Bitcoin and cryptocurrency, the revolutionary technologies that have today’s trend of data exchange, move us closer to an entirely digitised society. However, many financial experts, such as Lule Demmissie, president of Ally Invest, said it is the transformative technology behind the scenes for crypto and Bitcoin that we should really pay attention to Blockchain’.
Blockchain has been the driving force behind popular disruptive technologies such as smart contracts, AI, and cryptocurrency. Essentially, it is defined as a ‘distributed database’ shared among the nodes of a computer network and stores information electronically. Blockchain is created from information collected in groups, known as a “block” that holds sets of information, and once filled, closes and links itself to the previously filled block, thus forming a chain of data known as ‘blockchain’.
Blockchain is gaining traction due to its decentralised nature that allows digital information to be recorded and distributed but not edited – all transactions can therefore be viewed by either having a personal node or using blockchain explorers. If most network users agree that the code’s new version and the upgrade are sound, the system can be updated. This guarantees the fidelity and security of a record of data and generates trust without the need for a third party. The reason is that new blocks are always stored linearly and chronologically, making it extremely difficult to go back and alter the contents of the block unless a majority of the network has reached a consensus to do so. Further, if such a surmountable change were to be introduced by a hacker, network members can ‘hard fork’ off to a new version of the chain and the hacked version token will plummet in value, making the digitised asset now worthless.
There are thousands of projects looking to implement blockchain to help society other than just recording transactions, such as the innovation of smart contracts, a computer code built into blockchain to ‘facilitate, verify, or negotiate a contract agreement’ under a set of conditions to which users agree. But what does it mean now to the post-Covid world and, ultimately, globalisation?
Like how social fabric across the world has changed dramatically, the pandemic has also shown the potential of overwhelming Europe with profound changes. The lockdown policies gave rise to an unprecedented challenge to the world economy and nearly halted Europe’s single market. The EU’s apparent lack of solidarity has also fuelled the rise of economic nationalism alongside existing nationalist movements caused by an ongoing immigration crisis. Governments have imposed temporary restrictions on movement to slow down the spread of the disease and effectively save lives. However, this measure has led to a resurgence of economic protectionism. Countries have started to switch their industrial policies and implemented more robust screening to safeguard major industries from foreign takeover and investments. Further, the crisis created a political hierarchy between ‘my nation’ and other nations to pursue national economic interests. For instance, the EU proposed “corona bonds” to mutualise risk across all Euro-zone members and share the burden of common debts caused by the disease – countries such as Greece and Portugal were in favour of moving forward with the proposal. In contrast, Finland and the Netherlands opposed it. This move potentially paints an unwelcoming picture of globalisation and lead multilateral trade and investments to a standstill created by restrictive measures. These restrictive measures are introduced within Europe and other nations, such as an EU-wide ban to limit exports of certain medical products outside the EU bloc, in a bid to keep sufficient supplies within the EU.
The application of blockchain to cryptocurrency may ease and potentially untangle most of the knot around European politics and open globalisation to the world. One such example is the immutability of cryptocurrency. This characteristic of crypto can help facilitate the movement of goods and services around the globe and bypass economic issues such as high inflation rates and currency manipulation techniques, and regulatory constraints. For instance, the decentralised blockchain makes the transfer of assets free and manageable across borders – traditional cross-border transfers require compliance with the legal framework of different countries, such as the tax code and legal norms of a nation. A peer-to-peer technology erases the boundaries between businesses and allows capital to circulate freely. This is especially crucial for the UK as asset digitisation could be the first step towards creating a frictionless global marketplace, giving the country the cutting edge, and securing international trade agreements with other nations, safeguarding the economy from a no-deal Brexit.
Blockchain can also be used to promote governmental agility and social equality. It can promote seamless civil participation and help implement a better, democratic policy-making framework to automatically execute policies with accuracy and efficiency, such as electronic voting.
Its most significant influence is probably within financial sectors- by utilising a decentralised, distributed network, parties can transfer assets freely without third party interference, a solution to global uncertainty and distrusts.
Blockchain may also play a primary role in advancing society to Industry 4.0. In this new age, the goal is to move towards the ending destination of becoming an entirely digital enterprise through the adoption of smart technology and appliances. With decentralisation becoming the year’s trending concept in the financial sector, the emergence of blockchain and cryptocurrency can possibly create “smart factories”, making it highly appealing to businesses looking to participate in the digital transition.
With the rapidly changing landscape of the world’s economy, some financial operators even envisioned the birth of new “blockchain-based virtual nations” to replace the existing nation-state with new and allegedly “apolitical governance systems”. This inception of a new framework for “global citizenship” is to introduce a collective identity, providing new opportunities for “collective action and civic participation in a post-national world”.
That being the case, this concept supported by different groups for very different purposes is controversial. On the one hand, the idea of a virtual nation appeals to libertarians who see it as an opportunity to reduce room for governmental intervention by creating a more ad-hoc structure and aims to create a society governed by unregulated market forces only. On the other hand, some see it as an opportunity to overcome the lack of trust in governmental institutions by creating new trusted communities with a global scope.
Although revolutionary, citizens cannot easily revoke their allegiance to a particular nation-state as much as they want to. As highlighted by Rainer Bauböck, “the social contract” between the government and citizens is not a negotiable contractual agreement entered into by both parties and that, once acquired, cannot be discarded. To a certain extent, however, citizens could still choose to acquire additional citizenship and become members of the communities they chose based on affinity and consent.
Blockchain-based solutions’ novelty and unexploited potential have not made policymakers move away from employing conventional practice and outdated technology in the public sphere. Nevertheless, blockchain presents valuable qualities that could enhance transparency and accountability, which could materially impact democratic governance and sustainable development around the world.