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The Latecomers’ Guide to Crypto

The Latecomer’s Guide to Crypto

Until fairly recently, if you lived anywhere other than San Francisco, it was possible to go days or even weeks without hearing about cryptocurrency.

Now, suddenly, it’s inescapable. Look one way, and there are Matt Damon and Larry David doing ads for crypto start-ups. Swivel your head — oh, hey, it’s the mayors of Miami and New York City, arguing over who loves Bitcoin more. Two N.B.A. arenas are now named after crypto companies, and it seems as if every corporate marketing team in America has jumped on the NFT — or nonfungible token — bandwagon. (Can I interest you in one of Pepsi’s new “Mic Drop” genesis NFTs? Or maybe something from Applebee’s “Metaverse Meals” NFT collection, inspired by the restaurant chain’s “iconic” menu items?)

Crypto!

For years, it seemed like the kind of fleeting tech trend most people could safely ignore, like hoverboards or Google Glass. But its power, both economic and cultural, has become too big to overlook. 20% of American adults, and 36% of millennials, own cryptocurrency, according to a recent Morning Consult survey. Coinbase, the crypto trading app, has landed on top of the App Store’s top charts at least twice in the past year.

Today, the crypto market is valued at around $1.75 trillion — roughly the size of Google. And in Silicon Valley, engineers and executives are bolting from cushy jobs in droves to join the crypto gold rush.

As it’s gone mainstream, crypto has inspired an unusually polarized discourse. Its biggest fans think it’s saving the world, while its biggest skeptics are convinced it’s all a scam — an environment-killing speculative bubble orchestrated by grifters and sold to greedy dupes, which will probably crash the economy when it bursts.

I’ve been writing about crypto for nearly a decade, a period in which my own views have whipsawed between extreme skepticism and cautious optimism. These days, I usually describe myself as a crypto moderate, although I admit that may be a cop-out.

I agree with the skeptics that much of the crypto market consists of overvalued, overhyped and possibly fraudulent assets, and I am unmoved by the most utopian sentiments shared by pro-crypto zealots (such as the claim by Jack Dorsey, the former Twitter chief, that Bitcoin will usher in world peace).

But as I’ve experimented more with crypto — including accidentally selling an NFT for more than $500,000 in a charity auction last year — I’ve come to accept that it isn’t all a cynical money-grab, and that there are things of actual substance being built. I’ve also learned, in my

career as a tech journalist, that when so much money, energy and talent flows toward a new thing, it’s generally a good idea to pay attention, regardless of your views on the thing itself.

My strongest-held belief about crypto, though, is that it is terribly explained.

Recently, I spent several months reading everything I could about crypto. But I found that most beginner’s guides took the form of boring podcasts, thinly researched YouTube videos and blog posts written by hopelessly biased investors. Many anti-crypto takes, on the other hand, were undercut by inaccuracies and outdated arguments, such as the assertion that crypto is good for criminals, notwithstanding the growing evidence that crypto’s traceable ledgers make it a poor fit for illicit activity.

What I couldn’t find was a sober, dispassionate explanation of what crypto actually is — how it works, who it’s for, what’s at stake, where the battle lines are drawn — along with answers to some of the most common questions it raises.

This guide — a mega-F.A.Q., really — is an attempt to fix that. In it, I’ll explain the basic concepts as clearly as I can, doing my best to answer the questions a curious but open- minded skeptic might pose.

Crypto boosters will likely quibble with my explanations, while dug-in opponents may find them too generous. That’s OK. My goal is not to convince you that crypto is good or bad, that it should be outlawed or celebrated, or that investing in it will make you rich or bankrupt you. It is simply to demystify things a bit. And if you want to go deeper, each section has a list of reading suggestions at the end.

Crypto will be transformative

Understanding crypto now — especially if you’re naturally skeptical — is important for a few reasons.

The first is that crypto wealth and ideology is going to be a transformative force in our society in the coming years.

You’ve heard about the overnight Dogecoin millionaires and Lamborghini-driving Bitcoin bros. But that’s not the half of it. The crypto boom has generated vast new fortunes at a clip we’ve never seen before — the closest comparison is probably the discovery of oil in the Middle East — and has turned its biggest winners into some of the richest people in the world, essentially overnight. Some riches could vanish if the market crashes, but enough has already been cashed out to ensure that crypto’s influence will linger for decades.

Crypto’s madcap, meme-crazed online culture can make it seem frivolous and shallow. It’s not. Cryptocurrencies, even the jokey ones, are part of a robust, well- funded ideological movement that has serious implications for our political and economic future. Bitcoin, which emerged out of the ashes of the 2008 financial crisis, first caught on among libertarians and

anti-establishment activists who saw it as the cornerstone of a new, incorruptible monetary system. Since then, other crypto realms have fashioned similarly lofty goals, like building a decentralized, largely unregulated version of Wall Street on the blockchain.

We are already starting to see a swell of crypto money headed toward the U.S. political system. Crypto entrepreneurs are donating millions of dollars to candidates and causes, and lobbying firms have fanned out across the country to win support for pro-crypto legislation.

In the coming years, crypto moguls will bankroll the campaigns of crypto-friendly candidates, or run for office themselves. Some will peddle influence in the familiar ways — forming super PACs, funding think tanks, etc. — while others will try to escape partisan gridlock altogether. (Crypto millionaires are already buying up land in the South Pacific to build their own blockchain utopias.)

Crypto is poised to soon become one of a handful of true wedge issues, with politicians all over the world forced to pick a side. Some countries, like El Salvador — whose crypto-loving president, Nayib Bukele, recently announced the development of a “Bitcoin City” at the base of a volcano — will go full crypto. Other governments may decide that crypto is a threat to their sovereignty and crack down, as China did when it outlawed cryptocurrency trading last year.

The divide between the world’s pro-crypto and no-crypto zones could end up being at least as big as the divide between the Chinese internet and the American one, and maybe even more consequential.

In America, we have already seen how crypto can scramble the usual partisan allegiances. Former President Donald J. Trump and Senator Elizabeth Warren, the Democrat from Massachusetts, are united in crypto skepticism, for example, while Senator Ted Cruz, Republican from Texas, is in the same bullish camp as Senator Ron Wyden, the Democrat from Oregon.

We have also seen what can happen when the crypto community feels politically threatened, as happened last summer, when crypto groups rallied to oppose a crypto-related provision in President Biden’s infrastructure bill.

What I’m saying, I guess, is that despite the goofy veneer, crypto is not just another weird internet phenomenon. It’s an organized technological movement, armed with powerful tools and hordes of wealthy true believers, whose goal is nothing less than a total economic and political revolution.

Crypto could be destructive

The second reason to pay attention to crypto is that understanding it now is the best way to

ensure it doesn’t become a destructive force later.

In the early 2010s, the most common knock on social media apps like Facebook and Twitter was that they just wouldn’t work as businesses. Pundits predicted that users would eventually tire of their friends’ vacation photos, that advertisers would flee and that the whole social media industry would collapse.

The theory wasn’t so much that social media was dangerous or bad; just that it was boring and corny, a hype-driven fad that would disappear as quickly as it had arrived.

What nobody was asking back then — at least not loudly — were questions like:

What if social media is actually insanely successful?

What kind of regulations would need to exist in a world where Facebook and Twitter were the dominant communication platforms?

How should tech companies with billions of users weigh the trade-offs between free speech and safety?

What product features could prevent online hate and misinformation from cascading into offline violence?

By the middle of the decade, when it was clear that these were urgent questions, it was too late. The platform mechanics and ad-based business models were already baked in, and skeptics — who might have steered these apps in a better direction, if they’d taken them more seriously from the start — were stuck trying to contain the damage.

Are we making the same mistake with crypto today? It’s possible. No one knows yet whether crypto will or won’t “work,” in the grandest sense. (Anyone who claims they do is selling something.)

But there is real money and energy in it, and many tech veterans I’ve spoken to tell me that today’s crypto scene feels, to them, like 2010 all over again — with tech disrupting money this time, instead of media.

