Embracing Blockchain: Harbinger of Decentralization

It’s the year 2077, and civilization is collapsing. Environmental degradation, which began with mass deforestation, fresh water shortages, altered atmospheric composition, and biodiversity losses has driven us towards an unbalanced ecosystem. We are close to depleting Earth’s life support systems, and this has affected entire populations, especially on geographically vulnerable populations in many tropical countries. Increasingly severe hurricanes and floods have swept away the populations¹McMichael, A., Patz, J. and Kovats, R., 1998. Impacts of global environmental change on future health and health care in tropical countries. British Medical Bulletin, 54(2), pp.475-488., thus polluting the nearby environments with hazardous chemical compounds. Health problems have risen²McMichael, A., Patz, J. and Kovats, R., 1998. Impacts of global environmental change on future health and health care in tropical countries. British Medical Bulletin, 54(2), pp.475-488., especially malnutrition and intoxication. The government, as an established order, has failed to propose meticulous policy regarding this issue and act to maintain environmental sustainability. Major corporations are facing severe financial distress, the toll taken by decades of unsustainable exploitation, caused by low supply of resources and low demand levels. Stock markets crashed far worse since The Great Depression resulting in high-profile blow-ups of  investors, major investment banks, and hedge fund companies. 

Consequently the failure of governments and corporations in meeting the People’s needs have resulted in mass disillusionment among the masses. These problems contagiously spread and act like fallen dominoes in many countries. Even the United Nations couldn’t handle it. Many anti-establishment populists and opportunistic movements  have risen across the world, driving the ‘Leviathan’ out of the system. Societies collapse and mortality rates peak, pushing us forward into the dusk of extinction.

Of course, this is a hypothetical scenario, but the likelihood of such a scenario happening in the near future (well within our lifetimes) might be higher than you think. We never realize something is a big problem until the Great Disaster strikes; and when it does, the impact is pervasive and overwhelming.

It begs the question as how could the robust system of centralization collapsed and reignited the means to decentralize? Centralization level has always been swinging like a pendulum, usually starts with the collapse of centralized, complex systems. In time, a new centralized system will rise and replace the old one. However, as the harbinger of decentralization, the emergence of blockchain may reshape a new course of history.

Our centralized society

Centralized systems have been a major feature of society., and the development of new technology amplifies it. At the moment of this article being published, you still use Google as your search engine, using Instagram to share your moments, and buying those good ol’ converse sneakers from Amazon. Technology has gotten us to a simple, practical way of living. Corporates streamlined the production costs, as centralization of production opened new operational possibilities, such as outsourcing the process to a nation with lower wage level. Customers find that switching between products becomes too troublesome. Using ‘google’ to search for everything you need on the internet seems much more easy than switching between search engines for specific functions. However, such a centralized system creates bigger risks of transparency and security. Major political parties can also buy personal data for their campaigns, thus creating ‘echo chambers’ in the digital society³Fenwick, M. and Vermeulen, E., 2019. Decentralisation is Coming: The Future of Blockchain. The Journal of the British Blockchain Association, 2(2), pp.1-6..

The emergence of a new distributed ledger system ‘blockchain’ around the corner, any ‘great leveler’ event resulting in civilizational collapse will eliminate the big players⁴SCHEIDEL, W. (2018). GREAT LEVELER. PRINCETON University PRES.. In the future, with adequate computing power required to run blockchain for individuals, the central government will be shifted towards embracing local government more, and economic independence can be shifted to a local company, hence dissecting the ‘giants’ out of the equation⁵Fenwick, M. and Vermeulen, E., 2019. Decentralisation is Coming: The Future of Blockchain. The Journal of the British Blockchain Association, 2(2), pp.1-6.. The further question is, how can blockchain serve the system viably?

The blockchain innuendo

In 2008, the world was introduced to bitcoin, the first circulating cryptocurrency in the world. It is a decentralized currency without the control of a central bank or any single entity that can be transferred from user to user exchange on a ‘peer-to-peer’ network without the need of intermediaries⁶“Statement of Jennifer Shasky Calvery, Director Financial Crimes Enforcement Network United States Department of the Treasury Before the United States Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on National Security and International Trade and Finance Subcommittee on Economic Policy” (PDF). fincen.gov. Financial Crimes Enforcement Network. 19 November 2013. (PDF) from the original on 9 October 2016. Retrieved 1 June 2014.. It also gave birth to the public distributed ledger system of (yes, you guessed it) the blockchain. It was mainly used to automatically record every bitcoin transaction, until it became the backbone of every cryptocurrency transaction. Many people haven’t realized its potential back then until companies started to invest and adopt it into their operation. As of 2017, there are over 250 active venture-backed startups in the space and more than 200 venture capital firms have already invested $1.3 billion into companies across the emerging ecosystem⁷Fairviewcapital.com. 2017. The Rise Of Blockchain. [online] Available at”http://fairviewcapital.com/wp-content/uploads/attachments/Fairview_Capital_Rise_of_Blockchain.pdf [Accessed 18 May 2020]..

