Posts from policy

What Problem Are We Trying To Solve?

Pro-Publica has an excellent interview with Jeff Kosseff, the author of The Twenty-Six Words That Created the Internet, a book about Section 230 of the Communications Decency Act.

Those 26 words are:

“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

In the Pro-Publica interview, Jeff makes a fantastic point:

I think it’s possible to reform Section 230. But there are a few barriers. First, we haven’t agreed on what the problem is. There are very different conceptions of what is wrong. Half of Washington thinks that there should be more moderation and that the platforms should be more restrictive. The other half thinks that the platforms need to be less restrictive, and in many cases say they shouldn’t do any moderation at all.

Also there’s this: If you’re saying that there should be more moderation and less harmful content, the big problem with that is that we still have the First Amendment.

With elected officials all clamoring to enact Section 230 reform, we are in for a mess if we don’t start with the problem we are trying to solve. I have not yet heard any elected official or staffer clearly articulate what exactly they want to achieve with Section 230 reform, except to earn political points with people who don’t actually understand the issue very well, like the New York Times.

This point, again made my Jeff, expresses my personal fears about Section 230 reform:

Both sides are to a certain extent under the illusion if you got rid of Section 230, that would magically fix all of their problems.

I worry that the compromise is going to be this jumbled-together mess of a bill that does not make any sense.

In my view Section 230 is sort of like what Winston Churchill said about democracy:

Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…

Section 230 is certainly problematic in many ways. But when you sit down and really think about alternatives, it becomes clear that it is better than any alternatives that have been suggested.

#policy#Politics

Twitter and Trump

I heard the news last week that Twitter had permanently banned Trump and thought “oh my.”

Sure it is wonderful news that the lies, the hate, the awfulness that is the current President of the United States will no longer be available on Twitter (where I am still a shareholder) and no longer in the White House very soon.

But as a very wise person texted me Friday morning:

Do you think it is appropriate? Do you think it is problematic that they have this much power?

Yes, I think it is problematic that Twitter has this much power. Not only are they silencing Trump, they are taking away his tens of millions of followers, and they are prohibiting all of his followers from seeing his tweets.

We should be careful what we wish for. This is a slippery slope we are heading down.

It is long past time that we move away from centralized applications to protocols.

If Twitter was a protocol, Twitter the app could ban the President from using its application and could block his tweets from being available in its app. But Trump could use another Twitter protocol client and his followers could as well and all of that social graph would still be available to them.

That is the way the web works. That is the way email works. That is the way social media should work as well and it is high time we start moving there.

This should be a warning sign to everyone in DC; the Senators, the Representatives, the folks leaving the White House and the folks entering it. He who kills the king becomes the king.

It is time to force the big centralized apps to open up. It is time to force the mobile app stores to open up. The longer we wait the worse this will get.

Update: My partner Albert posted his thoughts on this topic last night and I agree with them. You can read them here.

#policy#Politics

How Not To Regulate Innovation

The Secretary Of Treasury, in his last month in office, is giving us a textbook case of how not to regulate important technology innovation. The issue is “unhosted wallets” and how regulated exchanges and other “hosted wallets” interact with them.

Let’s start with why this is important. Our current financial systems are old, creaky, expensive, and do not serve enough people. According to a 2017 survey by the FDIC, 25 percent of U.S. households are unbanked or underbanked. That is close to 100mm people, mostly black and brown. This is a big deal. This is a piece of the structural inequity that exists in the US and around the world.

Technology can, will, and should change this. When a bank account can simply be a wallet on our phone or computer, it should be massively less expensive and much easier for anyone to have one. And when that wallet can connect to any other wallet or bank and send, receive, sell, buy, etc, as easily as a browser can connect to AVC.com, then you have the architecture for an open financial system that is several orders of magnitude less expensive and more available than what we currently have.

What I have just described is how blockchains and cryptocurrencies work today. You can download a cryptocurrency wallet onto your phone, you can send some Ethereum to it from your Coinbase account in the cloud (called a “hosted wallet” and/or “exchange”), and then you can send that Ethereum to anyone else using any other crypto wallet. All of this is built upon open protocols in the same way that the web was built on open protocols. It is completely and totally interoperable, like the web or email, unlike our current financial system.

