FinTech Lecture 12 : Cyber-Physical Society and Future of Finance
Slides I used for FinTech - Financial Innovation and the Internet 2022 Fall at Graduate School of Business and Finance, Waseda University on December 23, 2022.
Sending money — generated by Stable Diffusion. FinTech — Financial Innovation and the Internet 2022 Fall Lecture 12 : Cyber-Physical Society and Future of Finance Kenji Saito, Graduate School of Business and Finance, Waseda University Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.1/27
This class is recorded 7 out of 15 lectures will be online only. When online, Camera ON is recommended, but not required You do need to speak often anyway (we are going to have a lot of dialogue) We will use breakout rooms a lot, but those won’t be recorded unless you do it yourselves (need to be allowed) Keep your Zoom client updated! We might use latest features The recordings could be used for research on (online) learning Transcribed for use and anonymized Will let you know when the necessity arises Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.2/27
The lecture slides can be found at : https://speakerdeck.com/ks91 Recording and chat text will be posted at Moodle and Discord Trial automatic transcriptions will be posted at Discord Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.3/27
Schedule (provisional) Lecture 1 9/30 Overview of FinTech (1) • Lecture 2 10/7 Overview of FinTech (2) • Lecture 3 10/14 Internet Technology and Governance (1) — online • Lecture 4 10/21 Internet Technology and Governance (2) • Lecture 5 10/28 The World of Apps (1) — online (close enough to Halloween) • Lecture 6 11/11 The World of Apps (2) — online • Lecture 7 11/18 Basics of Cryptography and Blockchain — online • Lecture 8 11/25 Blockchain • Lecture 9 12/2 Blockchain and Smart Contracts — online • Lecture 10 12/9 Smart Contracts — online • Lecture 11 12/16 Further Smart Contracts • Lecture 12 12/23 Cyber-Physical Society and Future of Finance • Lecture 13 1/13 FinTech Ideathon — online Lecture 14 1/20 Q & A Lecture 15 1/27 Presentations and Conclusions Online presence is possible but not recommended for non-online lectures for interactivity reasons Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.4/27
Last Time, We Did . . . Impossibility and Challenges of Blockchain Brief Introduction to Upgrading and Governance of Blockchain Technical Challenges of Blockchain Assignment Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.5/27
Today’s Topics Assignment Review Cyber-physical Society and Future of Finance Q & A Assignment Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.6/27
Assignment Review Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.7/27
Assignment 5. “The DAO Attacked” In 2016, an autonomous decentralized investment fund “The DAO” leaked 3.5M ETH in an attack that exploited a bug in a smart contract, but this incident was made to look like it never happened, by the hard fork of Ethereum 1) Choose between A) public policy position (of a country with many victims), or B) management position at The DAO 2) Discuss briefly what would have been the best thing to do from your position Deadline and how to submit December 20, 2022 at 17:59 JST From Moodle (mandatory) (Q&A forum) So that your classmates can read your report, refer to it, and comment on it Optionally, you can also post to #assignments channel at Discord Just plain text, and be concise, please Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.8/27
Trends and Measures Trends . . . of your reports Measures . . . how to improve the class 14 out of 28 students submitted (always better late than never) Your choices of positions and opinions : public policy position : 9 don’t hard fork (3) / do hard fork (1) / don’t let it happen again (2) / clarify legal status of DAO (1) / illegalize all (1) / no clear action (1) business management position : 9 do hard fork (4) / do soft fork (1) / other quick reactions (3) / bargain with the hacker (1) I think your opinions were well thought out from each standpoint Many of you could have written your answers a little shorter Try to use bullet points or other ways to make it easier for the reader to read and get your point across Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.9/27
C-san’s Opinion [snip] the public policy I propose is to work towards a clarification of the legal status of DAOs, and potentially to their systematic legal recognition as taxable business entities, under certain conditions This would allow a more efficient litigation settlement process in the case of hack and leakage More specifically, the policy would provide a systematic enforcement of Smart Contracts Audits and Due Diligence, in the same way that traditional organizations are subject to Anti-Money Laundering (AML) and Know Your Customer (KYC) policies ⇒ It sounds fair I believe that there have been ongoing discussions Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.10/27
W-san’s Opinion The bug itself is not from the smart contract concept but the coding of The DAO program [snip] It’s better to legislate laws for the blockchains, which is against the decentralized concept of it So from my perspective, it’s better to just declare all blockchain investments and speculations as illegal and any losses will not be protected by the government, to decrease the speculative activities in such segments ⇒ Certain mechanisms are more prone to bugs than others I believe that technological care must be taken ⇒ Outlawing might indeed be one way to go If it is a rebellious activity anyway But then again, it seems to me that the knowledge gained so far is that legalization will avoid funding underground (not necessarily righteous) activities Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.11/27
F-san’s Opinion Assuming that I am a law court judge, I may argue that any individuals or institutes should not edit the contract or the programming result, even though the hackers led to a massive loss for DAO society If someone needs to bear the loss, that will be the management of DAO, who needs to pay for the investors’ loss through insurance and improve the security problem in the system ⇒ It sounds fair Especially since it seems to be a common practice to turn an organization into a DAO in order to evade responsibility Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.12/27
Cyber-physical Society and Future of Finance Key concepts : Cyber-physical and Cognitive Aim for future — like passing the ball to a moving teammate Life with Earth-Scale OS (Operating System) and Meta-Nature Changes of Economy Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.13/27
