Crypto’s Upgrade Anxiety – POLITICO

With help from Mohar Chatterjee

US regulators could soon gain much more influence over the world’s second-largest blockchain network, a prospect that has been the subject of growing concern in the crypto world in recent days.

Ethereum developers are moving closer to a tentative date for a long-awaited network upgrade called “the Merge,” which will update and speed up the way it processes transactions.

When that happens, fears are growing in the industry that the post-merger network will be more susceptible to government scrutiny — especially Treasury Department sanctions.

Currently, a small number of services that manage Ethereum deposits on behalf of their owners are positioned to have an outsized influence where new blocks of data will be recognized by the network after the merger. (Think of it as roughly analogous to the power delegated to large asset managers like BlackRock to cast corporate governance votes on behalf of clients.)

Most of these major services are subject to US jurisdiction. So, despite crypto’s promise of decentralization, they may collectively have the power to block sanctioned addresses from the Ethereum network.

And the day of reckoning is approaching: The merger is currently planned for 15 September.

Many crypto firms have already blacklisted sanctioned addresses from accessing their blockchain-based services, but the fear in the industry is that post-merger US regulators will take enforcement a step further, forcing the custodian services to block transactions involving sanctioned addresses from executing on Ethereum -the blockchain at all.

Such a policy could take several forms, and it is not clear how most major service providers will respond.

(Last week, Brian Armstrong, CEO of Coinbase, which runs one of the most popular services, said on Twitter (that he would be inclined to give up that part of the business entirely rather than block certain transactions from the Ethereum blockchain.)

Several factors contribute to the uncertainty about how a pressure on sanctions after a merger might play out. Pro-compliance and anti-compliance factions of network operators may try to join forces on the other camp to enforce their preferred approach, or the camps may separate, with each managing its own version of the Ethereum blockchain.

Some researchers argue that this uncertainty can make it difficult for regulators to know what to do, thereby increasing the chances that they will do little.

Jeff Dorman, chief investment officer at digital asset manager Arca, argued that the feared sanctions pressure is unlikely to materialize anytime soon, if at all, given a general pro-tech drive among US regulators.

And if US-based operators were stymied by sanctions requirements, Dorman predicted, activity would quickly move overseas.

“Others would step in,” he said, “to fill that void.”

As the federal government works to implement more “reliable” AI in application processing, asylum seekers may be caught up in the debate over what that means.

The US Citizenship and Immigration Services office revealed its use of an artificial intelligence tool last week that relies on machine learning and computer graphing to identify plagiarism in asylum applications – often an indication of fraud. The Asylum Text Analytics tool scans the “digitised narrative sections” of asylum application forms, looking for “common language patterns”. The Department of Homeland Security did not provide further details about the type of language patterns.

I spoke with UC Davis linguistics researcher Jeremy Rud about the AI ​​tool, and his concerns that it would create more obstacles for weary asylum seekers.

Rud called USCIS’s use of the text analysis tool “alarming for several reasons”. The legal standards for what an asylum seeker’s life experience narrative should look like are rigid and already difficult to meet, especially given linguistic and cultural differences, he explained.

“If we have these incredibly high expectations for how a narrative should read, sound and be performed, but still consider colloquial language or common language patterns to be fraudulent, this will create impossible standards for credible fear claims in asylum applications,” said Rud.

DHS did not respond to a request for comment. — Mohar Chatterjee

The Urban Legend of Social Media Politics: While the influence of social media giants on the country’s politics is fresh in the mind, here’s a digital futures-friendly longread from Benjamin Wofford on Wired Backchannel that delves into the paid TikTok influencers who sell not just products, but political ideologies.

In “Meet the Lobbyist Next Door,” Wofford describes the business model of adtech startup Urban Legend, which has carefully recruited “700 social media influencers who have varying degrees of allegiance from audiences totaling tens of millions.”

Ahead of the midterm elections, Senate hopefuls like John Fetterman see the value of courting the youth vote on TikTok. And Urban Legend is certainly well positioned to offer its sponsored content services to political “power brokers” in Washington who are “quietly moving toward a full embrace of influencers.” — Mohar Chatterjee

In Albuquerque, New Mexico, a family-owned business is ready to rent autonomous security robots.

… And while we’re on autonomy, a decentralized blockchain company has unveiled a new type smart contract whose legal provisions are activated without human interaction or bots.

Not to get too existential, but what does that mean for a robot knows himself? That’s what researchers at Columbia’s Creative Machines Lab are finding out.

Meanwhile, Chinese researchers have found one new machine learning technique to restore overcompressed social media videos.

And ICYMI: 3D printing is find a home in the defense industry.

Stay in touch with the entire team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Mohar Chatterjee ([email protected]); Konstantin Kakaes ([email protected]); and Heidi Vogt ([email protected]). Follow us on Twitter @DigitalFuture.

Ben Schreckinger covers technology, finance and politics for POLITICO; he is a cryptocurrency investor.

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