810—comparable to today’s share of household purchases of personal computers—to a de minimis share more recently

From The Price of Nails since 1695: A Window into Economic Change | NBER:

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