The blockchain attracts interest from former White House officials

The blockchain industry is attracting professionals from many different walks of life. Joining those from traditional finance are Former White House officials, and the most recent appointment is Jamie Smith, who has joined BitFury as Global Chief Communications Officer. Smith previously served as Special Assistant and Spokesperson for President Obama, and White House Deputy Press Secretary.

“I believe in the Blockchain and the transformational power of this technology. And you should too.”
— – Jamie Smith, Bitfury Global Chief Communications Officer

Founded in 2011 by Valery Vavilov and Valery Nebesny, the BitFury Group is a Bitcoin Blockchain infrastructure provider and transaction processing company, that builds ASICs, PCB boards, servers and data centers.

Smith’s role will be to effectively manage all global media and communications, create awareness of blockchain technology, and promote the peer-to-peer money movement. “I am deeply inspired by the power of the Blockchain, BitFury’s leadership in this extremely innovative ecosystem, and the possibilities of this groundbreaking technology. I am delighted to be a part of the BitFury team,” she said.

Vavilov is equally as thrilled to have Smith on board. “Jamie’s respect and passion for the media and innovative technology are the perfect fit for BitFury. With her leadership, we look forward to telling the BitFury Blockchain story to the world.”

In a post on the BitFury website, Smith stated that it became apparent to her that blockchain technology can make positive changes on a global scale, after a great deal of research. She encourages readers to imagine a world with blockchain ideas that may “sound crazy,” such as sending money as easily as sending an email, and a world in which e-commerce sites no longer risk being hacked.

Another White House employee, former Senior Advisor for Mobile and Data Innovation The White House Office of Science and Technology Policy Brian Forde, was recruited by the Massachusetts Institute of Technology’s (MIT) Media Labs in April. In his new role Forde works with researchers across the Institute, and leading experts from other universities, in addressing some of the challenges in creating a safe, stable, and secure digital currency.

The Director of Media Labs, Joi Ito, wrote in his blog that “as Bitcoin continues to gain momentum and capture the interest of entrepreneurs, hackers, businesses, policymakers, and academics, we have decided to launch an Initiative at the MIT Media Lab, with participation from faculty and students from across the Institute, focusing on Bitcoin and more generally cryptocurrencies.”

The MIT Media Lab was founded by MIT Professor Nicholas Negroponte and former MIT President Jerome Wiesner in 1985. It is an interdisciplinary research laboratory devoted to projects at the convergence of technology, multimedia, sciences, art and design.

“The goal of this initiative is to bring together global experts in areas ranging from cryptography, to economics, to privacy, to distributed systems, to take on this important new area of research. The effort will reach across the MIT campus, and we look forward to including collaborations with leading experts around the world.”
— – Brian Forde, MIT Media Labs

Ito disclosed that having Forde on board is fortunate, as the development of their research agenda will require his assistance. “Brian’s experience mainstreaming emerging technologies from the rural mountains of Nicaragua to the White House will be invaluable as he tackles the challenges of digital currency — one of the most promising emerging technologies for the next 10 years.”

Forde’s role at the White House involved determining how the Obama administration can leverage open data and emerging technologies to address the president’s national priorities. "While at the White House, Brian led extraordinary initiatives to leverage the power of tech and innovation to make the future of America ever brighter," said the White House advisor for technology, Todd Park, in an MIT media release. "The impact of Brian’s work will continue to be felt by Americans for years to come."

Forde disclosed that as a technologist, MIT Media Labs is one of the most exciting places to work. “The innovations that come out of the Media Lab have made a truly global impact. I look forward to working with the faculty and students and collaborating with developers, academics, entrepreneurs, governments, and nonprofits to help us get closer to a more robust and viable digital currency that could have tremendous benefits around the world.”

According to Forde, blockchain technology is at a pivotal point and tremendous opportunities are arising for developing nations and governments to increase access to critical financial services for all, create more transparent democracies, and develop services that dramatically reduce barriers for global commerce. “My hope is that we can provide the support needed for the digital currency community to help realize these predictions,” he added.

Dr Harald Malmgren is another former White House advisor proclaiming the blockchain’s benefits, but he also describes potential risks. In an interview with Zero Hedge, he stated that the interest shown from governments and private companies is in using a worldwide transactional system, such as the blockchain, and stems from a desire to have additional data available to them.

"The people now intensively working on a mechanism for a cashless society are building it around the concept of blockchain technology. In essence, there would be a single ledger that records each expenditure or revenue event (the block), linking them chronologically with every other subsequent purchase, sale, or revenue event in a recorded chain."
— – Dr Harald Malmgren

Malmgren refers to the CEO at Digital Assets Holdings, Blythe Masters, who he describes as “ultimately pursuing a global blockchain, which is consolidated at any moment in time. Everything you have and everything you owe are visible.”

This is a clear risk for the former advisor. In this cashless framework, regulators would try to oversee daily activities more actively. "If your funds are being used in a statistically abnormal manner then they can start routinely asking you for an explanation, if it was drug money or money laundering or purchases of regulated products like alcoholic beverages or firearms," he said.

"A complete ledger system would place everyone inside a precisely defined, monitorable box with defined set of rules of behavior."
— – Malmgren

Malmgren thinks that not only would this raise privacy and surveillance concerns for individuals, but it would also redefine aspects of social governance. “If local or national governments found themselves in financial crisis, they would not be limited to European style bail-ins of savings accounts. They could tap personal or family assets directly through the ledger system. Your balance could be altered by government simply by adding one new block to a long chain.”

“One can understand the benefits, but there are potential negative consequences for individuals and businesses, and the Social Contract between citizens and their governments would be threatened.”
— – Malmgren

Masters is pushing for what is known as a “permissioned” blockchain, which is controlled by a central authority. This is fundamentally different to the blockchain that started it all, the decentralised and public Bitcoin Blockchain.

Bitcoin is censorship resistant, there is no central authority for governments to target, and there is no way for any central authority to alter balances or change the transaction history.

In December 2010, donations to WikiLeaks were blocked by the Bank of America, VISA, MasterCard, PayPal and Western Union, in response to the release of secret US diplomatic cables.

WikiLeaks was able to find a way around this issue by accepting donations in both bitcoin and litecoin. The bitcoin address listed on the WikiLeaks site has received over 3,901.19679484 BTC, which is the equivalent of US$1,722,873. The amount could well be higher, as the whistleblowing site also provided individually-generated bitcoin addresses to donors upon request.

Malmgren also states that a global ledger could have an impact on banking and investment management circles. It’s common practice in finance to use the same assets for re-collateralization, known as rehypothecation.

Banks and brokers can use client assets that have been posted as collateral, such as a house in a mortgage, to back their own transactions and trades. In the US, rehypothecation is limited to 140 percent of the underlying asset.

The practice has been named as a primary factor in the subprime mortgage crisis, and the global recession that followed. In 2007, rehypothecation accounted for half of the activity in the shadow banking system. As the collateral is not cash, it does not show up on conventional balance sheet accounting.

The International Monetary Fund calculated that US banks were receiving over US$4 trillion worth of funding by rehypothecation, much of it sourced from the UK where there are no statutory limits governing the reuse of a client’s collateral. It has been estimated that the underlying original collateral was worth only US$1 trillion.

Malmgren sees the unalterable aspect of blockchain technology producing discomfort for investors as “No asset could be used for more than one transaction. No asset could be used twice for increased spending or investment leverage.”