ChatGPT & SDCs - Genies best kept in the lamp?

Digitalization of services is becoming the mantra of advancement – just about everything we use in daily life is now digital and connected. Our digital smart phones give access to our digital banking Apps. Our WiFi grants access to our entertainment channels and services we use to access goods and services – Amazon, Supermarket home delivery, Netflix, Sky etc. Our landline phones are heading the same way with the BT Digital Voice programme.

If we apply for a job its odds on we use an online portal and its equally likely our application is filtered by application tracking software designed to scan resumes for keywords and weed out the ones that don’t match the job description (which itself is often computer generated and so heavily loaded with buz words that it is difficult for the actual demands of the post offered to be identified). The list goes on and grows day by day

Now we have a new service – An AI that can create original content, capable of writing articles, content, code, and many more things. The output from this can take many forms; text, code, images, videos and even in its embryonic state is blurring the line between original thought and automated digital creation in a way that increasing numbers of people use to present as authored original works and in counterpart many cannot distinguish from personal effort and endevour.

Enter ChatGPT.

Now lets add a further digital "advancement" and goal – SDC’s. State Digital Currencies. What do these creations offer us?

I asked the ChatGPT AI what it thinks the benefits and risks of SDCs are in under 1,000 words...

Here is its reply:

"In this article, I will discuss the three biggest benefits of state digital currencies.

1. Improved Financial Inclusion: One of the most significant benefits of state digital currencies is their potential to improve financial inclusion. Many people around the world, particularly those in developing countries, do not have access to traditional banking services. This can make it difficult for them to participate fully in the economy and access financial services such as loans or insurance. State digital currencies could provide a way for these individuals to make payments and receive remittances without needing a bank account. This could help to reduce poverty and inequality by providing access to financial services for those who may not have had it before.

2. Lower Transaction Costs: State digital currencies could also significantly reduce transaction costs, making it easier and cheaper for individuals and businesses to make transactions. Traditional payment methods often involve intermediaries such as banks or payment providers, which can result in high fees and slow transaction times. State digital currencies, on the other hand, can eliminate the need for intermediaries, reducing fees and transaction times. This could be particularly beneficial for low-income individuals and small businesses, who may be disproportionately affected by high transaction costs.

3. Improved Security and Transparency: State digital currencies can also offer improved security and transparency compared to traditional payment methods. Digital currencies are more secure and transparent than traditional payment methods, reducing the risk of fraud and corruption. Transactions made using state digital currencies can be tracked and verified using blockchain technology, which can help to reduce the risk of fraudulent activity. This could help to increase trust in the financial system and reduce the cost of fraud for businesses and governments.

In conclusion, state digital currencies have the potential to offer significant benefits for individuals, businesses, and governments. The improved financial inclusion, lower transaction costs, and improved security and transparency are just three of the many potential benefits of state digital currencies. While there are also potential drawbacks to their adoption, it is clear that state digital currencies are a topic worth exploring further for governments around the world. As with any new technology or innovation, it is essential to carefully consider the potential benefits and drawbacks before making a decision on their adoption.

In this artical, I will describe the three biggest risks of SDCs.

1. Cybersecurity Risks: SDCs are vulnerable to cyberattacks, which can result in theft or loss of funds. This is because SDCs are stored in digital wallets that are connected to the internet and can be accessed remotely. Hackers can exploit vulnerabilities in the digital infrastructure that supports SDCs to gain unauthorized access to wallets and steal funds. Furthermore, the use of SDCs could increase the potential for cybercrime, as the volume and value of transactions increase. To mitigate this risk, governments will need to invest in robust cybersecurity infrastructure and protocols that can protect SDCs from cyberattacks.

2. Privacy Risks: SDCs could pose significant privacy risks, as they enable governments to track and monitor transactions in real-time. This level of surveillance could compromise individuals' privacy and freedom of financial expression. For instance, governments could use SDCs to monitor and censor transactions they deem as being politically or socially undesirable. Moreover, the use of SDCs could make it easier for governments to conduct mass surveillance, as all transactions could be monitored and analyzed. To address this risk, governments will need to establish strict rules and regulations that protect individuals' privacy rights.

