Document No. 9 Technology

The Financial Time’s excellent “New IP” story, about Huawei’s proposal to fundamentally change the TCP/IP architecture of the internet got me thinking. Or rather tenuously connecting some faint dots.

Warning: this is an extremely speculative post. But my spidey-sense tells me there’s something here. So, here we go…

The internet is not just how we get information - it is how we communicate, and (increasingly now) interact with society. It’s the fundamental data platform. Beijing wants to centralize and add authority to it.

Money is how we store our wealth, transact and thus survive in society. And the People’s Bank of China (PBoC) is pushing forward with its digital currency plan (about which I waxed extremely lyrical and perhaps mistakenly here). Beijing wants to centralize add authority to money.

And our identity is the thing we bring to all our interactions and transactions, social, financial, spiritual, intellectual, political. And Beijing’s still-murky plan to build a “social credit score” system, while much-exaggerated in it current instantiation, could evolve into your identity as far as access to a large chunk of services and activities in China goes. So, for identity, Beijing seems to want to centralize management and add its authority to it.

Data, money and our identity. And three still-nascent, ambitious plans seemingly aiming to centralize management of them, and add an authority layer on top. Let’s take them quickly one at a time.

The current internet is based on the TCP/IP architecture, which basically means that packets of information get sent from your IP address to another through the internet, and then back again. There’s no top-down management of the network, only of the protocols that define how data is transferred. Addresses are tied to devices, not people. And there’s no predefined path for data packets to move by; part of DoD/DARPA’s original intention of course was for the network to be resilient to bits of it going down.

Now, there are aspects of Huawei’s still-murky ‘new IP’ architectural proposal that solve well-recognized problems. It would allow the length of IP addresses to vary, which might help with simple, low-power IoT networks. It might be able to stop denial-of-service (DDoS) attacks. It would tie you into the network, rather than your devices, which might be useful as you increasingly are tied to many more devices. I’m not sure how this would work but it claims the ability to better integrate new networks, like the ones we’ll need for working with VR/AR and holograms or for space.

But Huawei’s proposal also involves authenticating your identity before you send anything, putting information about you and your activity in the data-packet and having the ability to stop the packet if it breaks ‘the rules’. Those would require the network operator to know you and manage (or rather, police) what you do on the internet. Suddenly, it appears, the Great Firewall could be internalized into the network itself. Beijing we know has long longed after ‘Internet sovereignty’ and this architecture could deliver it (as well as be attractive to other authoritarian regimes.) (As an aside, the FT’s piece on the ITU me wondering if Beijing has been as successful in nurturing guanxi there as at the WHO…).

Meanwhile, the PBoC has been working on an electronic equivalent of cash, DCEP, and the COVID-19 crisis is likely going to accelerate the plan, given cash is so damn dirty. (At least you don’t get the cocaine in China, just a smattering of ket.) Here are the basics of the plan.

Discussions over DCEP tend to quickly get all crypto-y. “Facebook’s doing Libra (or not?), Bitcoin’s doing this, Ethereum that, and PBoC is doing DCEP”. But DCEP is very different; unlike Bitcoin/Ethereum, it’s not a new currency, it’s just electronic Renminbi. It likely won’t be blockchain-based; hashing is way too slow to allow DCEP to replace all those transactions. There won’t be a “distributed ledger” either; the PBOC will administer/control/see all data. Banks will have DCEP accounts at the PBoC, which will parallel and eventually replace their cash reserves. And people will have DCEP accounts at their banks and would then pay for stuff with DCEP. Any merchant which currently offers Ali/Tencent e-payment will probably be required to offer DCEP too and/or Ali/Tencent will need to merge their QR code back-end and allow DCEP to run on the same rails.

DCEP will be marketed on the basis that it’s dependable – its the central bank running it, not an ‘unreliable private company’! In theory, the PBOC will be able to not only see every transaction – but to approve them too. They don’t want someone to pay you? Computer says no. They don’t like a bank lending to you, computer says no. They’re not excited about you transferring cash out of the country? Computer says no, or levies a 20% tax. (For those of you who don’t get the allusion, here’s some Little British humor.)

And then we have social credit. This system is still evolving, and I’ve not looked in much detail at it. Right now, it seems the biggest impact is on large-scale debtors who get placed on a list and thus cannot buy a high-speed rail or plane ticket. But once the infrastructure is in place, it could easily include other metrics. It could evolve into the equivalent of your dang-an, a record of your political activities and performance. And then access to a mortgage, a good school for your kids, a passport might all depend on keeping your score up.

All this sounds pretty dystopian. And thus easy to pooh-pooh as highly unlikely. For sure, the technical challenges are immense. In my previous piece on DCEP, I was skeptical. The PBOC is not known for its commercial savvy, and DCEP requires a lot of that, since if it’s not easy to use, people won’t use it (unless Alipay get an offer they can’t refuse). It also needs a lot of back-end computing power and super-efficient plumbing. The PBoC are working with private firms to get that all done. Ditto with Huawei’s ‘New IP’ and the social credit system.

Put the technical difficulties aside though, and it seems to me that the bureaucracy (and China’s completely independent private sector) is currently working on the same vision; a Document No. 9 Technology future.

This foundational document for the Xi era laid down, in categorial fashion, the need for a robust One Party-led, top-down political system and the rejection of individual liberties and any constraints on CCP power (a little more from me on this here). Technology is especially powerful when it is set up as a platform - as New IP, DCEP and social credit all are - and when systems work together, as these I suppose, may do. Bad social credit score? Well, more tightly-supervised access to the Chinese internet then. Trying to send DCEP out of the country? Well, that will damage your social credit score. Kids not doing their Xi Jinping Thought homework? Their discount school fees just went up.

These systems may never be built - or when they do they might be so badly run that they fail to get taken up or are just so full of latency and errors that they don’t get anywhere the vision the Party’s dreamers have for them. But the vision is there; Document No. 9 Technology.