Inequality and Blockchain: An Economic Case for Decentralization
I have been following the development of the blockchain with considerable interest for a number of years. The idea of peer to peer transactions on a centralized ledger, without the need for intervention resonates with me.
In the existing internet payment process, problems exist, largely around transaction reversal and mediation. Financial institutions must be trusted as the necessary third party. Other than face to face cash transactions, a level of suspicion and fraud is deemed acceptable.
Electronic payment based on cryptographic proof rather than trust completely eliminates the need for the middleman. The elimination of the middleman eliminates the possibility of the system from being usurped by a centralization of power. This is the defining feature of blockchain. From the dawn of history, centralization of power never leads to the good of the majority for any sustainable length of time. Inevitably, absolute power corrupts absolutely.
A certain amount of conversation revolves around the possibility of public vs. private or consortium blockchain. As argued eloquently by others, it does seem to me that the idea of a corporate or consortium-controlled ledger is not true blockchain; the whole idea being that anyone could participate in both the transaction and in the authentication and distribution of the records without the need to be granted access by anyone else.
Capitalism is such that companies have great incentive to grow. Growth is significantly accomplished by acquisition, and enough acquisition leads to control - a monopoly on that market.
The problems with monopoly are:
Inequality - in which consumers who have nowhere else to obtain are charged more than logically necessary, or those who do not dictate the conditions are stuck accepting what is granted.
Stagnation of innovation - there is no impetus to improve if there is nothing else out there to beat.
Morally stunted profiting - the power to lobby for change remains with those who make the prices and as long as it increases the bottom line, any means might be deemed acceptable.
Blockchain holds significant promise to impact the above identified problems by taking the power out of the whole transaction. No single entity maintains or controls the accounts, so that no one can pilfer or otherwise manipulate the ledger. The transacting individuals themselves and the whole company of the cryptocurrency network share the control.
I see this as another blow to the inequality in our first-world democratically-based societies. I am of the opinion that the best thing someone can do who is tired of having significant terms of life dictated by others, e.g. employers, is to purchase and run their own small or medium sized business. As a business owner, one will still encounter issues they cannot control, but they also still possess the right and the opportunity to decide how to respond. The business owner is in position to act on his or her own best interests and those of the people they employ in their respective community. They possess a measure of control and therefore, a measure of influence.
Control of capital in the hands of the majority, instead of in the control of few, will demonstrably restore equality to economics. I imagine that, eventually, public and permissionless blockchain will do a great deal to return equality to online commerce. This model, along with small and medium business ownership, stands to serve as an example of innovation that favors parity - a critical example that is sorely needed.
