When it comes to blockchain, we often hear people use different variants of the term “disruption” repeatedly. However, it has always been clear that this technology would disrupt many aspects of the industry, environmental sustainability, and the economy. In recent years, the capacity of the blockchain revolution to disrupt or impact society has become very clear as well.
Blockchain is a technology born of emergent social ideals that have been cooking in people’s minds for a long time. Unsurprisingly, implementing these ideas in the form of blockchain can have, and has had, notable positive and negative impacts on the broader society.
These positive and negative impacts that we will be discussing in this post. But first, we must understand why blockchain came about in the first place.
The Social Basis of the Blockchain Revolution
What pops up when you hear the term “Blockchain”? I imagine your mind swarms with terms like “decentralization,” “anonymity,” “immutability,” etc.
The association of these terms with blockchain technology comes from a history of social thought. A study that goes back as far as the early 19th century.
As of 1809, thinkers like Pierre-Joseph Proudhon developed economic ideas that boiled down to “political federation and decentralization.” This idea of decentralization would later become the battle cry of the Blockchain revolution.
20th Century in Retrospect
As the 20th century progressed, discontent with centralized systems festered, especially in economics. People wanted more control over their financial assets. They grew increasingly disillusioned with the undue capacity of government and corporate powers to arbitrate all things concerning value.
Such systems fail so magnificently when the central hub of economic control suffers. And that didn’t help matters either.
By the 1990s, ideas about the decentralization of money were taking root, especially with the work of Austrian philosophers like Friedrich von Hayek. Many now consider his 1990 book, The Denationalization of Money: The Argument Refined, the theoretical basis for the Bitcoin decentralization idea.
While all these ideas were going around, computer scientists/engineers were already conceptualizing decentralized blockchain systems and the blockchain revolution.
The New Century
In 2008, a yet unidentified person (or group) came up with an improved idea of the blockchain system. They used it as the core component for the first cryptocurrency, Bitcoin, which they launched the following year. This was a new digital currency based on a distributed ledger whose records were unalterable.
As a result, it was beyond the ability of governments to arbitrate, and all transactors enjoyed anonymity.
Not surprisingly, the essay that accompanied the project’s code cited some concerns with conventional currency. Among them was the popular discontent about the amount of trust in the relationship between people, their assets, and central banks. But, of course, banks had a history of breaching that trust, so it was time for a revolution – the blockchain revolution.
Today, we all see how the ideas behind this blockchain revolution have gained widespread traction. And now that we understand the social issues that led to the realization of said revolution; let’s examine how it can affect society.
Societal Effects of the Blockchain Revolution
Blockchain is usually described as a disruptive technology, which often comes with negative connotations. However, disruption is not necessarily a bad thing. As you will soon see, blockchain technology is both yin and yang when it concerns its social impacts. We’ll be considering both under each of the ideals:
So, let’s explore these.
One of the main features of blockchain technology is the immutability of records on the ledger. It’s in the way the distributed ledger system works. Essentially, once participants in a blockchain network complete a block and receive a time stamp, it becomes part of a fixed record.
Moreover, the chain exists on multiple servers worldwide. Therefore, all the other copies of the chain in the network will contradict any changes someone makes to their copy and expose them.
The Problem Explained
This immutability of records solves a rather vexing problem in many social and corporate contexts: altering records. Governments and regulatory bodies worldwide have fought an eternal battle against this problem, especially with corporate entities.
Records are essential in a business, especially for investors or regulatory bodies that deal with those businesses. They help determine tax payments, how well a company is doing, how it runs its operations, etc.
Not surprisingly, companies often alter their records after the fact for their benefit. For instance, a company might alter its financial records to pay fewer taxes than it should. Such alterations may even mislead investors to their financial peril.
Alternatively, virus attacks, honest human errors, hacks, and even hardware or software malfunctions may damage or alter the records. Either way, the centralization of records makes them easier to alter.
But, of course, businesses are not the only ones affected. Governments and regulatory bodies, religious institutions, academia, and many other sectors also fall victim to this problem. As a result, the quality of governance drops, financial and medical services face problems, and the credibility of institutions in the eyes of the people drops.
The Blockchain Revolution is the Solution
But with blockchain-based record-keeping, this problem all but goes away.
However, this advantage also has a downside. Because of how difficult it is to change blockchain records, it poses a problem, primarily when used in the criminal system. For example, what happens when someone wishes to have their criminal convictions expunged? In a blockchain-based system, that legal benefit practically goes out the window.
Perhaps some might have a philosophical argument or two against the justice system expunging criminal records. But what about other things like leaked nudes or any private information that one would rather not have on record?
Once such things get on a blockchain, taking them down becomes impractical. These are just some ways in which the immutability of blockchain can negatively affect society.
The whole idea of decentralization is that no one central figure controls the system. Instead, an entire network of participants does. Therefore, any decisions concerning its operation are a matter of consensus. Now, this has very clear social impacts.