If they’re wrong, they’re wrong. But if they’re right — even partly — the best time to start paying attention is now, before the paths are set and the problems are intractable.

The third reason to study up on crypto is that it can be genuinely fun to learn about.

Sure, a lot of it is dumb, shady or self-refuting. But if you can look past the carnival barkers and parse the convoluted jargon, you’ll find a bottomless well of weird, interesting and thought-provoking projects. The crypto agenda is so huge and multidisciplinary — drawing together elements of economics, engineering, philosophy, law, art, energy policy and more —

that it offers lots of footholds for beginners.

Want to discuss the influence of Austrian economics in Bitcoin development?

There’s probably a Discord server for that. Want to join a DAO that invests in NFTs, or play a video game that pays you in crypto tokens for winning? Dive right in.

Crypto is a generational skeleton key

Mind you, I am not suggesting that the crypto world is diverse, in the demographic sense. Surveys have suggested that high-earning white men make up a large share of crypto owners, and libertarians with dog-eared copies of “Atlas Shrugged” are likely overrepresented among crypto millionaires. But it’s not an intellectual monolith.

There are right-wing Bitcoin maximalists who believe that crypto will liberate them from government tyranny; left-wing Ethereum fans who want to overthrow the big banks; and speculators with no ideological attachments who just want to turn a profit and get out. These communities fight with one another constantly, and many have wildly different ideas about what crypto should be. It makes for fascinating study, especially with a bit of emotional distance.

**And if you do learn some crypto basics, you might find that a whole world opens up to you. **

You’ll understand why Jimmy Fallon and Steph Curry are changing their Twitter avatars to cartoon apes, and why Elon Musk, the richest man in the world, spent a decent chunk of last year tweeting about a digital currency named after a dog. Strange words and phrases you encounter on the internet — rug pulls, flippenings, “gm” — will become familiar, and eventually, headlines like “NFT Collector Sells People’s Fursonas for $100K In Right-Click Mindset War” won’t make you wonder if you’re losing your grip on reality.

Crypto can also be a kind of generational skeleton key — maybe the single fastest way to freshen your cultural awareness and decipher the beliefs and actions of today’s young people. And just as knowing a little about New Age mysticism and psychedelics would help someone trying to make sense of youth culture in the 1960s, knowing some crypto basics can help someone perplexed by emerging attitudes about money and power feel more grounded.

Again, I don’t really care whether you emerge from these explainers as a true believer, a devoted skeptic or something in between. Participate or abstain as you wish!

All I’m after is understanding — and possibly, a little relief from the question that has consumed my social and professional life for the past several years:

“So ... can I ask you a question about crypto?”

Let’s start from the beginning: What is crypto?

A decade or two ago, the word was generally used as shorthand for cryptography. But in recent years, it’s been more closely associated with cryptocurrencies. These days, “crypto” usually refers to the entire universe of technologies that involve blockchains — the distributed ledger systems that power digital currencies like Bitcoin, but also serve as the base layer of technology for things like NFTs, web3 applications and DeFi trading protocols.

Ah yes, blockchains. Can you remind me, without going into too much technical detail, what they are?

At a very basic level, blockchains are shared databases that store and verify information in a cryptographically secure way.

You can think of a blockchain like a Google spreadsheet, except that instead of being hosted on Google’s servers, blockchains are maintained by a network of computers all over the world.

These computers (sometimes called miners or validators) are responsible for storing their own copies of the database, adding and verifying new entries, and securing the database against hackers.

So blockchains are ... fancy Google spreadsheets?

Sort of! But there are at least three important conceptual differences.

First, a blockchain is decentralized. It doesn’t need a company like Google overseeing it. All of that work is done by the computers on the network, using what’s called a consensus mechanism — basically, a complicated algorithm that allows them to agree on what’s in a database without the need for a neutral referee.

This makes blockchains more secure than traditional record-keeping systems, proponents believe, since no single person or company can take down the blockchain or alter its contents, and anyone trying to hack or change the records in the ledger would need to break into many computers simultaneously.

The second major feature of blockchains is that they’re typically public and open source, meaning that unlike a Google spreadsheet, anyone can inspect a public blockchain’s code or see a record of any transaction. (There are private blockchains, but they’re less important than the public ones.)

Third, blockchains are typically append-only and permanent, meaning that unlike with a Google spreadsheet, data that’s added to a blockchain typically can’t be deleted or changed

after the fact. Got it.

So, blockchains are public, permanent databases that nobody owns?

You’re getting it!

Now remind me: How are blockchains related to cryptocurrencies?

Blockchains didn’t really exist until 2009, when a pseudonymous programmer named Satoshi Nakamoto released the technical documentation for Bitcoin, the first-ever cryptocurrency.

Bitcoin used a blockchain to keep track of transactions. That was notable because, for the first time, it allowed people to send and receive money over the internet without needing to involve a central authority, such as a bank or an app like PayPal or Venmo.

Many blockchains still perform cryptocurrency transactions, and there are now roughly 10,000 different cryptocurrencies in existence, according to CoinMarketCap. But many blockchains can be used to store other kinds of information, too — including NFTs, bits of self-executing code known as smart contracts and full-fledged apps — without the need for a central authority.

OK, but can we back up a second? Weren’t tech people telling us, years ago, that crypto was a new and exciting form of money? And yet, nobody I know pays their rent or buys groceries in Bitcoin.

So, were those people just ... wrong?

Good question.

It’s true that today, hardly anyone pays for things in cryptocurrency. In part, that’s because most merchants still don’t accept crypto payments, and hefty transaction fees can make it impractical to spend small amounts of cryptocurrency on daily living expenses.

It’s also because the value of popular cryptocurrencies like Bitcoin and Ether has historically gone up, making it somewhat risky to use them for offline purchases. (The counterexamples are usually cited with pity, like the guy who, in 2010, bought two Papa John’s pizzas using Bitcoin that was worth about 400 million today.)

It’s also true that the value of cryptocurrencies has grown enormously since the early Bitcoin days, despite them not being most people’s daily spending money.

Part of that growth is speculation — people buying crypto assets in hopes of selling them for more later on. Part of it is because the blockchains that have emerged since Bitcoin, like

Ethereum and Solana, have expanded what can be done with this technology.

And some crypto fans believe that the prices of cryptocurrencies like Bitcoin will eventually stabilize, which could make them more useful as a means of payment.

What are the actual uses of crypto, beyond financial speculation?

Right now, many of the successful applications for crypto technology are in finance or finance-adjacent fields.

For example, people are using crypto to send cross-border remittances to family members abroad and Wall Street banks using blockchains to settle foreign transactions.

The crypto boom has also led to an explosion of experiments outside of financial services. There are crypto social clubs, crypto video games, crypto restaurants and even crypto- powered wireless networks.

These non-financial uses are still fairly limited. But crypto fans often make the case that the technology is still young, and that it took the internet decades to mature into what it is today.

Investors are pouring billions of dollars into crypto start-ups because they think that someday, blockchains will be used for all kinds of things: storing medical records, tracking streaming music rights, even hosting new social media platforms. And the crypto ecosystem is attracting tons of developers — an auspicious sign for any new technology.

I’ve heard people calling crypto a pyramid scheme or a Ponzi scheme. What do they mean? Some critics believe that cryptocurrency markets are fundamentally fraudulent, either because early investors get rich at the expense of late investors (a pyramid scheme), or because crypto projects lure in unsuspecting investors with promises of safe returns, then collapse once new money stops coming in (a Ponzi scheme).

There are certainly plenty of examples of pyramid and Ponzi schemes within crypto. They include OneCoin, a fraudulent crypto operation that stole

90 million crypto hedge fund run by a 24-year-old investor who pleaded guilty to securities fraud and was

sentenced to seven and a half years in prison. But these cases aren’t usually what critics are talking about. They’re generally arguing that crypto itself is an exploitative scheme, with no real-world value.

And are they right?

Well, let’s try to understand the case they’re making.

