2019: Failures and Frustrations of the Digital Economy

Here we speak about events and trends of the outgoing year that seem important to us because of the negative effect that they have had on the entire digital economy.

Libra and TON — they tried

The future of two promising projects of digital currencies has been called into question due to active resistance from government authorities. Facebook and Telegram are related by the fact that they possess the necessary technologies and have every opportunity to launch global projects of digital currencies, payment systems and platforms.

With the gossip and some leaked data, the Libra and TON projects caused a stir in the media and gained numerous supporters and opponents. The reason for the interest in digital currencies from these companies was obvious: they would not just promise, they would implement. And so, when Facebook revealed the cards and presented its plans, Libra’s opposition from government agencies entered an acute phase. Meanwhile, only a narrow circle of investors knew about Telegram's plans — Pavel DUROV and others were very careful. However, shortly before the planned launch, TON felt the opposition of the authorities in its full power.

The situation around the digital currency projects of these companies shows the attitude of states towards the very idea of ​​alternative payment and currency systems: sharply negative.

While crypto is local in nature and cannot spread widely enough — the authorities ignore them, only placing warning signs (in fact, any modern cryptocurrency is an illustration of such a policy). But if there is a perspective of a project with the potential to become global, with broad user support — tough measures are used to restrict investor access and hinder its very existence.

The wave raised by Facebook Libra has not yet subsided: regulatory authorities of Asia, America and Europe repeatedly speak about the threat to the traditional financial systems, and new negative comments and prohibitive laws appear. Scheduled for next year's launch is unlikely to take place. As Mark ZUCKERBERG said, the project was suspended until all issues with the regulators were resolved, and the latter had no shortage of issues.

The fate of the claims of the US SEC on Telegram, in theory, should be decided in the coming months — court hearings are planned, defendants are called, but there is some doubt that one can’t count on positive decisions in favor of TON.

WeWork — WeDrown

The unicorn, the icon of the start-up movement, failed a mandatory check on financial performance, got a ton of negative ratings and accusations from the media, and went down.

From the moment of its appearance, the company has successfully raised investments, increasing its value from round to round. At the beginning of the year, it was said that it amounted to more than $47 Bln. Investors, including financial-world monsters such as J.P. Morgan Chase, Goldman Sachs, and SoftBank, generously pumped capital into the company. This allowed WeWork to pursue a policy of expansion to other continents, absorb numerous startups, buy real estate and demonstrate unbridled enthusiasm.

After this year, planning to go IPO, WeWork (to be more precise, We Company — the parent company) presented its financial indicators for public review, reflected in the S-1 form of the US SEC. And here came the problems. It turned out that the company lost about two Bln dollars for the last year only. Experts analyzed the WeWork business and came to the conclusion that it cannot be profitable at all. Adam NEUMANN, the head of the company, was reminded of his personal business jet, his relatives in the governing bodies of WeWork and much more. Also, accusations from employees were announced that claimed harassment, threats, and unfair pay.

In the end, the failure of WeWork is a blow to the reputation of:

• other startups — who knows what skeletons in the closet can be found if you look closely?
• investors — how imprudent and unskilled were they, transferring billions of capital in favor of a company with a loss-making business model?
• of the entire digital economy — if at least a couple of other unicorns join WeWork, then the crisis will probably be inevitable.

WeWork is currently worth less than the sum of all the investments it has raised, and the fall continues. It is unlikely that anyone hopes that the affairs of the former star of the startup movement will soon get better and everything will return to normal. Most likely, the hole in this ship is much lower than the waterline — eventually, it will drown. The only question is whether this ship will pull others along.

Data leaks: here we go again, stepping on the same rake

Throughout this year, a lot of different events happened with the data: losses, leaks, thefts, extortion. In general, nothing new — all this has happened before. Therefore, it would be more correct to formulate the question as follows: what did not happen?

• There was no qualitative change in the security policies of companies and organizations.
• There was no general understanding of the importance of reliable storage and transmission of information.

The introduction of information systems is happening everywhere. Humanity wants a smart environment: to live in automated homes, to possess self-driving cars in smart cities. State and municipal authorities equip streets and roads with advanced tracking and recognition systems. Registers and databases of citywide, national and international systems become computerized, acquire network interfaces and intelligent processing algorithms.

In the modern world, people who think about the dangers of access to information, apparently, are not the same people who make decisions about the development and implementation of information systems. Individuals, whose personal information fell into the hands of hackers and became the subject of bargaining or was sold to interested parties are better aware of the problems with data protection. A lot of unflattering words to careless administrators and developers can probably be heard from patients of hospitals whose treatment was suspended due to attacks on medical computer systems; or from consumers faced with a denial of service, the need to replace their cards, with losses of savings due to the hacking of payment and banking systems.

The evil irony is that state intelligence surveillance systems, zealously implemented by the authorities of many countries to control their citizens, very easily become weak spots in public security.

What will happen next? Most likely, nothing will change. Because there are no prerequisites for this. After each new scandal involving data leakage, loss or theft, reports on solving security gaps appear and investigations proceed, but there are no general conclusions followed by systematic steps.

What is happening now resembles the actions of a man stepping on a rake. Trying to protect his forehead from new blows, he wraps a thick layer of bandage on it and bravely takes a new step. Why not just look under your feet and do something with the rake?