The crypto sector is building a new financial system, that requires much fewer “middlemen” taking a piece of the transaction, that anyone can adopt and use by simply downloading some software onto their phone, and that is secured with state of the art technology.

But the Treasury Secretary and his advisors are concerned about bad actors using this new open global financial system to do bad things. That is a legitimate concern, but it turns out that only about 2% of transactions that go between regulated exchanges and hosted wallets and unhosted wallets are “illicit” according to Chainalysis.

So in late December, the Treasury Department issued a notice of proposed rulemaking seeking to make the rules around sending cryptocurrencies to unhosted wallets much more restrictive than cash.

The notice of proposed rulemaking is a long-standing approach to regulating new things. But this notice of rulemaking is not like any other. It was shortened to 15 days from the customary “at least 30 days and often much longer” and it was issued in late December making comments due yesterday. That means that comments were due over two holiday weeks in the midst of a global pandemic. And then the Treasury Department intends to wade through all of those comments and issue a rule before it leaves office in a couple of weeks.

That is madness and no way to regulate an issue at the very heart of a new open financial system that is poised to open access and massively reduce the cost of financial services for everyone.

One can only come to one conclusion about the Secretary’s intentions here and it is that this was done intentionally to stifle debate and discussion and jam bad regulation through on his way out of the door.

USV and many others in the tech sector, venture capital sector, and crypto sector have issued comment letters opposing this rulemaking. Our comment letter is here:

I hope the Secretary and his advisors come to their senses and realize that this is no way to regulate important new technology. This would be a terrible legacy to leave office with.

#blockchain#crypto#policy#Politics

Open Up Instead Of Break Up

In the wake of the news yesterday that the FTC plus 46 states and a few other locales sued Facebook for being a monopoly, I want to, yet again, argue for a different, more modern, and more powerful regulatory approach to tech monopolies. I first posted this a year and a half ago, and have reposted it at least once since.


There have been many calls to break up the large Internet monopolies; Amazon, Google, Facebook, Apple, etc.

Breaking up a large monopoly feels like a very 19th/20th century move to me.

I would prefer that politicians and policy makers think about opening up as the better intervention.

A good way to explain this is to go back to the architecture that Twitter used in its early days when there were many third-party Twitter clients. Imagine if Facebook, Instagram, Twitter, LinkedIn, etc were protocols, not applications, and there were many high-quality clients to participate in these networks.

Then the clients could innovate on things like content filtering, promotion of high quality content, business model, etc

If we are going to “break up” these large social media platforms, I would urge elected officials and regulators to think about pushing them to move from platforms to protocols instead of just ripping them apart.

We could do the same thing with search. Our portfolio company DuckDuckGo has built a nice search business by building a different user interface on top of one of the two leading search indexes. If we made it easier and reliable for others to innovate on top of the core search engine, then there might be many more options in search.

In mobile, a good first step is to open up the app stores and allow the browsers to have the same access to the operating system as native mobile apps.

In commerce, if I could checkout as easily everywhere as easily as I can on Amazon, there would be more competition for my shopping dollars.

I think you get the idea. It is very true that the big Internet services have built centralized monopolies and have consolidated their market positions. We do need more competition in these core services. And the best way to do that is to force them to open up their services, not break them up.

#policy

Expand E-Rate To Low Income Households

E-Rate is a program put in place in the 1996 Telecommunications Act to expand Universal Service Fund fees to schools in order to help them upgrade their telecom infrastructure. Telcos charge customers Universal Service Fund fees so that they can provide “universal service”, originally aimed at rural and other locations that were/are not profitable to service otherwise.

E-Rate has largely been successful in helping schools move from no internet, to DSL and low bandwidth internet, to cable and fiber over the last twenty years.

But now we have the realization that remote, blended, and hybrid learning models, brought on by the pandemic and likely here to stay in some form, require something more. They require that EVERY child needs a reliable high bandwidth connection to the internet from their home.