Unlike buying stock in, say, Apple, a purchase that (theoretically, at least) reflects a belief that Apple’s underlying business is healthy, buying a cryptocurrency is more like betting on the

success of an idea, they say.

If people believe in Bitcoin, they buy, and Bitcoin prices go up. If people stop believing in Bitcoin, they sell, and Bitcoin prices go down.

Crypto owners, then, have a rational incentive to convince other people to buy. And if you don’t think that cryptocurrency technology is inherently valuable, you might conclude that the entire thing resembles a pyramid scheme, in which you primarily make money by recruiting others to join.

I’m sensing a “but” coming on. But!

Even though there are scams and frauds within crypto, and crypto investors are certainly fond of trying to recruit other people to buy in, many investors will tell you that they are going in with their eyes wide open.

They believe that crypto technology is inherently valuable, and that the ability to store information and value on a decentralized blockchain will be attractive to all kinds of people and businesses in the future. They would tell you they’re betting on crypto the product, not crypto the idea — which, on some level, isn’t all that different from buying Apple stock because you think the next iPhone is going to be popular.

Matt Huang, a prominent investor, spoke for many crypto fans when he said on Twitter: “Crypto may look like a speculative casino from the outside. But that distracts many from the deeper truth: the casino is a trojan horse with a new financial system hidden inside.”

You can argue with that position, or dispute how much this “new financial system” is actually worth. But crypto investors clearly believe it’s worth something.

Is crypto regulated?

Only slightly.

In the United States, certain centralized crypto exchanges, such as Coinbase, are required to register as money transmitters and follow laws like the Bank Secrecy Act, which requires them to collect certain information about their customers. Some countries have passed more stringent regulations, and others, like China, have banned cryptocurrency trading entirely.

But compared with the traditional financial system, crypto is very lightly regulated. There are few rules governing crypto assets like “stablecoins” — coins whose value is pegged to government-backed currencies — or even clear guidance from the Internal Revenue Service about how certain crypto investments should be taxed. And certain areas of crypto, like DeFi (decentralized finance), are almost completely unregulated.

Partly, that’s because it’s still early, and making new rules takes time. But it’s also a property of blockchain technology itself, much of which was designed to be hard for governments to control.

This question comes from the (apparently crypto-curious) rapper Cardi B:

Is crypto going to replace the dollar?

Sorry, Cardi. The dollar is the world’s reserve currency, and dislodging it would be a huge, costly project that isn’t likely to happen any time soon. (To give just one small example of the enormity of the task: every financial contract that is denominated in dollars would have to be re-denominated in Bitcoin or Ether or some other cryptocurrency.)

There are also technical hurdles crypto needs to overcome if it’s ever going to displace government-issued currency. Today, the most popular blockchains — Bitcoin and Ethereum — are slow and inefficient compared with traditional payment networks. (The Ethereum blockchain, for example, can process only about 15 transactions per second, whereas Visa says it can process thousands of credit card transactions per second.)

And, of course, for a cryptocurrency like Bitcoin to replace the dollar, you’d need to convince billions of people to use a currency whose value fluctuates wildly, that isn’t backed by a government and that often can’t be retrieved if it’s stolen.

What kind of people are investing in crypto?

Is it all — to quote a recent Curb Your Enthusiasm episode — “Nerds and Nazis”?

It’s hard to say who’s investing in crypto, especially since a lot of activity takes place anonymously or under pseudonyms. But some surveys and studies have suggested that crypto is still dominated by affluent white men.

Gemini, a cryptocurrency exchange, estimated in a recent report that women made up only 26 percent of crypto investors.

The average crypto owner, the group found, was a 38-year-old man making approximately $111,000 a year. But crypto ownership does appear to be diversifying.

A 2021 Pew Research Center survey found that Asian, Black and Latino adults were more likely to have used crypto than white adults. Crypto adoption is also growing outside the United States, and some studies have suggested that crypto adoption is growing fastest in countries like Vietnam, India and Pakistan.

Blockchain expert, Tressie McMillan Cottom, has made the case that crypto — because it relies on permanent, irrefutable records of ownership of digital goods and currencies — is particularly attractive to people from marginalized groups, who may have had their property

unjustly taken from them in the past.

“If I live in a community where the police absolutely use eminent domain to claim my private property and I cannot do anything about it,” she wrote, “that sense of everyday powerlessness would make the promise of blockchain sound pretty good.”

That said, some recent studies have also found that a small number of people own the vast majority of crypto wealth — so it’s not necessarily an egalitarian paradise.

And what about extremists?

Are they into crypto?

Some are. Because you can buy and sell cryptocurrency without using your name or having a bank account, crypto in its early days was a natural fit for people who had reasons to avoid the traditional financial system. They included criminals, tax evaders and people buying and selling illicit goods. They also included political dissidents and extremists, some of whom had been kicked off more mainstream payment services like PayPal and Patreon. As a result of their well-timed entry into the crypto market, some extremists have gotten rich.

A recent investigation by the Southern Poverty Law Center found that several prominent white supremacists have made hundreds of thousands or millions of dollars by investing in crypto.

Of course, there are millions of crypto owners, the vast majority of whom are not white supremacists. And the same properties of anonymity and censorship- resistance that make crypto useful to white supremacists might also make it attractive to, say, Afghan citizens fleeing the Taliban. So, labeling the entire crypto movement an extremist group would be overkill.

Regardless, it’s safe to say that crypto has become attractive to all kinds of people who would rather not deal (or can’t legally deal) with a traditional bank.

Another criticism I’ve heard is that crypto is bad for the environment.

Is that true?

This is a real can of worms — and one of the most frequent objections to crypto.

Let’s start with what we know for sure. It’s true that most crypto activity today takes place on blockchains that require large amounts of energy to store and verify transactions. These networks use a “proof-of-work” consensus mechanism — a process that has been compared to a global guessing game, played by computers all competing to solve cryptographic puzzles in order to add new information to the database and earn a reward in return. Solving these

puzzles requires powerful computers, which in turn use lots of energy.

The Bitcoin blockchain, for example, uses an estimated 200 terawatt-hours of energy per year, according to Digiconomist, a website that tracks crypto energy usage. That’s comparable to the annual energy consumption of Thailand. And Bitcoin’s associated carbon emissions have been estimated at roughly 100 megatons per year, which is comparable to the carbon footprint of the Czech Republic.

Holy moly! How do crypto fans justify that kind of environmental impact?

Crypto advocates often quibble with these statistics. They also argue that:

Our existing financial system also uses a lot of energy, between powering millions of bank branches, A.T.M.s that sit idle for most of the day, gold mines and other energy-intensive infrastructure.

Many crypto-mining computers are already powered by renewable energy sources, or by energy that would otherwise be wasted.

Most newer blockchains are built using consensus mechanisms that require much less energy than proof-of-work. (Ethereum, for example, is scheduled to switch to a new type of consensus mechanism called proof-of-stake sometime in 2022, which could reduce its energy usage by as much as 99.5 percent.)

And are those arguments valid?

Partly.

It’s true that most newer blockchains are designed in a way that requires considerably less energy than Bitcoin, and that Ethereum’s switch to a proof-of-stake consensus mechanism will greatly shrink its environmental footprint, if and when it happens.

But it’s also a bit convenient to steer attention away from Bitcoin, which is still the most valuable cryptocurrency in the world. Bitcoin’s energy needs aren’t expected to fall significantly anytime soon. And even if every Bitcoin miner ran entirely on renewable energy — which, to be clear, isn’t the case — there would still be an environmental cost associated with maintaining the blockchain.

All told, it’s clear that crypto as we know it today has a significant environmental impact, but it’s hard to measure exactly how significant. Many frequently cited statistics come from industry groups, and it’s hard to find trustworthy, independent data and analysis.

But few crypto fans would dispute that blockchains consume substantially more energy than a traditional, centralized database would — just as 100 refrigerators use more energy than one refrigerator. They just argue that crypto’s environmental impact will shrink over time, and

that the benefits of decentralization are worth the costs.

