Digital Assets & Society | U.S. Government Is Investing in R&D
Feb 17, 2023
The United States Office of Science and Technology Policy recently published a Request for Information which “seeks input to shape a whole-of-government effort on research and development related to digital assets and distributed ledger technology.”
The federal government recognizes that responsible innovation in digital assets could provide significant benefits for the American people.
Those building digital asset technology claim that crypto and other web3 innovations will bring more liberty and prosperity to our lives.
The idealists speak of cutting out greedy middlemen in industries like finance and entertainment, making critical supply chains like food and medicine more transparent, and enabling more people to own valuable things like real estate and intellectual property.
I’m optimistic that digital assets will make the world a better place - but cautiously so.
One question looms large.
Are we building these innovations to help everyone or only some people?
Throughout history, we’ve seen how new technologies - from the cotton gin to the federal highway system to mortgage-backed securities - can help the overall economy while hurting large groups of people.
We have also seen how certain federal policies (such as redlining, accredited investor regulations, and parts of the tax code) have helped privileged Americans build more wealth while the majority of society gets left behind.
It’s a positive sign that the federal government is investing R&D funding to better understand digital asset innovations.
Hopefully this leads to public-private partnerships that leverage the power of the technology in ways that help all Americans.
As America’s public servants research digital assets and look to develop blockchain technologies in ways that can help people, here are four social equity trends to watch:
1. How are social impact organizations using digital assets to advance their missions?
Nonprofits with private funding have more freedom to experiment with new technologies than the publicly-funded government. As the public sector embarks on a research agenda, will more innovators in the social impact sector take action?
Some nonprofits are already utilizing digital assets for fundraising. DAOs are enabling groups of people to own and manage assets that they might not otherwise be able to purchase, such as a community center or a piece of land.
Philanthropic foundations are beginning to use decentralized finance (DeFi) to manage their endowment and disburse funds to their grantees. Verifiable digital identities are emerging as a way to unleash more civic engagement in local communities.
2. Will more women and underrepresented communities use digital assets?
Will DeFi and related technologies remain the domain of risk-takers, ponzi scammers, and tech bros? Digital assets present consumers with an opportunity to improve their financial condition, but only a small part of our society is currently participating in this economy.
The main reason is digital assets high barrier to entry. The user experience for most blockchain applications is pretty bad right now. Trustworthy educational resources are hard to find.
Solving this participation challenge feels like a chicken-or-egg problem. Are onboarding and user experience improvements needed to bring more and different types of people into web3? Or do we need a more broader cross-section of society participating in this ecosystem before the user experience will improve?
More diversity is required to represent the perspectives of all people in the design of new products in finance, entertainment, medicine, real estate, and other industries that affect more than just white guys.
Will blockchain companies make efforts to diversify their product development teams? Can the crypto industry attract more diverse workers to shape the contours of this technology?
3. Who will represent the interests of marginalized communities when crypto regulations get written in Washington?
With digital assets, it’s hard to find anyone who is speaking up for the needs of the underserved in our society. This is a huge opportunity for social equity, as lower income people could gain the most from the economic disruption that digital assets can bring.
The Biden Administration and Democratic leaders in Congress have not used their platform to encourage crypto regulation that levels the playing field for all Americans. By not taking action, are Democrats limiting the upside for the middle and lower income communities that elected them to power? Or are they purposefully slowing the pace of innovation in the name of social equity?
Republicans now control the agenda in the House of Representatives. Will they use their power to shape digital asset regulation in a way that levels the playing field for all Americans?
4. Will web3 technologies distribute wealth more evenly across America’s economic classes?
An uneven amount of the wealth generated from web1 (public Internet) and web2 (smartphone applications) has been concentrated in the Bay Area and Seattle. This week, Bloomberg reported that Amazon is taking, on average, 50% of sales from sellers in its marketplace.
In line with the web3 principles of decentralization and community ownership, many digital asset startups are distributing ownership equity in their companies to users. Some are also promising to give creators a larger share of revenue compared to web2 platforms like YouTube, Instagram, and the App Store.
How will this burgeoning battle between web2 and web3 business models impact wealth distribution across geographic areas and economic classes? Time will tell.
The Start of the Story
The story of digital assets is just beginning. If we want crypto, DAOs, NFTs, the metaverse, and DeFi to make a positive impact in the real world, then we need to be thoughtful about how we are building these things.
This is a great time for the federal government to invest in research to better understand how this new technology can impact our society.
Chuck Cummings is building Bankless Consulting’s social impact practice to help organizations implement web3 technology for real world impact. He also serves as the Strategic Advisor to the Do Good Institute at the University of Maryland. Chuck lives in Baltimore and likes to ride his bike.