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Alex Kimani

Alex Kimani

Writer, Divergente Research LLC

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Divergente Research LLC and Safehaven.com. 

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  3. Blockchain

The Uncomfortable Truth About Blockchain Tech


Blockchain technology has spawned a new decentralized economy, effectively taking power away from centralized authorities and handing it back to the people. Many blockchain advocates firmly believe that the new technology will accelerate the pace of innovation and lead to greater freedom and transparency in society as well as enhance peer-to-peer transactions.

While blockchain tech is mostly associated with the corporate world including numerous crypto startups, distributed ledger technology can be deployed in a wide array of applications even in the public sector. Not surprisingly, governments across the globe are busy investigating and implementing distributed ledger systems for everything from health records and electronic voting to land registrations.

For instance, the European Union Intellectual Property Office (EUIPO) is currently studying how blockchain technology can be used to combat counterfeiting, a menace that costs the EU €60 billion (£53.5 billion) every year.

The Swiss city of Zug, considered one of the frontrunners of government adoption of blockchain tech, not only accepts crypto as payment for public services but has also used blockchain to digitize ID registrations and has even completed an e-voting trial. Meanwhile, the Isle of Man has deployed blockchain to safeguard its thriving but vulnerable e-gaming industry.

Government Switcheroo

All those are remarkable cases of governments embracing a new and relatively novel technology for the benefit of the people. Related: The Changing Demographics Of Higher Education

But what is often neglected is the possibility of authoritarian regimes flipping the switch by using blockchain technology to create systems and applications that limit individual liberties for their citizenry. It’s hardly a prosaic concept and is considered almost anathema, but blockchain in the wrong hands can wreak untold pain and havoc. Read on:

Track citizens’ financial transactions

There is nothing that a malevolent government would love more than to gain control of every facet of its citizens’ lives, and few ways are more effective than to enforce a cashless society where only a single blockchain-backed sovereign currency is allowed. Such a digital currency would ideally run on a permissioned ledger with only select government agencies granted access. This would give such a state full transparency of all its citizens in real-time.

That  might sound far-fetched, but some aspects already exist as we speak. Iran is reportedly mulling its own cryptocurrency. Venezuela, on the other hand, has devalued its currency by 95 percent and instead pegged the bolivar to its own cryptocurrency—the petro—which is tethered to oil prices. The only thing missing is for the petro to be placed on a permissioned ledger and the scenario described above would become reality.

Create a blockchain social credit scoring system

Digital identities are rightfully cited as a promising use case for developing economies and unstable regions . But used wrongly, it can become a tool to segregate and discriminate against certain demographics.

For instance, a dictatorial government could use blockchain to create an immutable social credit scoring system that it uses to rank individuals according to their social values. The scores would then be used to determine who benefits from things like educational and employment benefits or even worse.

Related: Police Bust China’s Largest Bitcoin Hacking Scheme

That might sound like a futuristic Minority Report-like case, but again its incarnation is already here with us. China has begun implementing such a social credit scoring system that’s will be used within the confines of the Great Wall. Launched in 2014, the system is designed to gauge the “trustworthiness” of  the nation’s almost 1.4 billion citizens. A few tweaks here and there to implement the system on blockchain and make the data easily shareable with permissioned third parties could escalate it into something far sinister.

Store falsified data on public sector blockchain

A truly decentralized blockchain network is designed to prevent false data from being stored on the ledger. A heavily centralized one with nodes accessible to a central authority, however, would not only defeat the purpose of blockchain technology but could also be used by totalitarian governments to falsify public sector records to its advantage so long as nobody becomes privy to the behind-the-scenes operations.

Though not directly related, this project that’s trying to incorporate kill switches into siacoin blockchain to keep it free from corporate interests gives an idea how that might play out.

By Alex Kimani for Safehaven.com

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Leave a comment
  • MJ on August 28 2018 said:
    Crypto fanboys and critics alike seem to be unanimous about one thing: that blockchain is the future and has unlimited potential. Your article is a very welcome look into the potential dark side of blockchain; and that it isn't all unicorns and fairy dust like so many would have us believe.

    Does anyone really believe that governments, et al, will use blockchain to do anything but consolidate their grip on power and on our lives? They only see blockchain as a means of attaining that goal. Smell the salts and wake up folks.

    Gr8 article Alex!

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