Will blockchain and cryptocurrencies impact our political, economic, and social landscape? Yes. All three of these topics are being reshaped and redesigned by the influence of this new technology.
The impacts of the digital age are grinding their way into the mainstream discussion. Governments are scrambling to figure out which course of action will be best for their country. Businesses are waking up to the idea that the old ways of doing things will not work as well in the near future. Social norms are shifting as new ways of sharing ideas emerge. Let's take a look at a few ways blockchain/cryptocurrency are influencing change in society.
What Political Changes Are On The Horizon?
Power, Regulation and Taxation are probably the three biggest impacts in politics.
Power: Governments exert power in various ways and to varying degrees. One way to stay in power is to control the money supply. Most major governments create their own fiat paper money which is then manipulated through inflation to influence its value. With the introduction of Bitcoin/Cryptocurrency, direct control of the money supply began to change hands from the government to the people. Obviously, this poses a potential threat and will likely be met with resistance. Countries, such as the U.S., have the most to lose, and will likely be slower to adopt and accept cryptocurrency as currency. If there came a time when the people of the world no longer trusted the value of the US Dollar, and instead chose to trust a digital currency like Bitcoin, we could see power swiftly begin to shift in other directions.
Regulation: Politicians everywhere are wrestling with how much (or how little) regulation there should be on cryptocurrency. Questions such as: How to protect investors and consumers from fraud, and how much privacy people should have in their transactions, will lead to decisions which will shape our future. In addition, newer phenomenons like initial coin offerings (ICO's) have created easier ways for entities to raise money, while also avoiding much of the existing regulation that traditional IPO's must follow. As a result, we will see a trend that continues to move away from traditional banking system methods.
In reality, regulations do need to improve in order to increase trust and consistency with cryptocurrency. However, politicians are somewhat limited with what they can and cannot control. Because blockchain and cryptocurrencies put more control in the hands of the individual user, people will need to become more educated in protecting themselves.
Taxes: Currently, in the United States, cryptocurrencies are taxed in a similar manner as stocks, which means that they are not actually treated the same as currency. For example, if i made a purchase online using Bitcoin, I am taxed as if it is a capital gain on a stock. Can you imagine buying a cup of coffee and having to figure out if it is a long term or short term capital gain? Or can you imagine if there were a 10-37% tax (ordinary tax rate on short term gains) on that same cup of coffee? In this case, taxes are shaping the landscape of cryptocurrency more than the other way around. However, if blockchain and cryptocurrencies continue to gain ground in the mainstream economy, politicians will be forced to address the capital gains tax distinction to be more favorable in everyday use.
Politically speaking, this is not only about politicians being greedy for themselves. The fight for control also has ramifications internationally and between nations. If financial control shifts from paper money to digital money, it would also mean broader changes to overall government policy. For example, challenges such as how to fund military spending, social programs, or infrastructure development would be impacted if a country adopted cryptocurrency with a limited supply like Bitcoin (only 21 million ever produced). If a government can no longer simply print more money to pay for their political agendas, it would become less financially able to advance its international policies.
What Economic Changes Are On The Horizon?
Business Transactions: Businesses are always looking for ways to reduce expenses. One of the advantages of using blockchain is that it offers the potential to replace middlemen and costly supply chain steps. For example, if a manufacturing business no longer needed to pay someone tens of thousands of dollars to manage a supply chain, or if they could eliminate a step in the delivery process, they could save millions of dollars. These types of underlying changes could have major economical impacts as businesses reorganize and restructure. Some of the industries that could be most impacted are: companies with large supply chains, real estate, financial services, and ID services such as notaries and passports.
In addition, blockchain also provides an added level of data security that our current centralized services cannot. Large companies store their customers private data in a centralized platform which leaves it exposed to hacks and attacks. Every month there is some kind of data breach where millions of people have their private information wrongly exposed due to lack of security. Storing information in a decentralized blockchain allows for a new level of security to private information and would also increase trust in business transactions. Industries like healthcare, accounting, and retail can benefit from the security that blockchain can offer.
-International Business: Transactions made between countries can be made without using the international banking process known as Swift. Fees for using Swift are generally around $25 per transaction and can take 3-5 days to complete. It is easy to see why companies would look for alternatives like cryptocurrency to avoid large banking fees and wait times.
In addition, transactions that are made between countries or businesses would be permanently locked in a blockchain ledger which could then be verified by anyone, leading to increased transparency. Can you imagine if a government was held accountable by their people? Billions of dollars designated for foreign aid couldn't just vanish into thin air, and the extra accountability would lead to more fair decision making on the part of our government leaders!
Stock Market: For starters, having major stock exchanges (Nasdaq, Dow, S&P, etc) built on a blockchain creates more transparency and also the potential for better accounting practices. Furthermore, the potential addition of cryptocurrency ETF's adds a whole new asset class and another way for people to diversify their portfolios. Finally, ICO's and crowdfunding have already opened the eyes of those in charge of our economy. Companies and individuals have found new ways to raise money without the need for bank loans or bond programs. A fundamental shift within the stock market, revolving around blockchain and cryptocurrencies, brings the potential for massive transfers of wealth, power and economical implications.
What Social Impacts Are On The Horizon?
Censorship: Propaganda and censorship are nothing new. Government leaders have used media to influence the thinking of their followers since before the printing press was invented. In our present day social media, companies like Facebook, Twitter, and Youtube heavily influence the information we see (or don't see.) Political agendas, financial support, and desired ideology, can easily be manipulated depending on who is in charge of the media and what they believe. Building social media on decentralized blockchain platforms puts control back in the end users hands. The best content rises to the top based on what the network of users determines is the best. It cannot be manipulated or politically influenced. The impact of this would be that people could think for themselves freely, without outside bias, leading to new thought processes and social outcomes.
Trust: Transactions that are completed on a smart contract, or through a blockchain, reduce the need for trust between people. Basically the trust is transferred to technology. In other words, people put their trust in how the technology or smart contract is programmed. If any of the agreed upon parameters of the transaction are not met the transaction is not completed.
For example, imagine a real estate transaction between a buyer and a seller which is being done through a smart contract on a blockchain. Buyer agrees to price, date and other important details. Seller agrees to the price, date and other contingencies. Currently, the details of a real estate transaction are handled by real estate professionals (lender, real estate agents, etc). However, in this case, there would be no need for the middle man (real estate professionals) because technology can accomplish all the required agreements before the transaction is completed. If the requirements are not met, the transaction doesn't happen. Both participants save thousands of dollars in fees and commissions while accomplishing the end goal. Also, the trust would be placed in the technology instead of the humans involved.
This whole example is obviously oversimplified, but it shows the potential impact on social interactions during transactions.
Discrimination: When people can trust technology instead of having to judge each other, the potential to lower discrimination between people becomes possible. Imagine a low income person not being judged simply because of their income level. They either meet the requirements of the transaction or they don't. It is not based on skin color, income level, gender or any of the other social issues that seem to be prevalent in the news. I realized that this is a bit idealistic, but the potential does exist for solutions for at least some of the social issues our world currently faces.
Blockchain and cryptocurrency are bringing the opportunity for improvements to the political, economic and social landscape for countries all around the world. I am not so naive to believe that every problem we face can be fixed through this technology, however I do believe it offers a new way to address old problems. Doing the same thing over and over again but expecting different results is insanity, But looking at things a new way can bring positive change. There is still plenty of maturing that needs to happen in this industry, but we will definitely see subtle shifts in the way problems are addressed as new applications for this technology develop.
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