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PRIVATE KEY

What presidential hopeful Andrew Yang gets right—and wrong—about blockchain

Andrew Yang 2020
By Matthew De Silva
Published Last updated This article is more than 2 years old.

Andrew Yang is one of 19 Democrats who have declared their candidacy for president in the 2020 US election, but he is the only candidate so far who has incorporated blockchain into a major tenet of his platform.

An advocate for universal basic income, he proposes giving a $1,000 “Freedom Dividend” each month to every American older than age 18, assuming that they have graduated from high school and aren’t receiving other government assistance. “This would create two million new jobs in our economy,” he claims. “It would make children and families stronger and healthier and would help tens of millions of Americans transition through what is the greatest economic and technological transformation in our country’s history.”

This dividend, he has said, would “likely” be facilitated by blockchain.

Before his foray into politics, Yang founded a test prep company, which he sold to Kaplan, as well as Venture for America, a fellowship program that posts recent college graduates at startups. He lacks broad-based appeal and he’s highly unlikely to win the Democratic nomination, let alone the presidency, but his political platform could influence future discussions about income inequality and potential job losses due to automation.

That’s why it’s particularly frustrating that his portrayal about what blockchain can do isn’t quite right.

Blockchain, the data structure used by bitcoin, is notoriously energy-intensive and slow, and even if a blockchain is robust against hacking, that doesn’t mean its users are secure. Yang has parroted the idea that blockchain can enable trust, transparency, and security, but in practice, that’s not been true.

In 2018, $1.7 billion of cryptocurrencies were stolen from trading platforms or swindled from investors. Indeed, there’s little reason to put US dollars, or any other currency, on a blockchain. The Federal Reserve certainly knows that. And yet, Yang wants his “digital social currency” to run on a blockchain.

If Yang’s overexuberance about blockchain ended there, it would be fine—but it doesn’t. Yang has also embraced the “blockchain, not bitcoin” attitude that became popular over the last few years, expressing confidence in bitcoin’s “underlying technology,” but skepticism about the prices and viability of cryptocurrencies. In a Facebook AMA in July, Yang perpetuated the narrative that blockchain is some kind of technological elixir, suggesting that it “could enable secure voting.”

Yang isn’t 100% to blame for being wrong about blockchain’s usefulness for UBI, or voting, or any other application. Other business leaders and media have made the same mistakes.

Blockchain’s premise is open, public networks for, well, just about anything. And the brilliant—foolish?—part is that you don’t need to trust any intermediaries. It’s Facebook without Mark Zuckerberg, Uber (the platform) without Uber (the company). But virtually every time one of these projects is scrutinized, the “blockchain” component falls short.

The Jordanian refugee camp that distributes aid on a blockchain? Centralized, and essentially a database. The West Virginian pilot that used blockchain for the 2018 midterm elections? Same thing. Walmart’s blockchain for food provenance? Yup.

At some point, we have to acknowledge that these are just databases (perhaps with a slight twist), and that’s okay, especially if they improve upon outdated solutions. But a US presidential candidate touting the “power of blockchain” seemingly adds fuel to the fire of misinformation. It’s just like Ohio’s claiming to accept bitcoin for taxes—upon closer examination, it’s just not accurate.

That’s not to say that everything about Yang’s digital asset policy proposals is bad. There are some positive signs.

For instance, as president, he says he would promote legislation that “[clarifies] the tax implications of owning, selling, and trading digital assets.” Yang also wants to define which federal agencies have jurisdiction over which kinds of crypto assets and he recognizes the need for consumer protections. These are vital improvements that could strengthen the US cryptocurrency industry.

On the whole though, Yang’s love affair with crypto should be regarded with healthy skepticism, just like blockchain projects themselves. Yang’s campaign did not reply to repeated requests for comment.

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REGULATORY WATCH

NY judge considers whether credit card purchases of crypto are cash advances

Customers at Chase Bank filed a proposed class action lawsuit last year after being slapped with cash advance charges for purchasing cryptocurrencies. The issue will soon come before a Manhattan judge, and may help determine the legal treatment of digital coins.

Please send news, tips, and Freedom Dividends to privatekey@qz.com. Today’s Private Key was written by Matthew De Silva, and edited by Sarah Kessler. Better a diamond with a flaw than a pebble without.

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