A brief memo with supporting insights from ZeMing M. Gao and related articles on zemgao.com and his books BIT & COIN: Merging Digitality and Physicality (bitandcoin.net)
Core Statements:
- The US stands at a crossroads where true leadership in blockchain and the next generation of the internet, the true New Internet, is urgently needed.
- The current digital infrastructure is ill-suited for the AI revolution.
- The speculative cryptocurrencies and feigned decentralization hype are, at best, a misrepresentation of the true power of blockchain technology.
- The current Web3 developments are built on incorrect foundations.
- The original Bitcoin blockchain according to Satoshi’s vision is far more than ‘coins’. It is the foundational technology to build a true New Internet with a truth layer and a built-in “Internet of Value” (IoV), both at the base layer of the Internet rather than ad hoc applications added upon it.
- The New Internet is a necessary infrastructure to harness the power, and peril, of AI.
- Due to its revolutionary and fundamentally different architecture, the New Internet will give the US a distinctive and systemic advantage over authoritarian countries like China. It is a unique historic opportunity.
- Such leadership is necessary not only to compete globally (notably with China’s rapid tech advances), but also to ensure foundational integrity and sovereignty in the digital sphere of humanity.
- However, without coordinated redirection, the current Internet and blockchain are moving away from a truly integrated New Internet, not toward it.
- The stake is extremely high for both the US and the world. It is the difference between failure to meet the digital challenge in the new AI age and success in harnessing the power of the digital realm. It is also the difference between an opaque techno-feudalistic digital society and a transparent and free peer-to-peer communal digital society.
Below, we extend the above core statements with multiple insights. However, even these multipage highlights touch only the tip of the iceberg of some deep subjects.
Key Insights
1. Blockchain as Infrastructure, Not Speculation
We warn against viewing blockchain simply as a speculative vehicle typified by current crypto hype on assets lacking real utility. The crypto hype is an unfortunate result of an epic act of subterfuge plotted by a few but blindly followed by many. The movement hijacked and perverted the true utility of Satoshi’s blockchain. It even did the same to Satoshi’s true identity, which is a deep subject for another occasion.
The real blockchain has been suppressed, along with its potential of a truly decentralized, vastly scalable, extremely low-cost, reliable, and highly computable information infrastructure that serves as a global layer for data, commerce, and digital identity [1].
The U.S. must shift from speculative crypto markets toward meaningful technologies and protocols supporting real-world applications, transparency, and compliance with the rule of law [2],[3].
2. Corruption and Deviation of BTC and Most Cryptocurrencies
Within the broader context of blockchain’s promise and the critical need for US leadership, we strongly criticize the current state of Bitcoin (BTC, not the original Bitcoin) and the wider cryptocurrency ecosystem for fundamentally betraying Satoshi Nakamoto’s original vision.
While Bitcoin was intended as an open, decentralized, peer-to-peer electronic cash system, BTC, and most other cryptocurrencies, have instead devolved into vehicles for pure speculation and get-rich-quick schemes with no regard to actual economic and social utility. The crypto scheme was sold to the public under the disguise of decentralization but in reality became systems under ultra-centralized control, fueled by buzzwords and cultish narratives that mask widespread ignorance and dishonesty [4].
The emergence of powerful intermediaries, such as large unregulated exchanges and institutional interests that dictate market outcomes, sharply diverges from Bitcoin’s intended disintermediation and democratization. It has led to abuse and manipulation. It misleads participants while undermines real technological progress [4],[5]. This corruption has not only delayed but actively opposed blockchain’s real infrastructural development, turning what was once a movement for transparent digital utility into an arena dominated by opportunism and recurring cycles of hype and misuse.
It has been one of the most unfortunate and misguided developments in the history of technology.
Without the true New Internet and its truth layer built upon a globally scalable blockchain, the world becomes a victim of the crypto industry’s unique ability to hide corruption, fraud, and dishonesty behind the ironic veil of “trustless” façade.
3. The Web3 and Decentralization Hype
We also caution against overhyping “Web3” and superficial decentralization. Many so called Web3 projects merely create multilayered re-centralization rather than genuine decentralization of data and value [3].
The promise of the New Internet is in integrating at the base TCP/IP layer Satoshi’s Bitcoin blockchain with unbounded scalability, near-zero transaction fees, transparency, built-in compliance, and lawful peer-to-peer value exchange, not the proliferation of speculative tokens or “DeFi” projects that mimic and even amplify old financial bubbles [1],[3].
4. Perilous Threats to Digital Humanity
Humanity is already submerged in the digitalization of information. This massive change brings many conveniences, but also generates many significant problems, including:
- While human cognition is becoming more and more closely connected with an increasingly large number of information sources, it is ironically becoming increasingly isolated from factual truth. It is already impossible to tell the difference between “real information” and “fake information”. Not only national security, but the soundness of the very human cognition is under threat. This has progressed so badly that it starts to create confusion, challenges, and destruction in people’s understanding of the most basic truth and facts. The potential destruction is fundamental. When nothing can be trusted as objective reality, people will start to believe and act upon anything they want to believe based on subjective imagination. Humanity will not only lack truth but will no longer believe in truth. This will be full-blown digital cancer that kills humanity.