People have fuller control over their assets, but it has even greater significance in governance. Especially in the area of voting, our systems are largely stuck in previous centuries. The cumbersome and extremely vulnerable processes involved in voting and elections raise many concerns.
Ballot boxes go missing, and online government databases suffer cyber attacks that cause electoral data loss. Of course, politicians can easily use such vulnerabilities to their advantage, so many people don’t feel confident in the system.
Decentralize With Blockchain
However, a blockchain-based voting system is a different story. First off, security is hardly a concern since Blockchain cryptographic security is notoriously hard to crack. Furthermore, any hackers will have to alter the entire network of nodes (or at least half) to cause trouble. Otherwise, the network will immediately discover their attempt and reject it.
With such a state of affairs, people will have greater confidence in electoral processes. As a result, political accountability will soar, as will popular participation in political and government affairs. But there is also a bad side.
Recall the example of the nude photos or other private information from before now? If such details enter a blockchain, the entire network will have to agree to take it down. How confident can one be that a whole network of differently-minded people decide to do that in this age of controversy?
Especially when you’re a celebrity, you can bank on most participants refusing to comply. In this sense, then, a decentralized blockchain system becomes a detriment.
It can even be a problem where it concerns the public sector. Decentralization means slower decision-making since the entire network must agree. When a decentralized blockchain system runs a public sector, it may be running it less efficiently than a centralized system would.
Anonymity is another facet of the Blockchain revolution. In fact, anonymity is at the origin of the revolution itself. You may recall that till today, no one knows anyone who knows the identity of the inventor of Bitcoin.
For all we know, “Satoshi Nakamoto” may be a man, a woman, a group of men and women, or even a teenager. This is similarly the case for most people who participate in blockchain networks. The system allows you to engage in transactions without leaving any information that links to your real-world identity.
The Plus Side
Naturally, this has some positive societal benefits. Take voting exercises, for example. In very heated political climates, revealing your voting preference may be a bad move. It may expose you to intimidation, ridicule, and in the worst cases, physical violence.
However, in a blockchain-powered voting system, you can manage your digital identity to a greater degree. You can vote freely without ever revealing your identity and political preferences to others.
However, on the minus side, the anonymity afforded by blockchain technology is also a source of concern. There is a special class of people to whom anonymity is of the utmost importance: criminals. Since its inception, criminals have been taking advantage of blockchain as well. In 2021, criminal crypto activity amounted to an all-time high of some $14 billion.
A more precise case in point is the “Wonderland” affair. For years, crypto investors identifying themselves collectively as “Frog Nation” emptied hundreds of millions from their coffers into Wonderland’s crypto project.
The project aimed to provide an exchange system for the DeFi world. These investors entrusted their money to the project’s treasury manager, whom they knew only by his username: 0xSifu.
Things took a sour turn in January this year when the identity of the face behind 0xSifu was revealed. It was none other than Michael Patryn, a failed crypto developer who had previously been convicted of fraud.
The Wonderland enterprise nearly collapsed afterward. These and many more incidents have demonstrated the danger posed by the near-complete anonymity that blockchain technology offers.
What Can We Do?
As we have seen, each of these core aspects of blockchain technology has its positives and negatives. Now, while we should encourage the positives, what can we do about the negatives?
Well, if the immutability and decentralization problems demonstrate one thing, it’s that we must limit decentralization. While the idea of a thoroughly decentralized system may have strong appeal, it is ultimately a problem if allowed to run wild. For example, deleting a criminal record from a blockchain network with millions of nodes will be impossible.
So it will become necessary to either limit the size of individual networks or limit the kind of information we place on one.
Similarly, we cannot afford to have too much anonymity on blockchain networks. While it is great to have a system that protects user identity, we may also be giving criminals the tools they need to operate unchecked. Thankfully, there is some good news here that blockchain transactions are not completely untraceable.
Anonymity Isn’t Invisibility, Technically
In an interview with Cnet this month, Feng Hou, digital transformation chief at Maryville University, stated: “While there are certain ways that cryptocurrency does provide a level of anonymity, be aware that nobody today can claim a 100% anonymity at this point.”
But, sure enough, law enforcement agencies have been able to find ways to trace illicit activities on these networks.
In the same interview, Dr. Steven Gordon of Babson college explained that while there are some goods and services you can buy with crypto, not all are like that. Most of the time, you need to convert your crypto into local currency to use it, leading to a paper trail. Law enforcement can then follow that trail.
In addition, crypto companies like Coinbase now require users to verify their identities from time to time. With measures like this, blockchain-based companies can now help to stem the tide of anonymous criminal activity on their networks.
The Blockchain Revolution – Concluding Thoughts
We have seen the double-edged sword of blockchain technology, and we have understood its ideological roots. Still, it should be obvious its effects on society are far-reaching. No matter where the blockchain revolution heads from here.
Then, it is up to us to try to maximize its better effects while minimizing the worse. Thankfully, as we have seen, it’s not an impossible task, and we’re already making some reasonable efforts there.
If we continue to refine it and remedy its flaws, then the future of blockchain technology will be bright.