Got it. And those benefits, again, are ...

Some crypto proponents will tell you that the biggest benefit of decentralization is the ability to create currencies, apps and virtual economies that are resistant to censorship and top- down control. (Imagine a version of Facebook, they’ll say, in which Mark Zuckerberg couldn’t unilaterally decide to kick people off.)

Others will say that the biggest perk of decentralization is that it allows artists and creators to control their own economic destinies more directly by giving them a way (in the form of NFTs and other crypto assets) to bypass platform gatekeepers like YouTube and Spotify, and sell unique digital works directly to their fans.

Still others will say that crypto is most useful to people who don’t live in countries with stable currencies, or to dissident groups living under authoritarian regimes.

There are a million other hypothetical benefits of decentralization and crypto, some of which are realistic and some of which probably aren’t.

How do you actually use crypto? Is it like sending a payment over Paypal or Venmo?

It can be.

The quickest way to get started using cryptocurrencies is to set up an account with a crypto exchange like Coinbase, which can link to your bank account and convert your U.S. dollars (or other government-issued currency) into cryptocurrency.

But many crypto users prefer setting up their own “wallets” — secure places to store the cryptographic keys that unlock their digital assets.

Once you’ve got some crypto in your wallet, the process can be pretty simple — just type in the recipient’s crypto wallet address, pay a transaction fee (if applicable), and wait for the payment to clear.

Other types of crypto transactions, like buying and selling NFTs, can be significantly more complicated, but the basic act of sending a payment to someone typically takes only a few minutes.

I’m ready to dive into the rest of your explainers. But first, I have one final question about crypto’s culture: Why is it so weird and insular?

This is maybe the question I get asked most about crypto. People see their friends, co- workers and relatives diving down the crypto rabbit hole and emerging days or weeks later with a new obsession, new internet friends, a bunch of new jargon and the seeming inability

to talk about anything else. (There’s even a word for this — getting “cryptopilled.”)

People who believe in crypto tend to really believe in it — to the point that they can appear to the outside world more like evangelists for a new religion than fans of a new technology.

I was a religion reporter once, and I don’t think the comparison is totally inapt. (It’s also not necessarily a bad thing: Plenty of people find meaning and community and intellectual stimulation in religion.)

As people like the Bloomberg journalist Joe Weisenthal have pointed out, crypto has similar elements to an emerging religion: an enigmatic founder (the still-anonymous Satoshi Nakamoto), sacred texts (the Bitcoin white paper) and rituals and rites to mark yourself as a believer, such as tweeting “gm” (crypto speak for “good morning”) to your fellow believers, or photoshopping laser eyes onto your profile picture.

It’s fun to laugh at the (often cringeworthy) ways crypto fans try to entertain and inspire each other. But focusing too much on their behavior and customs might mean missing what’s genuinely novel — and, depending on where you sit, either exciting or dangerous — about the technology itself.

Which is why, when my friends ask me how to talk to their crypto-pilled relatives, I advise them to start by trying to understand what’s gotten them so excited in the first place.

Go deeper:

“WTF Is the Blockchain?”

In this basic explainer of blockchain technology, Mohit Mamoria looks into how blockchains work and the problems they’re intended to solve.

The YouTube video called, “Introduction to Blockchain and Money”, which explains the history and technical underpinnings of crypto, is the first lecture in a course taught at M.I.T. in 2018 by Gary Gensler, who is now the chief of the Securities and Exchange Commission. (The rest of the course is also on YouTube, and makes for interesting viewing.)

A Normie’s Guide to Becoming a Crypto Person

1. ThisNewYorkMagazinearticlebySaraHarrisonisa101-levelguidetocryptoculture, including a glossary of terms and explanations of the many crypto subcommunities.

2. DigitalGold”byNathanielPopper,offersadeepdiveintothehistoryofBitcoinandthe origins of the crypto economy in his book that he wrote back in 2015.

Introducing Haun Ventures (mirror.xyz)

Introducing Haun Ventures

Today, we’re introducing Haun Ventures, a firm designed from the ground up to help founders build the next generation of the internet. We’ve raised $1.5 billion in capital to support the growth of web3.

We’ll invest through two platforms: a $500 million early stage fund and a $1 billion acceleration fund.

My road to crypto and then to venture was unconventional. I spent over a decade at the U.S. Department of Justice prosecuting organized crime, murders, public corruption, prison gangs, white collar crime, and money laundering. In 2014, I created one of the government’s first cryptocurrency task forces. In the course of that work, the vast potential of these technologies quickly became clear. Like any tool, they could be used for good or for bad, but we had just started to scratch the surface of the good.

After leaving the government, I collaborated with some of the most amazing builders and investors in the space, including Brian Armstrong, who recruited me to the Coinbase board in 2017. There, I met my friend and former partner Chris Dixon, with whom I launched and scaled one of the earliest and largest dedicated crypto venture franchises in the world. Working with founders over the years brought out my own entrepreneurial spirit, and I started to think about building something new based on my experience. Specifically, I have always

seen value in connecting the crypto world to different audiences – whether across government, academia, business, or otherwise – to facilitate greater understanding of the benefits of this nascent tech. All of this led to the launch of Haun Ventures, a firm built to uniquely serve the teams building the third generation of the internet, or web3.

Web3 has expanded beyond its financial origins — it now provides the technological building blocks to power the next iteration of the digital world

We think of Bitcoin as the original breakthrough that launched a thousand experiments. This first implementation of digital, decentralized consensus unlocked countless novel approaches to network-incentive alignment and non-sovereign stores of value. The decade since its invention has been characterized by a flurry of innovation across the infrastructure layer of web3, notably including the launch of Ethereum, a blockchain for deploying and running decentralized applications. This, in turn, ultimately made way for globally accessible financial use cases and the “DeFi Summer” of 2020.

Now, crypto has expanded far beyond financial use cases, touching gaming, art, media, and content. The web3 projects that emerge over the next decade will be even more expansive, applying the breakthrough mechanisms of the last decade to every industry from transportation and commerce, to fashion, sports, music, and more. We think consumer demand for digitally-native experiences and goods will continue to increase.

As more people embrace these products, there will be a shift in individuals’ expectations for greater control of their personal data and a new generation of creators will demand and enjoy better economics. We think open platforms will win through loyalty, transparency, and trust by delivering better incentives than the walled gardens that came before.

We’re energized by the opportunity to invest in every layer of the web3 tech stack, and will back projects in their early stages as well as when they are ready to accelerate growth.

Building a different kind of firm for web3

We believe the next generation of the internet will naturally produce a new generation of investors. Firms built for this moment need to be what one of our portfolio founders characterized as “venture contributors.” This goes beyond asking how to be helpful — it’s about being an active, committed participant in the community and operating in a way that advances the values of web3. Many crypto-native firms have been built this way from day one and other firms entering crypto will need to cross over. Beyond providing capital, we will contribute to web3 in two specific ways to start and plan to layer in other capabilities as we

Introducing Haun Ventures learn and grow.

First, we’re helping founders deliver system change. As a community, we are engaged in a grand experiment to build new incentive structures for the web that can increase trust, transparency, privacy, and opportunity. To create a new internet that is an improvement over our current tech paradigm is a hugely ambitious project. It not only requires brilliant technologists to build but also experienced operators who can responsibly shape public opinion, policy, and the broader systems that power our society so that web3 can fulfill its potential. We will partner with our portfolio to lead a global campaign for web3 that combats misperceptions, engages policymakers, highlights positive use cases, and wins the hearts and minds of leaders across all sectors. We believe this approach will help lay the foundation for the web3 projects we support to reach a billion+ people worldwide.

Second, we’ve baked community participation into our practices from day one. As an early investor in the space, I’m proud of the groundbreaking program I helped develop to delegate governance rights and tokens to civil society groups, universities, and non-profit organizations. Haun Ventures will continue to broaden the array of voices involved in this ecosystem. We will build playbooks and share insights as we go that help set new standards for how venture firms can participate in web3.