3. Financial Stability Risks: SDCs could pose risks to financial stability if they are not properly designed and managed. For example, if SDCs are not backed by sufficient reserves, their value could be volatile, leading to significant fluctuations in exchange rates and financial instability. Additionally, if SDCs are widely adopted, they could disrupt the traditional banking system, which could pose risks to financial intermediation and monetary policy transmission. To mitigate these risks, governments will need to carefully design and implement SDCs, in consultation with relevant stakeholders, including central banks, financial regulators, and the private sector.

In conclusion, SDCs offer several potential benefits, such as improved transactional efficiency and greater financial inclusion. However, they also pose significant risks, including cybersecurity, privacy, and financial stability risks. To reap the benefits of SDCs while mitigating these risks, governments will need to carefully design and implement them, in consultation with relevant stakeholders, while establishing robust regulatory frameworks that ensure the protection of individuals' privacy and financial stability."

So, the view expressed is that the adoption of SDC results in improved inclusion for everyone, lower costs & improved security. But comes with Cyber and Privacy risk and a threat to the financial stability of the existing banking system.

Now for my (a human) view: DON’T DO IT and Pause AI Development

Why?

Firstly: as I have previously commented - the almost none stop state money printing since the 2008 financial crises has already stretched the value of State Fiat Money to destruction. Moving to SDC would posibly make things "easier" for some but at the same time totally disenfranchise whole demographic sections of the population, the old and poor who do not have access to digital tools and live day to day using “real money”.

SDC’s effectively carry additional risks to those highlighted by the AI, including the risk of, and ability for, governments to make money a tool of state control - little different to Nectar Points or Air Miles . Reward tokens totally controlled and given value by their originator for playing their game and staying “on message”.

Don't believe it? Consider that China is already showing how an individual's digital foot print plus dependence on digital money gives huge ability for those holding power to direct, reward or punish - good boy / girl? have a free latte on us. Done something we don't like - deduct 20 credits... Been to a demonstration we like: plus 20 credits, One we don't: minus 100, and your travel card is cancelled...

Secondly: Privacy matters and is by definition personal - in Oxford dictionary:

/ˈpraɪvəsi/ [uncountable] the state of being alone and not watched or interrupted by other people.

An all knowing executive be it governmental, corporate or an amalgamation of the two is the Polar opposite of the dictionary definition

Thirdly: over 20% of worlds economy is delivered by the existing financial services sector – that represents many millions of jobs. 2008 and COVID have already shown what happens when this sector is destabilised. Open Banking has started to gain traction but a simple question – who makes money from it how many jobs does it protect, how many does it put at risk?

Fourthly: an act by a hostile state could instantly disrupt all digital communications. Say an unstable actor (such as North Korea) detonated a device 250 miles above Kansas – what would result? No need to guess as its been both experianced and modelled. A 1.4 Megaton bomb detonated 250 miles above Kansas would have minimal ground effect in terms of property damage and loss of life, you would not see a flash nor feel a shockwave, but the EMP effect would destroy most of the electronics that were turned on and unprotected across the entire Continental United States. The same blast over say Moscow would knock out unprotected digital equipped throughout most of Western Europe.

Result ?

For most people as all commercial digital equipment that was turned on at the time that lacked EMP protection (most of it including just about all commercial Internet connectivity and server farms) failed:- pandemonium. With SDC having supplanted “real money” we can add the likley instant destruction of stored personal wealth.

In short - Civil & Commercial Ragnarök.

And finally, I offer the Hal 9000 effect .. Do we really want to give up the key to the pod bay doors to an increasingly powerful, self aware and so judmental AI?

We should listen to Elon Musk and Steve Wozniak and others who call for pause for thought – a pause that for me should last a lot longer than 6 months. But in truth the Genie is out of the bottle. and the choice lies with us to make now – do we make the three wishes for progress and an easier digital existance and deal with the unintended consequences?, or command the genie return to lamp?

For balance I asked ChatGPT what we should do with this Genie – the answer is instructive …

“As an AI model, I don't have personal preferences or desires, so I cannot make wishes or return a genie to a lamp. However,it's essential to understand that the idea of making wishes and having them granted without consequences is unrealistic, and it's essential to consider the potential impact of our actions and decisions. In real life, we need to work hard"