Blockchain – Why Now?

Blockchain – Why Now?

July 30, 2020

By Maya Zaynetdinova

In late March, the U.S. government injected $2 trillion in the economy in an attempt to save the U.S. fiscal infrastructure from collapsing due to the national lockdown. In early June, and the House passed another coronavirus relief package worth $3 trillion. While somewhat effective in the short-term, these macroeconomic measures may have devastating long-term effects on the economy and people’s livelihoods by driving prices up (aka inflation) while bailing out big businesses.

Many analysts have already warned that 2020 could mark the start of a New Great Depression. If we really live in “the greatest country in the world” (or at least the richest), isn’t there a better solution?

A short answer is — there could be one.

Any crisis presents an opportunity. I believe the political and economic context of the global pandemic creates favorable conditions for a new technology that is not dependent on government interference due to its decentralized peer-to-peer nature, known as blockchain.

This modern technology may have the capacity to reshape or even eliminate the bureaucratic structure of the state as we know it.

Blockchain is based on the idea of a public ledger that stores information about all transactions conducted within the network. In short, the technology allows a network of personal computers to store data, which makes the data decentralized and distributed. Blockchains use cryptography to ensure the security of transactions, which are then stored in blocks of data that are linked together. What makes this technology unique is that the ledger is permanent, distributed, digital, resistant to tampering, accessible to every user, and universal (Täube and van Zeebroeck 2016).

Since blockchain is a peer-to-peer system, it eliminates the need for “middlemen,” the function typically performed by bureaucracies. Public dissatisfaction with the corruption and inefficiency of the current governance system (especially its response to the COVID-19 pandemic!) resulted in the questioning of the role of one of the biggest bureaucracies, the state. This public frustration gives rise to an argument in support of blockchain technology.

Supporters of the technology are making calls to replace the government by implementing decentralized solutions based on distributed ledgers. Blockchain has the potential to replace centralization, coercion, and hierarchies with a system of trust through distributed consensus (Atzori, 2015). This new system could give more agency to the individual.

Given the economic mess of the present moment, and the possibility of a New Great Depression, blockchain can become a new dominating mechanism of exchange and store of value.

Think about it. The economy is collapsing in front of our eyes and what the government is doing is vaguely reminiscent of the financial crisis of 2008. Yet again the state has allocated “$500 billion for the already wealthy and greedy” (TIME). How about focusing on people instead of bailing out the big industries?

This lack of innovation of economic policy inevitably leads to alternative approaches: “We must build new industrial and service sectors, not prop up the old and moribund ones,” says Jeffrey Sachs, a sustainable development proponent. Sachs is especially vocal about what a bolder mindset could bring:

“We could look forward to new high-tech industries, more shared leisure time, shorter commutes, cleaner skies, universal access to affordable healthcare and higher education and a guaranteed living wage for all workers” (CNN).

The new high-tech environment of the post-coronavirus era could include widespread usage of blockchain technology. It is gaining momentum because it gives power to people, not the Federal Reserve.

Bitcoin, the biggest financial application of blockchain, is a non-inflationary alternative to the US dollar that society needs more than ever:“When the world comes back, it will be Bitcoin, not banks and governments that save the day” (Coin Telegraph). The cryptocurrency can empower and protect the individual from the woes of government overspending.

Tim Draper, a long-time Bitcoin supporter, argues that the cryptocurrency “will be one of the most crucial tools in the times of the recovery of the ongoing global financial crisis” (Coin Telegraph). “New technologies like Bitcoin and artificial intelligence (AI) have the potential to completely transform all the industries from banking to healthcare and real estate” says Draper echoing a growing sentiment among progressives that the current financial bureaucracy needs a major transformation.

Imagine having a more responsive, transparent and accountable approach to decision-making instead of the chaos that is happening in the White House. For example, what if there was a public ledger of all spending items under the recent coronavirus stimulus bill. Every citizen has the right to know what businesses got financial relief from the government. Blockchain has the capacity to do so. We just have to be proactive about adopting it.

Of course, blockchain, as any “hot” topic, is not immune to the hype. The technology’s audience is usually split between strong supporters and skeptics. The good news — there is room for all of them! As a nascent technology, blockchain has its flaws but its potential outweighs them.

The challenges brought by the pandemic present new opportunities. Do we really need to wait for another global collapse to start reshaping the world’s financial systems? The time is now. Learn more about blockchain and try using a cryptocurrency to be part of a decentralized and fairer future.

Maya ZaynetdinovaMaya Zaynetdinova is a doctoral student and scholar-activist in the Department of Global Studies. Her research focuses on civil society activism, technologies of advocacy and movement leadership.