We’ve assembled a world class team of leaders that have deep experience in very specific areas (inside of crypto and out). They are all-in on crypto and have already had a positive impact on how web3 is viewed throughout the world.

My path to this moment certainly wasn’t a traditional one. In many ways, I didn’t fit the mold. The mentorship and support of so many people, far too many to name here, helped me step outside my comfort zone and turn not fitting the mold into an asset. I’m incredibly grateful to all of them. As web3 grows to touch every aspect of our lives, we’ll need more voices and perspectives of those who break the mold.

I’m also thankful to the founders I’ve had the privilege of working with over the years who have been so encouraging of my decision to start this firm.

Finally, I want to thank our limited partners. Our focus on system change was a key consideration in selecting our LPs – true strategic partners who are all-in on the vision for web3 and willing to leverage our combined capabilities to drive impact.

We’re committed to building a web3 ecosystem that future generations will admire.

This is a exciting first step, but the real work begins now

We’ll have more to share as we continue to build our team and make investments.


Source:

https://mirror.xyz/haunventures.eth/XHOD9o8ZjALuf7QnJz-oydihpROmt0txDFYIMOUoUzY

Crypto Tokens: A Breakthrough in Open Network Design

Crypto Tokens: A Breakthrough in Open Network Design

It is a wonderful accident of history that the internet and web were created as open platforms that anyone — users, developers, organizations — could access equally. Among other things, this allowed independent developers to build products that quickly gained widespread adoption. Google started in a Menlo Park garage and Facebook started in a Harvard dorm room. They competed on a level playing field because they were built on decentralized networks governed by open protocols.

Today, tech companies like Facebook, Google, Amazon, and Apple are stronger than ever, whether measured by market cap, share of top mobile apps, or pretty much any other common measure.

Big 4 tech companies dominate smartphone apps (source); while their market caps continue to rise (source)


These companies also control massive proprietary developer platforms. The dominant operating systems — iOS and Android — charge 30% payment fees and exert heavy influence over app distribution. The dominant social networks tightly restrict access, hindering the ability of third-party developers to scale. Startups and independent developers are increasingly competing from a disadvantaged position.

A potential way to reverse this trend are crypto tokens — a new way to design open networks that arose from the cryptocurrency movement that began with the introduction of Bitcoin in 2008 and accelerated with the introduction of Ethereum in 2014. Tokens are a breakthrough in open network design that enable: 1) the creation of open, decentralized networks that combine the best architectural properties of open and proprietary networks, and 2) new ways to incentivize open network participants, including users, developers, investors, and service providers. By enabling the development of new open networks, tokens could help reverse the centralization of the internet, thereby keeping it accessible, vibrant and fair, and resulting in greater innovation.

Crypto tokens: unbundling Bitcoin

Bitcoin was introduced in 2008 with the publication of Satoshi Nakamoto’s landmark paper that proposed a novel, decentralized payment system built on an underlying technology now known as a blockchain. Most fans of Bitcoin (including me) mistakenly thought Bitcoin was solely a breakthrough in financial technology. (It was easy to make this mistake: Nakamoto himself called it a “p2p payment system.”)

2009: Satoshi Nakamoto’s (post) announcing Bitcoin

In retrospect, Bitcoin was really two innovations: 1) a store of value for people who wanted an alternative to the existing financial system, and 2) 

a new way to develop open networks. Tokens unbundle the latter innovation from the former, providing a general method for designing and growing open networks.

Networks — computing networks, developer platforms, marketplaces, social networks, etc — have always been a powerful part of the promise of the internet. Tens of thousands of networks have been incubated by developers and entrepreneurs, yet only a very small percentage of those have survived, and most of those were owned and controlled by private companies. The current state of the art of network development is very crude. It often involves raising money (venture capital is a common source of funding) and then spending it on paid marketing and other channels to overcome the “bootstrap problem” — the problem that networks tend to only become useful when they reach a critical mass of users. In the rare cases where networks succeed, the financial returns tend to accrue to the relatively small number of people who own equity in the network. Tokens offer a better way.

Ethereum, introduced in 2014 and launched in 2015, was the first major non-Bitcoin token network. The lead developer, Vitalik Buterin, had previously tried to create smart contract languages on top of the Bitcoin blockchain. Eventually he realized that (by design, mostly) Bitcoin was too limited, so a new approach was needed.

2014: Vitalik Buterin’s (forum post) announcing Ethereum

Ethereum is a network that allows 

developers to run “smart contracts” — snippets of codesubmitted by developers that are executed by a distributed network of computers. Ethereum has a corresponding token called Ether that can be purchased, either to hold for financial purposes or to use by purchasing computing power (known as “gas”) on the network. Tokens are also given out to “miners” which are the computers on the decentralized network that execute smart contract code (you can think of miners as playing the role of cloud hosting services like AWS). Third-party developers can write their own applicationsthat live on the network, and can charge Ether to generate revenue.

Ethereum is inspiring a new wave of token networks. (It also provided a simple way for new token networks to launch on top of the Ethereum network, using a standard known as ERC20). Developers are building token networks for a wide range of use cases, including distributed computing platforms, prediction and financial markets, incentivized content creation networks, and attention and advertising networks. Many more networks will be invented and launched in the coming months and years.

Below I walk through the two main benefits of the token model, the first architectural and the second involving incentives.

Tokens enable the management and financing of open services

Proponents of open systems never had an effective way to manage and fund operating services, leading to a significant architectural disadvantage compared to their proprietary counterparts. This was particularly evident during the last internet mega-battle between open and closed networks: the social wars of the late 2000s. As Alexis Madrigal recently wrote, back in 2007 it looked like open networks would dominate going forward:

In 2007, the web people were triumphant. Sure, the dot-com boom had busted, but empires were being built out of the remnant swivel chairs and fiber optic cables and unemployed developers. Web 2.0 was not just a temporal description, but an ethos. The web would be open. A myriad of services would be built, communicating through APIs, to provide the overall internet experience.

But with the launch of the iPhone and the rise of smartphones, proprietary networks quickly won out:

As that world-historical explosion began, a platform war came with it. The Open Web lost out quickly and decisively. By 2013, Americans spent about as much of their time on their phones looking at Facebook as they did the whole rest of the open web.

Why did open social protocols get so decisively defeated by proprietary social networks? The rise of smartphones was only part of the story. Some open protocols — like email and the web — survived the transition to the mobile era. Open protocols relating to social networks were high quality and abundant (e.g. RSS, FOAF, XFN, OpenID). What the open side lacked was a mechanism for encapsulating software, databases, and protocols together into easy-to-use services.

For example, in 2007, Wired magazine ran an article in which they tried to create their own social network using open tools:

For the last couple of weeks, Wired News tried to roll its own Facebook using free web tools and widgets. We came close, but we ultimately failed. We were able to recreate maybe 90 percent of Facebook’s functionality, but not the most important part — a way to link people and declare the nature of the relationship.

Some developers proposed solving this problem by creating a database of social graphs run by a non-profit organization:

Establish a non-profit and open source software (with copyrights held by the non-profit) which collects, merges, and redistributes the graphs from all other social network sites into one global aggregated graph. This is then made available to other sites (or users) via both public APIs (for small/casual users) and downloadable data dumps, with an update stream / APIs, to get iterative updates to the graph (for larger users).

These open schemes required widespread coordination among standards bodies, server operators, app developers, and sponsoring organizations to mimic the functionality that proprietary services could provide all by themselves. As a result, proprietary services were able to create better user experiences and iterate much faster. This led to faster growth, which in turn led to greater investment and revenue, which then fed back into product development and further growth. Thus began a flywheel that drove the meteoric rise of proprietary social networks like Facebook and Twitter.

Had the token model for network development existed back in 2007, the playing field would have been much more level. First, tokens provide a way not only to define a protocol, but to fund the operating expenses required to host it as a service. Bitcoin and Ethereum have tens of thousands of servers around the world (“miners”) that run their networks. They cover the hosting costs with built-in mechanisms that automatically distribute token rewards to computers on the network (“mining rewards”).