School districts all over the country have been scrambling for the last nine months to raise money from charitable sources so that they can provide hot spots and other ways to get kids internet in their homes so they can attend school. I have participated in a number of these campaigns and they have been heroic in many ways, but it is still not enough.

The FCC can do something simple and powerful. They can do it now. They can expand E-Rate to include low income households who need reliable and high bandwidth internet so that their children can attend school.

I would like to see them do that asap.

#hacking education#hacking government#policy

Digital Dollars

I have written about stablecoins a bunch here at AVC. I believe cryptocurrencies that are not highly volatile are important for use cases like e-commerce. I explained why here.

So we need crypto assets that are price stabilized and one of the best ways to do that is to peg a crypto asset to a fiat currency like the dollar. You do that by fully reserving the asset with dollars.

The two most popular digital dollars are USDT (Tether) and USDC. There is almost $20bn of circulating supply of USDT and just over $3bn of USDC.

There has always been some concern that USDT is not fully reserved. I share that concern. I am more confident that USDC is fully reserved and it is the digital dollar that I hold and use.

We got some big news yesterday about USDC which is that the VISA card network is going to “help select Visa credit card issuers start integrating the USDC software into their platforms and send and receive USDC payments.”

I think this is going to give more payment networks and financial services platforms the confidence to also integrate USDC. I could imagine USDC having a circulating supply of the current size of Tether by this time next year. We will see.

There are concerns for those, like me, who are big fans of digital dollars. A few members of Congress yesterday proposed a bill requiring stablecoin issuers to be banks. I appreciate that our elected officials want to provide for consumer safety and confidence. But forcing all of this innovation into the banking system is the surest way to kill it that I have ever heard of. Maybe that is what they want to do. We cannot allow that. The crypto sector and innovative financial services companies like VISA will need to spend time on the Hill educating our elected officials on what good regulation looks like and what bad regulation looks like. All we seem to be getting out of DC right now is on the bad side.

Finally, I should mention that while we are debating the role of digital dollars here in the US, China is rolling out its own digital Yuan. Goldman Sachs estimates that over a billion people will be using the Digital Yuan within a decade. I think that is way too pessimistic.

I think everyone who uses fiat currency right now will be using digital/crypto versions of these fiat currencies within a decade. The only question is which ones we will use the most. If we want the Digital Dollar to be in the top two or three, we had better get behind the ones that are out there and support the issuances of new ones too.

#blockchain#crypto#policy#Politics

Crypto Wallets Are Not Bank Accounts

We learned last week that the US Treasury wants to regulate crypto wallets like bank accounts. On the surface, one can understand that temptation. If people store, send, receive, and sell crypto assets in crypto wallets, then surely they should be regulated like bank accounts.

Except that is only one use case for a crypto wallet. It happens to be the primary use of crypto wallets right now but it is not likely to be the primary use of crypto wallets in a decade.

Regulators need to think of crypto wallets like web browsers. They are software applications that open up access to the decentralized internet and over time they will reduce our reliance on applications like Facebook, Google, Amazon, etc. But only if they are allowed to exist without crushing regulation, like we treated the web broswer when it came out in the mid 90s.

Brian Armstrong, the founder and CEO of Coinbase, pointed this out in a series of tweets last week and these two are particularly good examples of ways that crypto wallets are used that are not like bank accounts:

These are just early use cases for crypto wallets that don’t resemble bank accounts. There will be many many more soon if we don’t strangle crypto wallets with suffocating regulation.

Crypto will eventually lead to a decentralized internet but the first industry it is decentralizing is finance. It reminds me of the web browser that started in media. The issue with decentralizing finance first is that regulators are tempted to regulate crypto like it is just finance and that could not be more wrong. And it will take everything the industry has to push back on this temptation.

#blockchain#crypto#policy

Link 230 Protections To Opening Up

The latest charade of bringing Jack and Zuck in front of Congress to yell at them reminds me that our elected officials and regulators don’t have a plan for how to properly regulate social media. Jack and Zuck probably do have a plan and if they play their cards correctly, they will be able to use regulations to lock in their dominance for many many years to come. That should scare us all.

