Lex Sokolin, a CoinDesk columnist, is Global Fintech co-head at ConsenSys, a Brooklyn, N.Y.-based blockchain software company. The following is adapted from his Fintech Blueprint newsletter.
The news cycle is obsessed with a global technology competition between China and the United States. Whether we look at artificial intelligence, 5G, blockchain or the Internet of Things, these next generation platforms are supposed to be the battleground between the world’s latest economies. The fighting is getting unfair. We can look at India and its band of over 50 Chinese apps, including the super app WeChat, or we can analyze the Donald Trump treatment of TikTok, put up for a fire sale and justified with jingoistic rhetoric.
However, competition in the next century is going to be far more complex than intellectual property ownership. It is going to be waged over multinational open-source networks, reintegrating finances and economies into a digital global superstructure. We have to develop clearer ways of thinking about this competition, and in this entry we will discuss one such framework. But first, why is there such extreme positioning over technology assets by both China and the U.S.? The simple answer is pain, and the economic havoc wrought by the coronovirus epidemic on the world.
See also: Lex Sokolin – DeFi Protocols Should Act More Like Fiduciaries
The West has had the worst quarter in recent economic history – down 10% both in the U.S. and the eurozone. I’ve written before how the shock of opening up to capitalism in the USSR led to a 45% GDP collapse over half a decade, resulting in life expectancy decreasing by 10 years for the average Russian due to alcoholism and violence. We aren’t going to see something of that scale in the U.S., but we will see continued social unrest, deep racial tension and restructuring. Perhaps this is productive stress. More likely, it is a pressure cooker with a hefty price.
China is holding up a bit better in the coronovirus environment, based on stronger national control over people, technology and narrative. The country’s second quarter saw 3.2% relative GDP growth (though arguably the first-quarter collapse was sharper in China than elsewhere). China has expanded control over Hong Kong, and made big investments into artificial intelligence and blockchain, which the West continues to view in a generally negative light. Chinese fintech giant Ant Financial is planning a $30 billion initial public offering (in Hong Kong) at a $200 billion valuation.
And now these tensions come together in a farcical way around TikTok.
Most people see TikTok as a way for teens to socialize and negotiate popularity. It creates memes and celebrities through algorithmic recommendations. This isn’t Amazon or Well Fargo, by comparison.
To Donald Trump and the American national security apparatus, it’s a Trojan horse pulling private data and various functional information from a global user base of 1.5 billion…