- The management of digital information is increasingly under control by a strong aggregating force of the ‘centralized database gravitational field’, leading to extreme centralization of information. As a result, information becomes an object of exploitation and manipulation by oligarchs. People are exploited and used without their knowledge.
- The global economy has begun to gradually degenerate from a form of relatively free capitalism into a digital feudal system – typified by ‘digital landlords’ – and may even further degenerate into an information slavery system.
- The real blockchain is a revolutionary technology to solve these significant problems. Unfortunately, in the past decade or so, the world has suffered pervert developments in the disguise of a brave ‘monetary rebellion’. The real blockchain technology has been overshadowed and replaced by a large-scale cryptocurrency speculation campaign. This outright corruption has introduced much harm and no benefit to society. It has brought no technological progress, no economic growth, and no productivity improvement. It has polluted the market, the media, public opinion, and even the government.
5. The choices:
Facing the above challenges, we have the following two choices:
- An opaque techno-feudalistic digital society that is more and more detached from reality, less and less free, and increasingly controlled by centralized platforms on which the true ownership of both data/information and economic/social values is deceptively and cleverly transferred from their natural owners to “digital landlords” who are data collectors and manipulators.
- A transparent peer-to-peer communal digital society that thrives with decentralized data, decentralized value, and decentralized social- economic participation of natural owners and participants, liberated and incentivized to uphold truth.
6. The New Internet – A Call for US Leadership
But how can we escape the techno-feudalistic digital dystopia?
The answer lies in a true New Internet.
The original Bitcoin blockchain according to Satoshi’s vision, is far more than “coins”. It is the foundational technology to build a true New Internet with a truth layer and a built-in “Internet of Value” (IoV) at the base layer of the Internet rather than ad hoc applications added upon it.
Due to its fundamentally different architecture, the New Internet can give a free society like the US a distinctive and systemic advantage over authoritarian countries like China.
A national Internet system that is highly closed and centralized can do relatively well with the current Internet, but it is unlikely to do so with the New Internet.
With the current Internet, a closed and centralized system can consider the disadvantages in terms of public information availability a relatively small cost compared to what it can gain in political and social stability. In fact, as long as other advanced nations have an open system, a closed system even enjoys an asymmetrical advantage in information flow. This has proven to be true with China.
But the New Internet will drastically change that.
First, with the New Internet, an open system becomes more secure than a closed one. Thus, openness is no longer a disadvantage in terms of national information security.
Second, the integration of blockchain with IPv6 at the base layer to form a Peer-to-Peer IoV will have profound implications on every nation’s monetary and financial systems, as well as its underlining IT stacks. With the New Internet, the most basic value transactions happen at the base layer to build an IoV from the ground up, making it much more difficult to keep the monetary and financial system closed while still enjoying the benefits of the Internet.
The New Internet thus pressures all nations to adopt a more open system and to connect (collaborate or compete) on an equal basis.
For countries that have benefited from an asymmetrical advantage in the past, the New Internet will pose a hard dilemma.
In contrast, an open system is naturally compatible with the open architecture of the New Internet and is thus better positioned to take advantage of the new system without fearing losing control.
As its leadership in shaping the original Internet in the 1990s, the United States should take the lead on the New Internet. Only when its own system is strong can it serve to shape and lead the global New Internet development.
7. “Phygital”: Merging the Physical and Digital
A key feature of the New Internet is that it creates “physicality” on digital data. It transforms completely intangible data into objects of “materiality” to anchor digital humanity and reality, without losing digital convenience.
We introduce the concept of “phygital”: the blending of real-world (physical) assurances (like cash) with the efficiency and utility of digital data.
Blockchain, when deployed correctly (as with Satoshi’s original vision for Bitcoin that has unbounded scalability and extremely high efficiency), enables the transfer of truly unique, non-fungible digital assets—mimicking the certainty of handing physical currency or objects [1].
All this can happen without promoting speculative coin prices.
8. US Risks Falling Behind Without Visionary Leadership
China has taken bold steps in internet infrastructure. The country is also aggressively deploying AI and blockchain. In particular, China’s blockchain strategy clearly distinguishes cryptocurrencies and blockchain [6],[7], with a strong emphasis on promoting Blockchain technology while prohibiting the proliferation of cryptocurrencies.
Conversely, the US policy has been fragmented, with regulatory confusion and political distractions that dampen innovation and discourage real technology developments [8],[9].
The US government’s deep misunderstanding of Blockchain technology and cryptocurrencies has been an enabler of the explosion of speculative and opportunistic cryptocurrency markets at the cost of real Blockchain technology developments.
However, the US has a unique historic opportunity to turn this around to reclaim the leadership. See below.