So what would a good plan look like?

My partner Albert laid it out plainly and simply in this post a while back and I thought I would recirculate it.

Give a Section 230 like protection to companies in return for providing a complete set of enduser APIs. In other words, require Twitter, Facebook, YouTube etc. to be fully programmable in order to have their liability limited.

https://continuations.com/post/619477235088457728/the-social-media-triangle

It is really simple. Allow third parties to build interfaces on top of these networks if they want to maintain section 230 protection. Those new interfaces will allow massive user choice in terms of algorithms, curation, moderation, and more.

We need 21st century forms of regulation for 21st century problems. And we are not seeing much of that from our regulators right now, sadly.

#policy#Politics

Educating Electeds

A number of members of Congress sent a letter to the Office of Comptroller of the Currency (OCC) on Tuesday. I have embedded it below but readers via email may need to click here to read it.

Letter to the OCC on Fintec… by CoinDesk

These elected officials are correct that way too many people in the US are unbanked or underbanked. They are also correct that community banks and minority owned banks are closing at a rapid rate, which is contributing to these alarming unbanked and underbanked numbers.

However, I think that the OCC and, more importantly, the crypto industry, owe these elected officials an education on how crypto can address these important issues and why it is not a distraction from them.

In the letter, the members of congress mention “the immediate needs of millions of at-risk individuals who have not yet received an economic stimulus check and/or cannot deposit their funds in a bank.”

If the United States was developing (as is China), a digital currency stablecoin (a digital dollar), then those millions of at-risk individuals would have been able to receive their economic stimulus funds via any one of the popular mobile apps that support or will soon support digital assets, like Coinbase, Square, PayPal, Robinhood, and many more.

It would have been less expensive (by an order of magnitude or more) and much simpler to get funds to these at-risk individuals with blockchain based assets vs outdated technologies like paper checks.

I am not taking a swipe at these well-meaning elected officials. I am saying that the crypto sector needs to sit down with them and their staffs, pull out their phones, have them do the same, and send them some money. And then talk about regulations that will accelerate the adoption of these new technologies among the at-risk communities instead of what we have now which are regulations that are holding all of this progress back.

#blockchain#crypto#policy#Politics

Universal Access and Choice

Our current investing thesis at USV is about expanding access to knowledge, wellness, and capital. We believe that these are core human needs and that opening up access to them is both good for society and also good business. Our approach to these challenges is centered on lowering the costs of these services and increasing competition to provide them.

Often society’s answer to providing universal access is to grant a monopoly. Look at cable services in the US. We granted local franchise monopolies in return for a commitment to build out the market and serve everyone. Look at our K12 system in the US. Everyone can go to school for free but you have to go to the school in your town, even if it’s much worse than the school in the next town. Look at Medicare in the US. Everyone over 65 can get Medicare. But everyone gets the same coverage even if they have vastly different medical needs.

These efforts are all great successes. They have provided needed services to the vast majority of society. But they are monopolies. To see them any other way is wrong.

I strongly believe in equity for all humans, but I also believe that choice is incredibly important. It keeps everyone honest. It keeps costs in check. And it is central to ensuring equity for everyone.

I started thinking about this during a debate with my kids and their friends this summer about making college education free for everyone. I wondered whether that would just entrench the current ridiculously expensive model of college education in the US. And whether there might be a better way of making sure everyone can access a high quality higher education experience.

It is tempting to say “we should standardize on this and agree that we will all pay for it and make it available to everyone.” How can you argue with that?

And yet we know that approach leads to systems that don’t change, don’t adapt, cost too much, fail us, and frustrate us.

This is the reason I am so drawn to the idea of a universal basic income. I can’t honestly understand how we would structure it, how we make it sustainable, and how we actually all agree to do it. But the idea of spending our money ensuring that everyone has the means to access the essential human needs instead of trying to provide these services makes a lot of sense to me. Imagine if we stop providing these services and use all of that money to give people to ability to pay for them.

#policy#Politics