Blockchain vs Government: Friend Or Foe?
Blockchain vs Government
Blockchain vs Government: Friend or Foe? Blockchain technology is a distributed ledger, meaning that no central party, individual, or business needs to facilitate the transactions that take place on the blockchain network. The trust needed for transactions to take place on a blockchain network is instead left with the community of nodes, or peers, in the network. This is a shift from our traditional way of thinking whereby we instill our trust in national governments. With this being the case, is blockchain technology a threat to governments around the world? Furthermore, in the age of Big Data, is blockchain technology a threat to the large companies that profit off of our data and information? In this article, we will take a look at how blockchain technology could pose a threat to national governments and large companies around the world.
Simplified Transfer of Digitally Represented Assets
As mentioned, a blockchain network allows for a distributed trust system wherein transactions can take place without a 3rd party intermediary. This enables anyone to transact with any asset that can be digitally represented; interchanging this digitized asset with anyone else on the blockchain network. It can be a digital representation of money, such as cryptocurrency, or information such as title deeds or personal information and data.
The blockchain network can also grant access to any digital asset such as personal information if the person who owns the asset wishes to grant someone else access to it. This is achieved using cryptographic keys that represent ownership of assets on the blockchain and enable the interchangeability of these assets between people in the network.
Now that we have taken a look at how blockchains can enhance any asset that can be digitally represented, let’s take a look at the threat it poses to governments and large companies.
Blockchain vs Government: The Threat
Blockchain networks pose a big threat to governments because anyone can become part of a blockchain network and transact anonymously. This is an issue for governments for a number of reasons which we will now take a look at.
Anonymous Transactions
As mentioned, anyone can transact on the blockchain anonymously. This is a problem for governments globally because it is extremely difficult to track and stop illegal financial activities such as money laundering. Activities that may be regarded as terrorism are also difficult to monitor since blockchain technology can be used to create anonymous messaging channels that do not flag certain keywords. Furthermore, if a suspicious activity does take place on the blockchain and governments are aware of it, it is relatively difficult to link the blockchain profile with an off-blockchain identity.
Seamless Global Payments
Anyone on the network can seamlessly transact without borders. This is a problem for governments when looking at cryptocurrencies which are mainly digital representations of money since anyone can now send and receive funds globally using the blockchain. This is great for anyone on the network but not so great for governments because they cannot efficiently monitor the inflow and outflow of funds in their respective countries. This creates a huge problem for governments as the amount of money in each of their countries can no longer be monitored and controlled.
No Tie To Any Jurisdiction
Since the blockchain is decentralized, it falls under no governmental jurisdiction. This means that people transacting on the blockchain are doing so outside of the country that they reside in. At the time of writing, all activity that takes place or any profit made on the blockchain is not taxable until the money is exchanged for a fiat currency that belongs to a certain country. When cryptocurrency is exchanged for a fiat currency that belongs to a certain country, then the value exchanged is susceptible to tax regulations in that country. However, the majority of people feel that their funds are better off on the blockchain than in a bank account. This is a problem for governments because they can’t collect as much tax as they were able to before the invention of blockchain technology. People can also hide how much money they have in a blockchain ecosystem due to the anonymity and privacy that blockchain enables.
These are just some of the main issues that blockchain technology creates for governments across the globe. There are many more that haven’t been thought of, or that aren’t considered major threats yet, that will inevitably become bigger problems as the current adoption of the technology grows to mainstream adoption. Let’s now take a look at how blockchain technology poses a threat to large companies. This mainly applies to companies that have monopolized the Big Data industry.
Blockchain vs Government: Fiat Currency
Fiat currencies refer to currencies used in each country and are paperback currencies like the Dollar, the Euro, and the Yen. Financial use cases of blockchains, or rather cryptocurrencies, are a threat to fiat currencies because they make money borderless and accessible to everyone. This threat to fiat currencies is a major problem for governments across the world, mainly because governments use their financial power to try and establish their dominance over other governments. Since cryptocurrencies are not necessarily tied to one particular government or jurisdiction, governments will inevitably lose their financial edge over other governments that have less financial authority.
Blockchain vs Government: Big Data
Data and personal information are more valuable than gold and oil in the current era we live in. Big technology companies have realized this and have found a way to monetize our user data, with many arguing that they violate our privacy as well by selling our personal information to other companies. Blockchain poses a threat to these big technology companies. Let’s take a look at how.
Blockchain vs Government: Power to the People
The biggest technology companies in the world rose to their positions mainly because of the data that they collect about us. These technology companies use the data that they have collected from us to profile us for the highly lucrative market of targeted advertising. Blockchain is a threat to this business model because a blockchain does not belong to a single entity or company. Instead, every time we transact on a public blockchain our data is encrypted and stored on the blockchain only and not on a company’s servers. Furthermore, our encrypted data can only be viewed by anyone that has access to the private key that belongs to the data. Unless shared with someone else, we are the only users on the blockchain that hold the private key for our data. Therefore, only we can see our decrypted data. Anyone else that tries to look at our data will see it in its encrypted form. This means that large companies and institutions can no longer freely access the data and information needed to profile us. We control what happens to our data.
Blockchain vs Government: Privacy
Due to the encryption of blockchain technology, users are anonymous and can transact privately on the blockchain. This privacy that comes from the encryption of user data does not just pose a threat to large companies, but also to governments across the world. This is because governments are unable to track and potentially flag illegal activities that take place on the blockchain. When taking a look at the financial use cases of blockchain technology, governments are left powerless to stop the inflow, and most importantly the outflow, of capital in and out of the jurisdiction that they are responsible for. Even if they somehow find a way to control the flow of capital across the border of their jurisdiction, it is relatively difficult to link the transactions to real-world identities. This is especially the case for blockchains that focus on strengthening user privacy and anonymity on the blockchain.
Blockchain vs Government: A Threat to Big Tech
As you may remember, blockchains allow anyone to control access to their digital assets. These assets can include money, like cryptocurrency, or can be information such as personal information, title deeds, etc. This enables people to do what they never could before: control access to their personal information. This is a problem for big technology companies that were previously able to collect our data in the background without necessarily asking for our permission, and then monetize it by selling it to other companies. Now, thanks to blockchain technology, users can control how much access these big tech companies have to their personal data and what personal information they have access to. This will drastically decrease the potential earning capacity of this lucrative revenue stream for these big technology companies. Blockchain technology can also remove any monopolies in the marketplace, creating a more fair marketplace with a lowered barrier to entry for new market players. With all of this said, it is easy to see why some of the biggest technology companies, especially companies playing in the Big Data space, are investing in research to identify ways to play in the blockchain space while also mitigating the risk that blockchain technology poses on their position in the industry.
Blockchain vs Government: Conclusion
Blockchain technology poses a serious threat to governments and large companies around the world because of its ability to give users control over their data back, while also protecting user privacy and providing a seamless, global transaction ecosystem that anyone can transact in. Furthermore, companies operating in the Big Data industry are most at risk because blockchain technology will restrict their access to their clients’ information if their clients start using blockchain technology in their daily lives. This will have a significant impact on these companies’ revenue streams that are built around collecting and selling their clients’ information.