9. A Unique Historic Opportunity
Despite China’s enormous commitment to Blockchain technology, its political system has so far prevented it from committing to the truly revolutionary blockchain technology.
This is because there is a fundamental incompatibility between a closed authoritarian political system and a genuinely decentralized public blockchain with unbounded scalability and a potential for global adoption.
This has kept the door open for the United States.
The true Blockchain technology is fundamentally compatible with the democratic and rule-of-law political system of the United States.
We are not advocating for laws and regulations to stop speculative cryptocurrencies. In a free market, speculation is only natural. What is unnatural is a market that is misled into ignorance and misunderstanding of the existence of truly useful technologies.
The US only needs to take leadership in guiding the technological development in the right direction, as it did in the 1990s with the Internet.
This is one of the very rare times in history when the government of the United States could make an epoch-making difference that may impact the nation’s and the world’s well-being in many future decades.
In fact, the last time something like this happened was in the 1980s and early 1990s when the US government guided the Internet in the right direction. The leadership of the US government made a critical contribution to the Internet. The nation helped to make important decisions, not only on the development of the Internet in general, but specifically on what kind of standard and protocol the Internet was to be based on.For
For the above to happen, leadership must emerge at the right time and in the right position, and possess the right knowledge, to help the industry steer the Internet from shortsighted private-interest-driven developments to a much empowering and equitable direction, unified on a sound technological protocol to benefit the public.
We now stand at this historical junction where the government of the United States may shape the future of the New Internet, including the Internet of Value (IoV), blockchain, a new cybersecurity paradigm, a new data paradigm, and new digital assets.
Both the private sector and the public sector (including government IT, public records, and finance) can benefit immensely from the New Internet, but only if US leadership causes necessary collaborations and brings about clear standards and development [10],[11].
We plead for the emergence of new US leadership in this important tech field, starting from understanding the potentials, perimeters, directions, to coordination and collaboration of US technology companies, and beyond.
This is necessary because the entire crypto industry isn’t just confused now, but is in fact going in the wrong direction. A wrong decision, or non-decision, by the US at this time will have enormously negative implications for the future.
Put bluntly, with the current state of affairs, the default result is a disaster.
Actionable Points:
- Strategic Vision: US policymakers and industry leaders should take a fresh look at the potential of genuine Blockchain technology, articulate a blueprint for the New Internet, prioritizing infrastructure, sovereignty, and lawful innovation, not just chasing market trends.
- Compliance and Transparency: Embrace blockchain as a tool for greater transparency and accountability, especially in government and public-service applications [10],[11].
- Global Context: Recognize international competition (notably from China) as a motivator to catalyze investment, R&D, and regulatory modernization domestically [6],[7].
- Education and Engagement: Combat widespread industry and public misconceptions, which exist even among prominent figures like Elon Musk [13], with focused education around the true blockchain, digital trust, and the New Internet.
The timing is critical. The opportunity is unique and huge, but the rapidly growing “crypto cancer” is quickly destroying this opportunity. The window is measured in years, not decades.
References
[1] “Blockchain Brings Physicality to Digitality”. CoinGeek (https://coingeek.com/zeming-gao-blockchain-brings-physicality-to-digitality/)
[2] “The US Needs Leadership in Blockchain and the New Internet”. (https://zemgao.com/13632/)
[3] “Decentralization: A Widely Misunderstood Concept”. CoinGeek (https://coingeek.com/decentralization-a-widely-misunderstood-concept/)
[4] “BTC Is a Stock Market Amplified Ponzi”. CoinGeek (https://coingeek.com/btc-is-a-stock-market-amplified-ponzi-zeming-gao/)
[5] “The Cancerous Crypto”. SSRN (https://papers.ssrn.com/sol3/Delivery.cfm/5296754.pdf?abstractid=5296754&mirid=1)
[6] “China’s Blockchain Strategy Clearly Distinguishes Cryptocurrencies and Blockchain”. China Daily (https://www.chinadaily.com.cn/a/202407/10/WS668dca9ea31095c51c50d440.html)
[7] “China Has Always Been Clear About Bitcoin Being Different from Blockchain”. (https://zemgao.com/15898/)
[8] “Crypto Classification Confusion”. Florida State University Law Review (https://www.fsulawreview.com/wp-content/uploads/2024/06/Crypto-Classification-Confusion-Holleman-1.pdf)
[9] “A Note on the Proper Understanding of Decentralization in Blockchain”. (https://zemgao.com/13883/)
[10] “Federal Financial Management Improvement Program”. CFO.gov (https://www.cfo.gov/assets/files/JFMIP-24-01.pdf)
[11] “Blockchain: The Infrastructure of Future Internet and Economy”. (https://zemgao.com/692/)
[12] “Why America’s Fascination with Crypto is Dangerous and Self-defeating”. (https://zemgao.com/15920/)
[13] “Musk’s Comments About Crypto and Blockchain Reflect Widespread Confusion About the Technology”. (https://zemgao.com/13690/)
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