Bottom Line Up Front
- Generative AI creates concerns about the authenticity of digital communications, leading to a call for digital identity verification systems in venues like Elon Musk and others’ call to pause AI developments.
- Blockchain technology used in Bitcoin mining can act as a mechanism, with modification, to verify digital identity.
- Bitcoin mining companies, like Riot Platforms, be uniquely positioned to adapt their business model by using existing infrastructure to pivot toward digital identity verification.
- A pivot towards digital identity verification requires significant investment in training, education, and compliance but could represent a substantial opportunity for mining companies to become market leaders – although the many unknowns present make it a risky proposition.
Generative artificial intelligence (AI) became this year’s buzzword as ChatGPT and similar systems became widespread in late-2022. AI encountered a major hurdle last week as hundreds of industry experts and prominent speakers on AI topics, like Elon Musk, signed an open letter calling for a temporary pause in further AI developments beyond its current state.
The Future of Life Institute released the letter on March 22nd, 2023. Two days prior, Twitter stopped text message-based two-factor authentication for non-paying customers. To date, I haven’t seen anyone draw a line between the two, but there may be a compelling case of interconnectedness – and an opportunity for Bitcoin miners to diversify their business model.
Identity Crisis
Much of the media focus on the open letter centered around Skynet-style implications of imminent AI rebellion and ultimate catastrophe. Because that type of exaggeration excites the imagination and AI proponents cease upon it as a strawman to tear down, many missed critical points within the letter that point to real, valid concerns. Sandwiched within the regulatory recommendations, the letter’s author(s) proposed “provenance and watermarking systems to help distinguish real from synthetic.”
What?
In essence, this line item recognizes the possibility and likelihood that AI-generated content is already sufficiently advanced to create a reasonable suspicion that whomever you’re interacting with may not be an actual, flesh-and-blood participant. Beyond the current bot scourge that plagues social sites, AI-enabled identity falsification is a growing theme for development teams.
Deepfake technology, or that which creates false video, audio, or other digital media communications purporting to come from someone it doesn’t, is somewhat well-known. Mainly used for entertainment to this point, the implications are clear: technology exists to create semi-convincing digital replicas of real people.
Combine this emerging technology with social media hacking of public figures, as in 2020 when a teenager hacked Barack Obama and Elon Musk’s Twitter accounts, and you have a disaster. One falsified statement from a world leader could kick off major conflict before damage control kicks in. Less damaging but equally plausible is a false announcement from a CEO announcing insulin cost cuts or similar measures that send stocks tumbling.
The open letter’s call for watermarking serves to address the risk. By forcing some digital ID so users can pin down whether the content came from AI, we create a regulatory bubble around legitimacy or a force field to protect “real people” from impersonation.
But a force field that’s wholly penetrable and thus useless. AI model proliferation is already exponential, and bad actors can develop their independent systems or replicate existing programs sans-watermark in the future, free from regulatory compliance.
Is there an alternative?
Blockchain Benefits
Blockchain technology acts as a mechanism to verify digital identity. The complexities are a bit beyond this article’s scope, but blockchain effectively acts as a modern, unfakeable version of an old-school wax seal. Already blockchain’s demonstrated usage cases include:
- Travel identity verification (beats TSA pre-check!)
- Proof of ownership, including real estate transaction and estate management cases
- Healthcare record management
Based on these and other applied instances of blockchain identity verification, it isn’t a far stretch to imagine similarly “blockchain-verified” social media accounts in which each Tweet, message, email, or other communication is digitally stamped with a verified user’s cryptographic seal. There’s still space in the paradigm for anonymous accounts, but those purporting to represent actual, notable personalities get a chance to validate legitimacy.
Broadly blockchain-based identity verification works like this, although specific application varies, and there isn’t one commonly accepted standard yet:
- I elect to participate in the program and get two sets of cryptographic keys:
- One key, like a crypto wallet (physical and otherwise), is private and recoverable only in specific circumstances. It is difficult to spoof as they’re primarily a custodial/physical security concern rather than subject to hacking or other tech-based aggression.
