How Blockchains could change politics forever
“I’m talking to people in particular in parts of Africa and India who don’t have a bank account, but they have been able to take part in these new digital economies and are now earning an annual salary every week”.
Author disclosure statement: None of the information nor opinions expressed in this article constitutes financial advice. I have personally made financial investments in technologies I talk about here.
All views are those of the author and not are not necessarily of Centre itself.
Throughout all human history, we have kept records. Ledgers have been carved in stone, written in parchment, and stored on computers. During the last Renaissance period a major breakthrough in bookkeeping happened when the double entry system was created. 600 years later this is still the system we use today. Double-entry systems became widely used mostly because trade started to expand beyond borders, so people needed a way to keep records that could be trusted more than the single-entry accounting ledgers.
When computers came around, ledgers became much more advanced, and people tried to expand upon the double-entry system. Triple-entry accounting was first conceived in the early eighties but there was a problem with creating something more accurate and honest than the double-entry accounting system: the “Byzantine Fault Dilemma .”
From bitcoin.com “When a distributed double-entry ledger is being shared among computing systems people cannot trust which system or server (node) is trustworthy, compromised, or functioning with a failure to detect. However, on October 31, 2008, an anonymous person(s) released a paper that solved the Byzantine Fault dilemma.”
You’ll definitely have heard of cryptocurrencies, be it people becoming millionaires or extreme crashes destroying their life savings, it is true that right now the native currencies of particular blockchains are traded in an unregulated, new, and interesting way.
The technology underneath all of this is worth paying attention to. Blockchains have become global accounting ledgers that cannot lie, have been expanded upon to run smart, self-executing contracts without the need for third party verification. So what is the role of government in this? Government isn’t going anywhere right now. Here are a few simple ways I see nations adapting to these technologies over the coming years.
Concerns over election security, voter registration integrity, and turnout has led governments to consider blockchain-based voting platforms as a means to increase faith and participation in elections. Blockchain’s decentralised, transparent, and encrypted foundation could erase election tampering and with a MetaMask wallet for example, a ping to sign a transaction to cast your vote makes voting easier than ever. However ageing members of a population may struggle to adopt blockchain tech in its current state, and as with any technology it could be vulnerable to attacks.
Government contracting is the greatest source of corruption worldwide. Many factors make this process attractive to exploiters in both first and third world countries. Processes especially to the private sector are complex, allowing for a high margin of not just corruption and exploitation, but also basic incompetence. Not only do these exploitations lead to massive poverty, but they directly attack the livelihoods of people, and frequently result in substandard goods and ineffective services.
Blockchains would make all these government transactions visible to anybody from the moment they occurred. If we had a truly cashless society where bribes and shady business couldn’t be conducted with briefcases full of notes/cash, it becomes easier to hold your government to account with evidence that cannot be tampered.
Bitcoin is very attractive to those who view it as a hedge against inflation: its supply is capped at 21 million coins and its halving process to distribute coins is set in stone. However, the original blockchain is very limited and many improvements to blockchain have occurred in the years since Bitcoin’s inception.
Ethereum was developed in 2015 by Vitalik Buterin, who set out to improve upon the original Bitcoin chain. Ethereum is seen as an “internet of ownership” and “a decentralised platform for building upon”, not to mention the innovative Smart Contracts.
For years now, core Ethereum developers have been hard at work on a huge set of upgrades to the Ethereum network in what is being called Ethereum 2.0. The goal of Ethereum 2.0 is to make the network more sustainable, more secure, and more efficient.
In August, developers completed a big part of this upgrade called Ethereum Improvement Proposal (EIP) 1559, otherwise known as the London Hard Fork, which changed the way transaction, or gas, fees are charged on the network. It’s confusing, but the network essentially sets a more predictable base fee on transactions to try to lower congestion on the network. However, it still seems like the network is struggling to reduce gas fees.
A set amount of the currency from every transaction is burned, effectively making Ethereum deflationary, with more than 1 million Ethereum tokens burned since August 2021. The network is still creating Ether tokens, but the burning is shrinking what the supply would be and limiting its growth right now. Longer-term projections show that once the move to Ethereum 2.0 is complete, the supply of Ether could decline by 2% annually. This is when people will start to get excited about the idea of Ethereum being more like Bitcoin and acting as a hedge against inflation, because it looks like the Ethereum supply will become more scarce over time.
Proof of Work blockchains like Bitcoin and Ethereum in its current state are hugely energy hungry. A single transaction on the Ethereum network uses the same amount of power as powering an average family house for 24 hours. Ethereum 2.0 upgrades are anticipated to reduce this energy usage by around 99.9% when it moves to a Proof of Stake system.
For better or worse, I’m sure you’ve heard of NFTs by now. I’d encourage everyone to look beyond the noise, beyond the ‘bros’ and into the reality of how some of those projects are changing lives.
Decentral Games is a DAO, a decentralised autonomous organisation, effectively a “company” governed by stakeholders. They recently launched a Play2Earn Metaverse Poker NFT collection, when if you wear one of these altar wearable NFTs you can get 50% of expected losses back in the native token of the DAO. This can then be staked back for governance and ownership of the casino itself. As a concept alone, it humanises and radically changes a harmful gambling industry, but it also goes much further.
The NFTs that enable this Play2Earn mechanic are limited in number, so as a holder you can choose to delegate it to a player for the day, in exchange for around 30% of their earnings that day. I am in the discord server for this community, talking to people in particular in parts of Africa and India who don’t have a bank account but have been able to take part in these new digital economies they are now earning a salary every week. When we hear about $40 million NFT sales, scandals, and influencers running away with people’s cash, it’s easy to overlook this. Yet everyone can see how new digital economies on the blockchain are at the genesis of a shift in the world. I can’t wait to see it play out over the next 10 years.
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Blockchains have the power to redistribute wealth and to help people in poorer countries. Its time we took a closer look at them:Tweet
Governments should look at the pros and cons of electronic voting and government contracts that use blockchain. Find out more here:Tweet
In countries with high inflation or where people don’t have access to a bank account bitcoin could serve as a secondary currency. Its time we took a closer look.Tweet
Danny Simm. Danny was the Liberal Democrat council candidate in Abram Ward, Wigan, and also serves on the North West executive of the Liberal Democrats. He is also a broadcaster and journalist, with a background in business & fundraising. His broadcasting career currently includes presenting drivetime on Bolton FM in Lancashire.
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