There are over 20,000 Ethereum nodes around the world (source)

Second, tokens provide a model for creating shared computing resources 

(includingdatabases, compute, and file storage) while keeping the control of those resources decentralized (and without requiring an organization to maintain them). This is the blockchain technology that has been talked about so much. Blockchains would have allowed shared social graphs to be stored on a decentralized network. It would have been easy for the Wired author to create an open social network using the tools available today.

Tokens align incentives among network participants

Some of the fiercest battles in tech are between complements. There were, for example, hundreds of startups that tried to build businesses on the APIs of social networks only to have the terms change later on, forcing them to pivot or shut down. Microsoft’s battles with complements like Netscape and Intuit are legendary. Battles within ecosystems are so common and drain so much energy that business books are full of frameworks for how one company can squeeze profits from adjacent businesses (e.g. Porter’s five forcesmodel).

Token networks remove this friction by aligning network participants to work together toward a common goal— the growth of the network and the appreciation of the token. This alignment is one of the main reasons Bitcoin continues to defy skeptics and flourish, even while new token networks like Ethereum have grown along side it.

Moreover, well-designed token networks include an efficient mechanism to incentivize network participants to overcome the bootstrap problem that bedevils traditional network development. For example, Steemit is a decentralized Reddit-like token network that makes payments to users who post and upvote articles. When Steemit launched last year, the community was pleasantly surprised when they made their first significant payout to users.

Tokens help overcome the bootstrap problem by adding financial utility when application utility is low

This in turn led to the appreciation 

of Steemit tokens, which increased future payouts, leading to a virtuous cycle where more users led to more investment, and vice versa. Steemit is still a beta project and has since had mixed results, but was an interesting experiment in how to generalize the mutually reinforcing interaction between users and investors that Bitcoin and Ethereum first demonstrated.

A lot of attention has been paid to token pre-sales (so-called “ICOs”), but they are just one of multiple ways in which the token model innovates on network incentives. A well-designed token network carefully manages the distribution of tokens across all five groups of network participants (users, core developers, third-party developers, investors, service providers) to maximize the growth of the network.

One way to think about the token model is to imagine if the internet and web hadn’t been funded by governments and universities, but instead by a company that raised money by selling off domain names. People could buy domain names either to use them or as an investment (collectively, domain names are worth tens of billions of dollars today). Similarly, domain names could have been given out as rewards to service providers who agreed to run hosting services, and to third-party developers who supported the network. This would have provided an alternative way to finance and accelerate the development of the internet while also aligning the incentives of the various network participants.

The open network movement

The cryptocurrency movement is the spiritual heir to previous open computing movements, including the open source software movement led most visibly by Linux, and the open information movement led most visibly by Wikipedia.

1991: Linus Torvalds’ forum (post) announcing Linux; 2001: the first Wikipedia (page)

Both of these movements were once niche and controversial. Today Linux is the dominant worldwide operating system, and Wikipedia is the most popular informational website in the world.

Crypto tokens are currently niche and controversial. If present trends continue, they will soon be seen as a breakthrough in the design and development of open networks, combining the societal benefits of open protocols with the financial and architectural benefits of proprietary networks. They are also an extremely promising development for those hoping to keep the internet accessible to entrepreneurs, developers, and other independent creators.


Next post: Crypto token roundupPrevious post: How Aristotle Created the Computer


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The Management Accountant, a Top Digital Transformation Pro

The Management Accountant, a Top Digital Transformation Pro

At a time when so many different factors can impact a company's finances, management accountants must be integral to the senior decision-making process.

As business organizations face complex challenges, the skills and competencies of their finance professionals need to be up to the task. The traditional role of the accountant — someone who reports short-term financials — is no longer sufficient for a business world challenged by disruptive technology, the need for good storytelling, geopolitical risks, and emerging regulatory frameworks. But within the finance function, a role already exists which addresses, holistically, how numerous issues impact an organization’s sustainable business performance: the management accountant. It’s a role that is certain to expand in scope and importance in years to come.

With virtually every business decision being one that impacts the financial statements, management accountants influence the entire value of the organization. In addition to budgeting, forecasting, performance management, and internal control, management accountants exert influence on decisions involving strategy, operations, and technology.

Broadly, that is what a management accountant does. Organizations that don’t recognize the value of management accountants or don’t recruit the right talent for the role are facing a skills gap. They need professionals who can not only report the numbers but also offer new insights and “tell a story” about the data to move the organization forward.

So, what are the more specific capabilities that management accountants bring to their organizations, and what particular competencies, responsibilities, and functions do they entail?

Analysis – Finding the Reasons Why

Management accountants are analysts who can successfully determine what the numbers “mean” for the company and are always seeking discoveries in the data. They’re “data explorers” if you will, answering the standard questions of management but also delivering new insights through analytics and visualization. Those insights should be about the organization’s supply chain, including the cost of service, innovation, insights into consumer behavior. Management accountants today are increasingly expected to deliver insight and foresight. There is a distinct difference between a management accountant and the traditional “bean counter,” who is vulnerable to having his or her competencies performed by robotic process automation (RPA) systems. 

Planning – Building Informed Strategies

Management accountants use the competencies of budgeting and forecasting to help senior leaders make the best financial and business decisions. By working closely with CEOs and other executives, management accountants play an instrumental role in crafting and executing long-term strategy. The in-depth knowledge they bring to the table (and the boardroom) can mean the difference between success or failure for new initiatives, product and service launches, or expansion into new markets. In the 21st century, when so many different factors can impact an organization’s finances, management accountants must be integral to the senior decision-making process. In effect, they offer technical accounting depth with business operations breadth.

Leadership – From Planning to Execution

As leaders of an organization’s finance function, management accountants must be able to manage and lead teams successfully. Many management accountants are skilled at leading teams, monitoring their progress, and identifying which people are best for which jobs. These are all core skills that management accountants can be expected to perform. In addition, they can develop strategies and execute detailed plans, often across multiple departments and divisions of an organization. 

The management accountant sits at the intersection of finance, technology, analysis, strategy, and leadership, helping to determine what drives profits and losses rather than just reporting on them. He or she takes a step further than reporting, helping the C-Suite devise strategies for long-term growth and adaptation to changing markets.

A management accountant is an asset to an organization struggling to understand the best path to stability and growth or straining to translate lofty “big picture” goals into concrete financial and operational actions. For finance professionals who want to make a real impact on organizations, this is an ideal role. And for organizations in need of informed financial decision-making that directly influences sustainable business value and growth, the management accountant is essential.

If you aren’t willing to go all-in, then don’t put on your RPA swimsuit

RPA Reebot blog series in collaboration with Kieran Gilmurray

RPA can be complex and expensive. It is not the perfect tool for all occasions but then again no technology is. Automation isn’t a quick fix. It’s a journey. For real results, you need to do more than deploy software robots. Before any organisation jumps headfirst into #RPA there are many questions that need to be asked and answered.

What is your organisation’s digital transformation strategy?

RPA needs to be part of a clearly articulated business transformation strategy. Don’t blame your vendor for your lack of transformation planning, strategy or foresight. Organisations need to articulate clear business outcomes from the very beginning of any RPA infused digital transformation program. It’s ok not to have your strategy planned to the nth degree but do understand the transformation direction you are going upfront. Begin simply, but have a plan to rapidly move up the intelligent automation value chain (RPA, AI, Analytics, process mining, OCR, Chatbots etc) to digitally transform your organisation (i.e. adopt a crawl, walk, run approach).

“RPA requires buy-in from all levels of the business, but for it to be successful firmwide, it needs to start at the top. I’ve seen many examples of where the wrong stakeholder have been engaged from the start and this has led to a failure in getting traction on the automation journey“
Amyn Jaffer – Head of Intelligent Automation at Ultima

Is automation a strategic priority for your business with strong executive support?