Blockchain is popular for its block-linking structure, which is the origin of its name. Each block contains information which is linked with other blocks stored in every individual’s personal computer. The block of information is shared so that any individual can’t alter it. This system works by the trust of each participant, in which one single defection may invoke drawbacks from all participants. However, the blockchain is secured by a cryptographic hash or a code that is nigh-impenetrable without a public key, which every participant has in the system. How? Each independent variable in a hash is encrypted by a complex mathematical algorithm that takes a large computing power to successfully alter it. Even though they successfully modify or alter the data inside the blockchain, every node in the system has the exact copy of the data in the original blockchain, therefore the original information can fully be recovered. Those advantages have solved the traditional problem of transparency and security in using a central database system. In a traditional central database system, not every stakeholder has access to it and a single alteration impacts the whole infrastructure⁸Conte de Leon, D., Stalick, A., Jillepalli, A., Haney, M. and Sheldon, F., 2017. Blockchain: properties and misconceptions. Asia Pacific Journal of Innovation and Entrepreneurship, 11(3), pp.286-300..

In recent years, blockchain has been developed to be used in a wide array of functions. One of the new developments in blockchain technology is smart contracts, which enables businesses to automatically enforce contracts and protection of intellectual property rights. ⁹Alharby, M., & Moorsel, A. van. (2017). Blockchain Based Smart Contracts : A Systematic Mapping Study. 125–140. https://doi.org/10.5121/csit.2017.71011. The contracts will be recorded in a blockchain and secured with a hash, so it’s pretty much irreversible after all parties agreed to conduct. Another latest development in this technology is token economics. Token economics, with blockchain, is a modified enterprise resource planning in providing blockchain infrastructure which connects all stakeholders, using a sophisticated block-linking model and smart contracts. While the basic mechanism for consumer and producer of apps would not differ that much, all of their computing resources to manage the flow of currency are supplied by resource providers, which receive supply of staking coins from coin holders. All of the ecosystem is provided by a single body acting as a government only to collect fees (some sort of taxes) and provide subsidies to resource providers and application developers to incentivize participation ¹⁰Laskowski, M., Kim, H. M., Zargham, M., Barlin, M., & Kabanov, D. (2019). Token Economics in Real-Life: Cryptocurrency and Incentives Design for Insolar’s Blockchain Network. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3465085. It’s very much decentralized because every single blockchain provider will each conduct this particular model to a particular customer/enterprise so that it isn’t centralized to one single provider, but to many blockchain providers.

How it applies to the newly decentralized society

The fallout was chaotic. The old, complex system crumbled, unable to sustain the drought, famine, and natural disaster that arose from climate change. Even in its early phase, the system already crumbled, as our high level of interconnection and interdependence through international trade and multinational companies ensured a devastating domino effect. Riots ensued, Hunger stroke, governments were left to scramble, we were back to the wild. It was as if we had never learned from the bronze age collapse. Trust in the central government weakened, its authority waned. Nobody was sure when it started, but we have a hint on how the revival of civilization started. Communities based on local authority and self-sufficiency arose, protecting and ensuring its own survival. We became civilized, once again. But with modern technologies, we added a twist on how it turned out.

The emergence of blockchain technology in the past can support the backbone of the modern decentralized society. Using smart contracts, they can formulate contracts by themselves which they can agree on, thus enabling the level of privatisation previously unattainable¹²Arruuada, B., & Garicano, L. (2018). Blockchain: The Birth of Decentralized Governance. SSRN Electronic Journal, April. https://doi.org/10.2139/ssrn.3160070. Coupled with an impenetrable infrastructure, the smart contract will also act as a law enforcement system which will sort out any defiant behavior. Every individual will also participate in a ‘court-like’ system which will determine punishment needed for every defiance¹³Atzori, M., 2017. Blockchain technology and decentralized governance: Is the state still necessary?. Journal of Governance and Regulation, 6(1), pp.45-62..