- The second is a public key widely associated with me as a known identification tool.
- Public keys are stored on the blockchain, and when a digital verification message goes through (like a Tweet digitally signed with my private key), similar processes to those used in mining execute to marry up my privately-signed message with the public key – therefore validating that, yes, I sent the Tweet. The private key usage, in this case, isn’t like an actual password or other mechanism but married to a QR code I must scan to send. Users can even tie their private keys to biometric scanners to further secure the means of messaging.
Factoring in Two-Factor
As I mentioned, Musk and the Twitter team restricted two-factor authentication via text to paying subscribers around the same time as the open letter’s release. Ostensibly to prevent abuse from non-payers circumventing and otherwise abusing text-based options, the move is a step towards a verification system using Twitter’s baked-in “blue checkmark” paradigm.
While not exhaustive, requirements for the checkmark (that conceptually acts as an authentication or validation mechanism) include a confirmed phone number and consistently behaving according to platform rules. You must also have a display name and profile picture, and lose the checkmark if you change either until Team Twitter reviews your changes – so I can’t score a checkmark under my identity, change my name and picture to Elon Musk, and keep the mark – to do so falls under Twitter’s misleading and deceptive identities policy, which acts as a catch-all pushing the digital verification utility of the checkmark by disallowing:
Impersonation
Photos depicting other individuals, including stock imagery
“Copied” bios, an ill-defined rule which acts as a further net to likely disallow any implication the user is someone else
Taken together with Musk’s assertion that AI threatens authentic and verifiable communication and messaging, this soft move towards digital verification seems to be an opening salvo towards a broader, comprehensive system of identity management. Musk, who is quite familiar with the blockchain and its peripheries, doubtlessly keeps blockchain-based digital verification on his shortlist if this is a pivot point he plans to incorporate within the newly-reformed X Corp.
Digital identity becomes even more pressing as he dubs the X Corp formation a step towards creating an “everything app,” including financial transactions, mainly to avoid blowback similar to what Twitter founder Jack Dorsey and company Block, Inc saw in recent weeks.
Mining Management
Now let’s take a quick detour that likely seems out of the left field but one that I promise ties together (somewhat, I hope) coherently soon.
Like blockchain technicalities, we aren’t going to dive deeply into mining’s mechanisms. Just know that, in short and simplified, computer systems solve a series of math problems (proof of work) that serves a dual function as both auditor/verifier of the transaction before addition on the blockchain and minting new, fractional Bitcoin.
Although anyone can mine Bitcoin, enterprise-scale companies like Riot Platfoms, Inc (RIOT) are a scaled version of an old desktop tower running in your closet, eking out a few bucks in Bitcoin daily. These facilities are massive, often housed in old and abandoned factories, and consist almost solely of hardware racks running 24/7 to mine Bitcoin while simultaneously facilitating transactions on the blockchain.
Source: Riot Platforms, Inc
All that computing power demands a hefty energy bill, too. Mining came under fire as recently as this week when NYT decried RIOT and similar mining centers throughout the nation as wasting electricity, contributing to pollution, and similar ills.
That mining is an energy suck is indisputable, and, climate concerns aside (although very real), these costs make enterprise-level mining a risky operation as it becomes subject to two volatile pricing environments simultaneously: cost of energy associated with mining, on the rise due to inflation and other factors, and the value of mined Bitcoin itself which is notoriously whip-saw.
Combine both with the fact that, over time, the energy costs for each coin’s mining rise as fewer remain and proof of work becomes more demanding. Eventually, the juice just won’t be worth the squeeze for enterprise-level miners like RIOT. As Brad Pitt said in Moneyball, “adapt or die.”
Pivoting into Profitability
A quick summary since we’ve hit a few disconnected themes:
- Industry leaders called for a pause on AI development to figure out, among other things, how to differentiate and verify differences between synthetic and real digital communications.
- Twitter made a soft move towards digital verification by increasing the legitimacy of its blue checkmark verification system via two-factor authentication denial to those without.