If the answer is no; then stop here. Programs that don’t have a strong executive sponsor are far more likely to fail. Executive teams need to lead from the front and present this picture of a brighter augmented future to their employees from the start.

“Implementing RPA can be far and reaching in any business, from Execs to the colleagues on the ground completing the work the BOTs may be brought in to automate, everyone can be impacted. It’s very important to have Exec level sponsorship but it is equally as important to make sure the people on the ground are communicated to from the outset….very often it’s the people on the ground who play a huge part in teaching the BOTs“
Andrew Hartley – RPA Consultant

Do you want a fast, cheap and easy RPA digital program?

Well, you can’t have one. Don’t blame the vendor for you wanting fast, cheap and easy. Nothing that Kieran (in his 25 years) or myself (with my time in the space) have seen delivers results that are worthwhile and sustainable in the medium to long term that is cheap and fast. An automation program of reasonable scale will cost £250k in the first 6 months alone. Whatever your vendor tells you, implementing RPA correctly takes considerable time and money.

“A straightforward way to improve your probability of automation success is to have a selection of vendors automate the same process as part of a competitive PoC process. Each vendor should fully involve you in their POC. That way you can see exactly how things are done using their software. You or they can produce a video showing live software with customer sample data demonstrating exactly how the proposed automation will work to show others. This approach reduces your all round risk with the added bonus of a head start with the software you end up going with“
JD Wilson Jr – RPA Hyper Innovator

Has someone else in the company already looked at RPA?

Kieran explained that he has come across large UK retailers and banks who have simultaneous RPA pilots running with separate vendors due to the fact that the business functions had a history of not communicating with each other. Do complete a comprehensive RPA product review. Don’t just rely on the recommendations in analyst reports. Look beyond the top 3 vendors. Select an RPA toolset that best suits your organisation’s digital strategy otherwise your RPA program may struggle to deliver anything at all.

Do you fully understand what RPA can do and can’t do?

RPA won’t work in lots of situations. In fact, an API may be a better solution. RPA works when processes are pre-defined; structured; repetitive; easy to understand; digital; high volume; where data quality is excellent and there is a logical set of predefined steps to follow. RPA does not work well when innate human judgement is required.

“RPA works well for structured, well ordered processes. It does not work well when human cognition is required; nor should you use RPA when there is a ready made API available“.
Matthew Coffey – RPA Delivery Lead at Pearson

Have you done your due diligence and determined what RPA will deliver in terms of tangible benefits to your organisation?

Have you completed a business process review, costed RPA, completed a POC (a well-defined and delivered RPA program costs a lot of money e.g. a mid-sized firm would burn through a quarter of a million in 6 months) and found that real business returns will accrue? See this article on measures you might consider when building your RPA business case.

Are your IT team aligned, their resources allocated and are they openly willing to support you?

Have you got a plan for how you’ll build and support (a key facet of RPA programs) your RPA program for the next 3 years? If you don’t have your IT teams buy-in then you are going to struggle to create momentum for your RPA program. IT help is needed to create a stable, agile cloud environment (recommended if you want to grow in an agile fashion), roll out software, help with network access, support bot pcs and lots more besides. Rolling out and successfully supporting more than 25 robots is a tough challenge. Without the support of a fully bought in IT team, your program will struggle to survive.

Have you got a well-defined ‘hearts and minds’ communications program in place to clearly articulate how, what and who will benefit from intelligent automation?

Newspapers and online news sites are choc a bloc with stories of major job losses caused by robotics. Consequently, the people you need to both offer up, and work with you to automate processes, may not be as excited about an RPA program as you are. Your HR team should have a strategy in place that clearly articulates how your organisation will grow in an era of increasing automation.

RPA is not about talent replacement, it’s about talent augmentation. – not just about cost optimisation, it’s also about organisational transformation. – not about taking the robot out of the human, but bringing the human back inside the human”.
Shail Khiyara – RPA & Intelligent Automation Executive

Is your organisation in the middle of a transformation initiative already? Will you have enough time rich subject matter experts (SMEs) to help your intelligent automation program?

Considerable SME time is required in design thinking, development, documentation and agile ceremonies. Never underestimate or under-communicate the effort needed from your SME (and their team members who run the process day-to-day) to help you automate and support processes.

Is your organisation’s RPA program easy to set up, code and use?

Superior product usability can lead to quicker scalability, greater ease of deployment, higher levels of adoption, cheaper run, and build costs and lots more. If the RPA product and its configuration, build, run and administration of processes are not efficient or easy to understand then this will likely lead to higher run costs.

Is your organisation’s culture aligned?

A workforce culture that truly embraces change will provide a platform for you to succeed at anything. A siloed, broken culture, riven by personal interest will stop any program, technology or otherwise, in its tracks. Which is yours?

RPA can play a transformative role in automating processes within your organisation. However, if you don’t prepare properly, then RPA can become a sinkhole which swallows your resources and time.

What questions would you recommend organisations ask before they implement an RPA program?

Free to share!

If you think this article would be beneficial to others please feel free to share it. If you want to post this article on your LinkedIn page then please feel free to do so. The more information we share within the RPA community the more likely businesses are to succeed with this excellent technology.

We’re moving from the Technology Era to the Human Era | RPA Tools

We’re moving from the Technology Era to the Human Era...

Most of us believe we’re living in an era of technology. Artificial intelligence, robotics, blockchains, and IoT are all here. They’re a given in our lives. But machines and technology are just tools whizzing through automated, repetitive, and standardized tasks. Though these amazing technological capabilities have become the norm, they are ushering in a new era where it is humans that make the key difference in enterprises, society, and the economy.

The old paradigm of technology

We’re all captivated by technological capability. Most of today’s executives believe technology is yet another must-have tool to acquire, and they’re closely watching what the competition is doing to keep up. However, the idea that implementing technology, adding software, or purchasing better data should simply follow a “plug-and-play” approach is misguided. That’s the old paradigm.

Technology isn’t enough

Merely adopting more technology isn’t enough to survive as a competitive enterprise. What most companies miss is that becoming a forward-thinking company requires us to become more human, not less. The success of becoming a leader in this new era doesn’t come from focusing on tech—but rather on people. Consider a recent statement by Nick Drake, senior vice president of Digital T-Mobile: “If you make [positive human experience] your primary metric, everything falls into place.”

Uniquely human strengths are needed to leverage technological computational powers. Today’s leaders need to understand how to hire the best talent and develop onboarding protocols that seamlessly absorb that talent into an innovative and inclusive culture. Successful leaders create a culture of innovation that brings the best from its people. They build trust in an organization’s AI systems by verifying and “looking under the hood” of algorithms. They create a symbiosis between people and technology that allows everyone to thrive.

Why leading tech companies are human-centric

This human-centric approach is exemplified by leading technology companies, including Google, Facebook, Microsoft, and LinkedIn. These companies understand they must transform the way they do business in a way that has nothing to do with technology. The issue isn’t whether machines will replace humans. It’s about how to create a business model in which machines and humans complement each other.

Machines expertly handle repetitive and automated tasks and will always be faster and more precise. However, uniquely human skills—creativity, innovation, adaptability, empathy, integrity, and imagination—are becoming increasingly imperative to an organization’s success.

These skills cannot be “outsourced” or “botsourced” to machines. These human skills are needed to bridge the gap between technology and people, and to utilize machines in the best way to serve customers, coworkers, suppliers, and stakeholders. Without a new business model, one that’s focused on cultivating human talent and authentic culture, the human element of the organization becomes an appendage to technology and quickly atrophies.