With blockchain’s sophisticated network, individuals can also sort out every agreement needed in running a society. Smart contracts can be used to formulate how the system will work, what policy they should formulate, what is the best ‘tax-like’ savings rate for each individual in order to sustain their group, etc. All of those are highly secured since blockchain is unalterable, and even if it’s somewhat altered by an external force, another node in the system already copied the original database which can be recovered by the internal public key of each participant in the system. When the alterations are needed, they can forge new smart contracts similar to how bills are signed by the government in the previous civilization. One of the leading theorists in this preposition is Ronald Coase with its popular theorem in constructing an agreement to sort out externalities. Coase argues that any individuals can sort out any market externalities without the existence of government, by forming an agreement between each individual¹⁴Coase, R.H., 1960. The problem of social cost. In Classic papers in natural resource economics (pp. 87-137). Palgrave Macmillan, London.. All of those are possible without a government¹⁵Atzori, M., 2017. Blockchain technology and decentralized governance: Is the state still necessary?. Journal of Governance and Regulation, 6(1), pp.45-62..

Most of the time, blockchain’s application was thoroughly defined in establishing a nigh-free market economic system. Its decentralized nature has driven out oligopoly in a centralized system so that it easen up the barriers to entry, which corresponds to how the free market system works¹⁶Fenwick, M. and Vermeulen, E., 2019. Decentralisation is Coming: The Future of Blockchain. The Journal of the British Blockchain Association, 2(2), pp.1-6.. With how the inequality flattens after the ‘great leveler’ event, individuals will gather up new resources nearby and seize all means of production which is essential to manufacture new goods and services. With blockchain in hand, all of the available information by shared networks can be available to anyone, hence fabricating nigh-perfect information circumstances. Individuals in the blockchain network can call for a demand and others will respond in that network through an integrated node¹⁷De Filippi, P., 2019. Blockchain Technology and Decentralized Governance: The Pitfalls of a Trustless Dream. SSRN Electronic Journal,.. For example if someone wants to buy furniture, he/she can write the demand to be stored in the blockchain. Local carpenters will respond to the demand by starting to produce the furniture. It’s very similar to the application of ‘Just-In-Time’ Inventory Management, but the difference is that it’s not centralized to a company, but rather scattered within individual producers. However, it’s not a perfect system since natural monopoly can still exist because of economies of scale, regardless it will be pretty decentralized similar to how local monopoly occurs. Each different individual will specialize in production and it’s very fruitful in sustaining the economy, especially by using token economics as a framework for operation¹⁸Laskowski, M., Kim, H. M., Zargham, M., Barlin, M., & Kabanov, D. (2019). Token Economics in Real-Life: Cryptocurrency and Incentives Design for Insolar’s Blockchain Network. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3465085.

Another application of blockchain in which we’ve seen emerge in current real-time is cryptocurrency. It’s currently one of the convenient investment assets and mediums of exchange although not all countries authorize it ¹⁹Assessing the Differences in Bitcoin & Other Cryptocurrency Legality Across National Jurisdictions Information Systems & Economics eJournal. Social Science Research Network (SSRN). Accessed 25 September 2017.. Cryptocurrency can be mined without a single intermediary and mostly capped in mining. For example, Bitcoin has a mining limit of 21 million and Ethereum has a limit of 60 million. Cryptocurrency can be mined by anyone, with adequate computing resources to solve complex mathematical problem and there’s usually a reward to miners from adding a block of transaction (exchanging an asset to a cryptocurrency) ²⁰https://www.investopedia.com/terms/b/bitcoin-mining.asp. The more they complete the transaction, the more reward they get, and it’s usually in a form of cryptocurrencies. This sophisticated system of mining dwarfs the inefficiency of the central banking system where it needs intermediaries to effectively supply printed money to the public. Miners, as the processor of transactions, get have already got the reward from mining in the system itself.

Can This Utopia Sustain in The Future?

The self-sufficient communities thrived. Perhaps not at pre-crisis levels, but nevertheless seems sustainable. But, nothing lasts forever. The stench of human depravities starts to seep into the corners of our bubble. Whispers of some kind of super-community, reigning over others in its immediate neighbours is no longer ignorable. Quite similar with how Majapahit conquered the Indonesian Archipelago. 