Cyber-physical Cyber ← Cybernetics Focus on communication and control, so that animals, machines and other systems can be uniformly understood Reference to our nervous system → sensing and actuation (physical to begin with) Cyber-physical Apply cybernetics, physical to begin with, to the physical society Specific space, or the whole society functions by sensing and actuation Social infrastructures that support human lives and computer networks will be tightly connected through a variety of (AI-assisted) sensors, actuators, mobile devices such as smart phones, or even laws Today, we are always connected with information environments through smart phones and such, and therefore we are already at the entrance of the cyber-physical age Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.14/27
Cognitive Not general-purpose artificial intelligence (not replacement of human) No need to have “consciousness” → no need to be ASTROBOY ( ) Does “learn” and “infer” → can be like GIGANTOR (Tetsujin 28-Go; 28 ) or GUNDAM Extension of human abilities of recognition and intellectual processing It really is off-the-shelf technology today Demonstration of hand-written number recognition (http://cs.stanford.edu/people/karpathy/convnetjs/) Perhaps, children’s work-place experience at a post office should start with something like above? It is not a question of machines taking people’s jobs It is a question of people sticking to jobs machines or machine-assisted users are better at ⇒ There is going to be an inevitable social shifts Let’s also demonstrate ChatGPT to create a course syllabus Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.15/27
Aim for Future What’s the trends of the changes from today → 30 years later? Even to aim a little ahead, we must be sure of the direction, because things are moving If you see things too closely to present, the business will be short-lived if social changes are rapid e.g. × Business assuming that self-driving cars are personally owned Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.16/27
Earth-Scale OS (Operating System) (2007) This is cyber-physical, applying cybernetics to the physical world “Centers” are going to be automated → Rise of DeFi (Decentralized Finance) Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.17/27
Earth-Scale OS and Meta-Nature Anthropology Informatics Environmental Studies Sociology Business Administration Politics Today Hardware Applications User OS Human Business Financial System Human Business Earth-Scale OS Automation System Earth Earth Near Future (as of 2007) Human Meta-Nature (Highly-automated decentralized social environment) Earth Near Future (as of 2021) To the left is just an excerpt of the typical studies involved Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.18/27
Amazon Go Shoppers are insensible of money → money will soon be invisible Variety of monetary media, coupons and points can work underneath the visible shopping environments Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.19/27
World with a Variety of Digital Currencies Global currencies such as bitcoin Digitization of national currencies (“digital JPY” in Japan) MUFG coin, J-coin, S-coin (digital coins by banks and alike) Trials by communities Trials by central banks (CBDC : Central Bank Digital Currency) Local currencies, “cause-oriented economy” Making an entry to the world where a variety of digital currencies are in use We will be insensible of its complexity, and we will just clarify our policies We will not even care whether the mechanism underneath is monetary or not Agents (e.g. smart phone apps) will start suggesting actions according to the policies Sharing economy will join, too ⇒ Decline of Monetary Economy! cf. “Maneki Neko” by BRUCE STERLING Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.20/27
Tetrad of Monetary Economy Exchange, Consumption, Saving, Investment Specialization Agricultural / Industrial Society Economic Gaps, Exploitation, Bankruptcy Bullshit jobs Digital Currency, FinTech → Meta-Nature enhancement ENH- -REV reversal retrieval RET- -OBS obsolescence Domination and Obedience Hierarchy Profit Maximization (Money-less) Trust System, Gift Economy Omnipotence Hunting and Gathering Society New media revive what have been once made obsolete, but will “gift economy” and “omnipotence” be revived? Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.21/27
Trends of the Changes Radicalization of money and finance leads to stagnation of exchanges and consumptions → Rise of sharing economy Life style of running economy without specialization (also boosted by AI or digital fabrication) → Degeneration of taxable economic activities Changes in how public works are carried out ← opportunities for us → At that point, we have already seen decline of money, have we not? By pushing the principles of monetary economy forward, money would rather retreat from the front stage of our lives, because accommodation without needing money are preferred → Destroys “employments” and “separation of selling and buying” Distinction between “ruler and ruled” or “producers and consumers” will melt away Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.22/27
Discussion : Changes in Economy and Labor How will economy be like after 30 years from now? How are we going to live through the path leading to that economy? How do we begin? Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.23/27
Assignment This is to prepare for the Ideathon, where you will bring your ideas to further nurture them Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.25/27
Assignment 6. “International Aviation Business” Summarize an idea for applying FinTech to the international aviation business This includes anything that appears at international airports and beyond Examples : passports, visas, tickets, immigration, customs, airplanes, money exchange, duty-free shops, etc. Use of blockchain (or better versions of them) is recommended because of the need to handle legal or any rightful records across countries Or, if you have a specific idea for another application, summarize that instead In any case, begin with four sentences : 1) problem, 2) why it is a problem, 3) your startling sentence, 4) its consequence Deadline and how to submit Janurary 10, 2023 at 17:59 JST From Moodle (mandatory) (Q&A forum) Optionally, you can also post to #assignments channel at Discord Just plain text, and be concise, please Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.26/27
See You Next Year! (Online on Jan. 13) Enjoy winter Take good care of yourselves Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2022 Fall — 2022-12-23 – p.27/27
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