There are five broad maneuvers to undertake in making this transition:

  1. Broaden your organization’s focus. The first step is broadening the single-minded focus on financial performance to include intentionality and purpose. Yes, financial performance and shareholder value will always be important. The difference here is that creating human-centered, technology-powered organizations will drive financial performance.
    Having a purpose in society, one that’s beyond mere profit, is a critical element of success. Millennial talent tends to seek out work environments that are dedicated to a higher purpose. It’s hard to inspire a workforce to innovation, creativity, and engagement by dangling financial payoffs. The pursuit of profit does not inspire human flourishing, creativity, or authentic care. It will not suffice in this new era where greater human capabilities are needed.
  1. Articulate your purpose. Business leaders should be able to clearly articulate their company’s purpose in the world and act with integrity. This means conforming to principle and having fidelity to the truth. In the age of information, the truth feels ever harder to come by. We are swimming in data, and yet we don’t always know which way is up. Companies that tell the truth when there is a temptation to lie will be rewarded by the cultivation of public trust. Companies that lie will be prone to scandals and failed cover-ups. How leaders react, and whether they demonstrate integrity, will determine whether they get to keep their jobs.
  1. Move from contractual to meaningful relationships. The quality of engagement with stakeholders—your customers, employees, and suppliers—depends upon the commitment to form meaningful human connections.
    As machines and humans work to adapt in real-time to customer and environmental demands, agility and flexibility will be in high demand. This will require a shift from rigid, functional procedures to systems thinking, from silos to flexible organizational structures, from strict hierarchies to flatter organizations and cross-functional integrated teams. We cannot get caught up in official job titles. We simply need to perform as needed, playing to our individual strengths, responding to and communicating our real needs to each other in real-time.
  1. Create a virtual presence. Organizations also need to shift away from requiring a physical presence in a brick-and-mortar office environment to flexible, virtual options. If your goal is to enhance creativity and productivity in service of your company’s mission, then it’s antithetical to the business mission to require employees to routinely subject themselves to unpleasant work conditions. At least be willing to shift from traditional offices to work environments that promote comfort. What matters is performance, not being in a cubicle.
    If you only trust your staff to work when they are literally under direct supervision and surveillance in an office setting away from home, you have trust issues. Find other performance metrics so they can work wherever it suits them. Unless you are dealing in sensitive materials that require a controlled environment (anything from protected health information to hazardous substances), let your teams work from wherever. Or make your office better than anywhere else they might rather be.
    Eight-hour workdays in a physical office should be replaced with far more pleasant arrangements that support human collaborative relationships and flourishing. Let’s replace the dreaded Monday morning commute with something more humane, efficient, and productive. That means virtual presence, collaboration in both physical and virtual teams, and a work structure that promotes the best in people.
    Consider Google, which lets employees take naps and work at their own pace in a highly comfortable, aesthetically pleasing environment. Treat people like humans instead of commodities. You’ll be surprised at the results.
  1. Shift to aspirational metrics. The last step is a shift from traditional productivity measures to aspirational metrics that incentivize innovation and creativity. In order to encourage human workers to exercise those uniquely human skills (as more and more cognitive work is “botsourced”), we need to change our performance metrics. The old management adage “You cannot manage what you do not measure” needs to go. Managing human creativity, caring, emotional intelligence, ethical convictions, and innovation will require us to use different measures of performance, not just work hours performed or cost reductions achieved.

The idea that “technology will fix things” is misguided. Technology cannot fix bad processes, poor management practices, or failing employee morale. Without people, there is no innovation, no strategy, no connections with customers. The uniquely human skills of creativity, innovation, adaptability, empathy, integrity, and imagination are becoming increasingly critical to success, and these skills cannot be taken over by machines.

This new era is about empowering human flourishing, emotional connections, and authenticity.

It is the Human Era.

We just have to be ready.

The Psychological Impact of Robotic Process Automation

Humans Need To Play A Bigger Role

Psychological research proves that people are happiest at work when they’re most productive, and further, when they’re happy, employees are more willing to try harder to win, serve, and retain customers. In order for leaders to maximize the positive psychological impact of Robotic Process Automation (RPA), implementation, communication, and collaboration between the business and its employees is an absolute requirement. While the fear of losing their jobs could become a reality for some workersautomation will also spur on the growth of many new jobs including some entirely new job categories.

The largest transformation will be for those human workers that will be working side-by-side with "robots". This is exactly why organizations must prioritize: Re-training employees. This includes encouraging continued innovation and research, and at the same time, developing workers’ skill-sets to adapt to automation.

Operating computer-powered machines enables intellectual stimulation to spill over to more creative aspects of a business and that results in employees feeling good about their work. In turn, our customers are being better served. Happier employees always leads to better serviced customers. If employees are focused on routine and menial tasks, they’re going to give you maybe 50% effort. Empowering employee leads them to want to do more — that’s the biggest indicator of great leadership — they want to improve their relationship with the customer because psychologically, the machine has already taken their boring tasks away. Human workers will always be able to give consumers something machines cannot — empathy and compassion — we need both now more than ever.

The Importance of Communicating to Employees

It’s extremely critical to communicate to your employees exactly why the move to RPA is being made. It gives them a sense of belonging, instead of feeling isolated, to know how exactly it will interact with our strategy and also their career. If employees understand how RPA fits into your business strategy, the benefits that RPA brings, and what organizations plan to do with the jobs being transformed, organizations can manifest significant support. Failing to effectively engage with your employees at both a developmental level and at a communications level will result in a disjointed RPA initiative that is unable to meet the wider demands of digital transformation. Only by coordinating the RPA program effectively can organizations transform their workforce by enabling a better workforce experience.

Humans react emotionally to major changes, especially if it impacts their well-being. Failing to answer the question of: “What will happen to me?” will spark emotional resistance. Preparing for this psychological impact requires structured change management programs to be put in place. If this is done well, RPA will absolutely lead to more engaged employees. The motivation of employees, the constructive ambition needed to operate new system and be part of a new ecosystem, requires communication from both business and IT leaders. Frankly, if this is not how you are communicating to your employees now, I think you're in trouble.

The benefits of RPA include reducing manual errors, increasing efficiency, being able to augment human hours by operating 24/7, better employee engagement, and reduction of fraud, to name a few. Just like how the nail gun was a great automation tool for builders, it still requires humans to know where to place the nails. And just like a nail gun is one of the many tools in the builder’s toolbox, RPA is similarly one of the many tools that organizations should enlist and implement in order to meet their digital transformation efforts.

Organizations that have achieved scale in automation are those with a clear vision, strategy, and approach that includes both business and IT leaders. With the highly repetitive and rules-based tasks being automated, RPA enables firms to create digital workforces that execute repeatable process steps faster, accurately, and more cost-effectively than traditional human workers. With RPA taking over menial tasks, workers can focus on what matters to the business most. This is due to workers focusing on more face-to-face, customer-intensive tasks instead of inefficiently focusing on other menial tasks.

The convergence with Artificial Intelligence (AI) means that RPA is starting to evolve even further. Being powered by AI means it will be able to conduct intelligent searches even faster. In the grand scheme of things, RPA is still in its infancy, I think there’s a lot more convergence, especially with AI, that will happen in the future. Companies should be looking towards increasing budgets, which will increase costs and decrease profit in the short-term. That's called an investment. Over the course of just six months, most companies are seeing a positive return on their original investment, and that will continue to compound as time goes on. Ignoring this will mean you will lose. It will just be a matter of time.

As RPA matures, data quality will also improve. In other words, RPA enables organizations, with the help of other tools, to create a deeper profile of not only the customer, but also the employee. Most employees were expecting to be more engaged in their current role than they actually are, but studies show that businesses undertaking RPA to optimize their processes and increase efficiency, are already experiencing higher levels of engagement from their workers compared to those who are hanging on to the status quo.

It's an exciting time to be alive for a multitude of reasons and if you're particularly interested in business than this will be the most disruptive technology you have ever seen. Robotic Process Automation will create jobs that you never knew would exist and will eliminate the ones that include menial tasks that most don't enjoy now. The need for high emotional intelligence, empathy, compassion, and being kind to others has never been more important. I know this might sound odd and may be contrarian, but I wholeheartedly believe that as RPA becomes adopted by more businesses, the more people will enjoy their careers and the more time they will spend interacting with humans rather than computer screens like today. Our jobs are going to become more humanistic than ever and that will all be due to the Automation Revolution.

-Jonathan Kogan