Although it’s clear cut that decentralized society supported by blockchain can be attained through smart contracts and token economics, problems will still arise. The existence of blockchain didn’t detach individuals from coercion. In a decentralized society, when it lacks any central governing entity, any policy and regulation are supposed to be discussed together and enforced by trust within individuals. It’s assumed that all individuals will act accordingly by consent, not coercion since it presumed an egalitarian society. However, in reality, the resources scattered after the ‘great leveler’ event won’t be distributed equally among individuals, hence there would still be discrepancy in wealth. There will also be discrepancies on natural resources for weapons, strategic locations, and technologies. These discrepancies can hinder the negotiation in forming ‘just’ regulations since the coercive action will most likely be implemented by individuals with a higher-possessing wealth. The backbone of this dilemma lies within how coercion and consent are both moral actions, and neither can’t be eliminated by the absence of state nor a horizontal distribution of authority ²¹Atzori, M., 2017. Blockchain technology and decentralized governance: Is the state still necessary?. Journal of Governance and Regulation, 6(1), pp.45-62.. It’s inevitable that in every society there will be a distinction between moral actions, and it will evoke continuous conflict until one side is completely eliminated. The winner will thus enforce coercive action to maintain order based on their moral compass and it’s impossible to run without subjecting any central governing entity ²²Bekkers, V., & Homburg, V. (2009). The Myths and Ceremonies of E-Government: Beyond the Hype of a New and Better Government?. In A. Meijer & al. (Eds.), ICTs, Citizens and Governance: After the Hype! (1st ed., p. 217-234). IOS Press.. To say that modern people have no inclinations to exploit another backed by imbalanced power relations is naive. We repeatedly discover companies doing exploitative practices throughout the 20th and early 21st century, even in 2010’s. Only when it was brought out to light that they started to diminish such practices. Left to their own, modern slavery can run rampant.

The promised land of equality after the ‘Great Leveler’ event is surprisingly unsustainable, as new oligarchy would still prevail in the social hierarchy. By embracing blockchain as a system of governance and economy, individuals gifted with technical skills to provide the back-end of the system such as code developers, miners, fin-tech professionals and technopreneurs will have a new privileged position in society ²³Dahl, R. (1989). Democracy and Its Critics. New Haven: Yale University Press.. In the previous case we assumed that in the future most of individuals’ computing power will be adequate enough to run the blockchain system or provide a back-end system. In reality, those are practically improbable because of specialization. Individuals will gather up resources to produce goods and services that are fit to their skills and economies of scale. It seems unlikely that everyone can code and mine cryptocurrencies for themselves, or provide sufficient skills to maintain the back-end of the system. Hence, this specialization will evoke social hierarchy and magnify the inequality even further ²⁴Bekkers, V., & Homburg, V. (2009). The Myths and Cerimonies of E-Government: Beyond the Hype of a New and Better Government?. In A. Meijer & al. (Eds.), ICTs, Citizens and Governance: After the Hype! (1st ed., p. 217-234). IOS Press.. What was once a utopian economic system becomes a capitalistic hellhole.

Final remarks

However, as old civilization crumbles, a new age begins. Individuals gather in small groups, appointing leaders before scrutinizing any settlements or safe territory, and start piling up food resources and weapons. By the time they find any settlements or abandoned territories, they will retort to conflict if there are any residents nearby or start to build their own if there are none. By occupying local territories, they will start to extract resources nearby. All of those are similar to how we behave back in the days we found agriculture. 

Even when the old civilization falls apart, remnants of it are still there, and our knowledge regarding it still remains. Technologies of the past will take a profound role in erecting the new order. One of it was blockchain, which plays a huge role in maintaining order, welfare, and the life of populations. By using its impenetrable and robust infrastructure, smart contracts, and token economics, no central authority is needed to sustain the existing societies. With blockchain, a lot of small, self-sufficient communities rise to maintain order and guarantee survivability. Embracing the dream of the free world and marxist utopia, there will be no crony capitalism and all individuals can seize their own means of production.

All of those scenarios are highly attainable and possible in the near future given the latest upheaval in our civilization. When centralization has failed to address the inevitable shortcomings of environmental fiasco, it can raise contempt and spark a revolutionary movement. As on how blockchain features enabled us to perpetuate growth and sustainability without central governing power, the new decentralized society might be on the horizon of starting our new age in history.

However, this anarcho-capitalist utopia might seem perfectly attainable and long-lasting, but any economist worth their salt cannot ignore the humane factors. By our ‘imperfect’ equality and different moral standards, coercive actions are inevitable to maintain any societal order before turning it into a mess from continuous conflicts. By embracing blockchain, we have opened the path of the new social hierarchy to prevail. The composed elite individuals will no longer consist of politicians, businessmans, or celebrities but rather the computer experts (code developers, miners, technocrats, and fintech entrepreneurs).

Editor : Rama Vandika Daniswara, Miftah Rasheed Amir

Illustrator : Shahifa Assajjadiyyah