- Bitcoin mining is pricy and subject to multiple, notoriously sensitive market factors. The cost continues rising, and eventually, enterprise-level mining will become impractical, leaving the option to either abandon ship or pivot to an alternative business plan.
So – can RIOT and similar hardware-heavy institutions play a role in a seemingly imminent transition to digital verification to diversify revenue and protect its status as one of the few companies with a semi-readymade hardware solution and network?
Maybe.
It’ll take a substantial series of innovations and commitment to accomplish that pivot, so if it’s on the table, these firms should start exploring possibilities now as the urgency remains low. What does that entail, and is it worth the cost and risk compared to waiting for an asset fire sale and dissolution once the current model becomes nonviable?
Is It Possible?
The mechanisms behind proof of work (mining) operations and digital verification differ. Both use technology to verify information, but the intention and processes (and underlying equipment) diverge.
Infrastructure Options
Since Bitcoin storage and all associated acts implicit in mining operations demand high levels of security, the existing infrastructure likely needs slight modification beyond realignment to comply with as-yet unknown accepted privacy principles, whether via political decree or public demand. Proof of work mining operations relies primarily on specialized systems like Application-Specific Integrated Circuits designed for specific algorithmic functions needed in mining. These may not be suitable off-the-shelf, and miners may need to adapt or replace tasks like these.
However, mining engineers and experts already embedded at RIOT and similar firms are deeply familiar with cryptographic information management and sensitive data handling practices. This expertise and skills set RIOT and other firms up to not only fall into place alongside a societal shift to blockchain digital verification but even to set up a proprietary system of their own – getting ahead of the curve, in effect, to be first-to-market and set the standard for others to follow while reaping the reward.
Assuming RIOT or other firms do intend to pivot, other considerations come into play:
Full Spectrum Operations
To offer a full suite of services, it’s in a company’s best interest to expand into document verification, facial recognition software, biometric authentication systems, and more – while facilitating verification may be enough to keep the ship righted as energy costs make mining prohibitive, true innovation relies on expansion and adaptation beyond simply transitioning to a new status quo.
Proprietary, custom-made solutions are likely too expensive to be practical, so strategic partnerships are the most probable course of action but far from a guarantee. Service providers may elect to stake out on their own or partner with smaller operations to capture a bigger share of the new paradigm.
People Pivot Too
From a high-level perspective, a massive pivot into a new model demands foresight and buy-in. Executive and managerial foresight to recognize the issues at hand and potential looming (assuming my thesis rings true) and, a trickier proposition, the dynamism to convince shareholders and stakeholders is in the company and investors’ best interest.
Lower-level personnel pivots must happen as well. Management must realign training and education for existing employees to meet the new paradigm, and privacy-centric compliance training is a heavy burden to bear. As a rough parallel, a single firm’s average HIPAA implementation cost is around $50,000. Aligning with new, emerging, and global privacy mandates will doubtless cost millions in consultancy and legal fees, serving and further dissuading dissenters.
New Horizons
What happens next is anyone’s guess, but few become rich by waiting on the sidelines.
The potential threat to transparency and public trust posed by AI-generated content creates a need for digital identity verification. This threat, in turn, presents an opportunity for Bitcoin miners like RIOT to pivot toward a new business model.
As the blockchain technology used in Bitcoin mining can act as a mechanism to verify digital identity, there’s a latent, unrealized demand for the centralized creation of a blockchain force field to protect authentic persons from impersonation. Although the mechanisms behind proof-of-work mining operations and digital verification differ, RIOT and other firms are well-positioned to fall into place alongside a societal shift to blockchain digital verification.
Although a massive pivot into a new model demands foresight, buy-in, and significant investment in training, education, and compliance, if executed correctly, it could represent a considerable opportunity for RIOT and others to forge a new system and lead from the front.
The most significant risk, of course, is the unknown.
Beyond the simple “what if” posed by whether the thesis rings true, the nuts and bolts behind actual implementation remain occluded so that any public shift in consciousness or government decree could render the point moot.
