Utopia or Dystopia?

In this article, we discuss how the unique properties of blockchain and crypto assets have the potential to both liberate and enslave. Utopia or dystopia, will you take the red pill or the blue pill?

A decentralized utopia?

Many crypto investors, decentralization advocates, and crypto-anarchists envision a future where the individual is empowered by blockchain technology.

Decentralized digital currency that functions entirely free of state or central bank intervention would be used for day-to-day transactions. Decentralized finance (DeFi) protocols would provide financial services to all, and a large portion of the populace would work in a truly global peer-to-peer trading economy that runs on the blockchain.

Increased transparency in business would lead to an increase in ethical business practices, while those in power could be held accountable more easily. Token-based funding options would empower small and medium-sized businesses to play a more significant role in the global economy.

Voting would become more trustworthy, and direct democracy would become more commonplace. The cost of financial transactions of all kinds would be greatly reduced. Individuals would retain ownership of their data and monetize it should they choose to. Surveillance capitalism would die, and banks would become obsolete.

While one can imagine how digital currencies and blockchain technology could usher in a new era where individuals gain more freedom and control over their lives, the opposite scenario is equally possible.

A dystopian future?

Cryptocurrencies, Dapps, and other blockchain-powered solutions have the potential to empower the individual, just as the original vision for the internet did. However, that promise can easily be turned on its head and, like all forms of technology, the ability to achieve good outcomes and bad outcomes can hang in the balance.

An authoritarian state, for example, could issue digital identities on a permissioned, government-owned blockchain that is interlinked with a citizen’s financial records, employment history, legal status, medical history, and any other personal information. A blockchain-based ID could be used as the access key for public services, such as transport, airports, restaurants, or even access to certain areas of a city. This access could be turned on or off at will by the state.

This scenario may sound like a scene out of the movie Minority Report but, from a technological perspective, most (if not all) of this is already achievable.

It may sound far-fetched to envision a future where cryptocurrencies are used to track all payments and where the blockchain is used to eliminate privacy and give more control to “the powers that be,” but is it impossible?

This very situation is already playing out in China, it plans to launch a central bank-issued digital currency that will enable it to track its citizens’ financial transactions. Combine this with a full rollout of its recently launched social credit scoring system, and you don’t have to squint very hard to see a dystopian horizon looming into view.

China’s survelliance state

China is working on the development of a central bank-issued digital currency. While there are very few details as to what this might look like, we can assume that it will not be based on a decentralized public ledger. Instead, we can expect a private ledger operated by the state.

A state-issued digital currency that runs on a permissioned ledger would also likely mean complete traceability of all transactions in that currency. That would mean that every single transaction anyone in China makes using the digital currency could be traced and, in an extreme scenario, be blocked. Additionally, the state would know every individual’s exact spending habits and could have the option to freeze or seize anyone’s funds at will.

One look at China’s track record of internet censorship, lack of freedom of the press, and regular human rights abuses make this dystopian scenario seem all the more plausible.

Perhaps the scariest aspect of China’s internet censorship, surveillance methods, and oppressive social credit scoring system is that the People’s Republic is reportedly trying to export these technologies into other countries. If China’s CBDC adds to the People’s Republic’s ability to monitor and control its people, other not-so-free governments could follow suit and issue their own digital currencies to follow in China’s totalitarian footsteps.

It is hard to make predictions about technology. Even more so, on how it will be adopted on a global scale. What is clear, however, is that open-source technology like the blockchain and cryptocurrencies can be used by anyone, including bad actors.

As always, it will be up to individuals to fight for what they believe in, and to push their governments to embrace the digital tools of freedom, and not turn to the dark side.