The future of finance and government is ominous. While the EU is edging towards financial dictatorship, and China is working towards its Social Credit System, it is time to consider alternatives.
Let me introduce a speculative story, based on the ideas of Pavol Luptak, who outlined some steps of how decentralization and cryptocurrencies can make governments obsolete. The Uber case study, as explained below, is a prime example of how people can respond with liberating alternatives as the government tightens its vice grip on innovation.
Cash prohibition & government monopoly
Cash payment is becoming regulated in most of the EU. In Slovakia, the cash payment of over 5000 euros is a criminal act. In France, the limit is 3000 euros, and in Spain 2500 euros. In the Czech Republic and Austria, as well as in many other European countries, anonymous prepaid payments cards became prohibited. In the Netherlands, more and more restaurants are only accepting non-cash payment. It is probably just a matter of time until cash is completely banned. All these actions increase government surveillance and control.
Anonymous cryptocurrencies may offer a solution. For example, Zcash and Monero are truly anonymous digital currencies. What Monero and physical cash have in common is fungibility. When you open your wallet, you have no idea who has used your coins in the past or who will use it in the future. Coins have no transaction history and are mutually interchangeable which is not the case for bank or credit card transactions. If you receive a digital transaction, it is easy to find out and trace the origin, look up through where it has passed, and read into its future. There is no such thing as anonymity in a bank transaction.
Governments have many reasons to remove anonymity which allows for more control. They know who is buying from who, selling what, as well as the populations’ consumer habits. Privacy is a fundamental right which should apply to finance as it does to other aspects we value in our lives. Thanks to cryptocurrencies, truly anonymous, fungible cash is possible and available.
Edward Snowden’s quote is appropriate:
“Arguing that you don't care about the right to privacy because you have nothing to hide is no different than saying you don't care about free speech because you have nothing to say.”
Government monopoly prompts decentralization
A prediction can be made on how existing technologies can significantly alter the fabric of our society. We can use Uber as a real-life example of how change is taking place, and where it can lead us. In many major cities, Uber is highly regulated or completely prohibited, with the main purpose of eliminating competition for taxi drivers. In Berlin, Uber is obliged to charge an equal amount as taxi drivers, as to not to harm their business. In cities all over the world, taxi drivers are striking and protesting, demanding (and receiving) action against Uber. It is easy enough to ban it as a central company, as it has already been done in London, Budapest, Barcelona, Denmark, Finland and the Netherlands.
The solution, if a society desires these services – is to decentralize Uber. These projects already exist – for instance, Arcade City provides a peer-to-peer taxi system in Austin, Texas, “with networks built by local communities, not corporations.” As governments continue to ban Uber, more people will turn to decentralized versions of Uber. Technically speaking, these cannot be shut down or regulated.
In the prospect that this decentralized Uber itself continues operating, a possible response could be that visa card will reject payments between their users. This situation will prompt people to switch from the state currency to cryptocurrencies, especially anonymous ones, paving the way for a truly decentralized application of Uber where all drivers and passengers will use anonymous cryptocurrency. If there is a specific a legal subject behind this decentralized business, the government can still ban, regulate or sue the given legal entity. But this is not possible if the company is fully decentralized.
Government will lose monopoly due to decentralization & cryptocurrency
Today, the states have a monopoly over business licenses, as they hold the control over what is legal. However, this may not be true for the future. In decentralized autonomous organizations (DAO), relationships between company owners can be defined by smart contracts, and store to a decentralized blockchain. Authoritative hierarchy (as a naturalized practice in governments or corporations) is ruled out as all rules are enforced digitally (using so-called “oracles” which interact with physical reality). If more and more companies will do businesses as decentralized autonomous organizations, governments will lose the monopoly.
The next step takes things further. The decentralized-Uber-supporting-anonymous-cryptocurrencies-based-on-DAO-framework will start to offer any services and products to anyone. It means there will be a universal decentralized sharing economy service and application allowing anyone to provide any services or products to anyone using truly anonymous cryptocurrencies. Robust reputation systems and escrow services will solve the mutual trust. Open Bazaar is an example of a thriving, open-source, decentralized marketplace, eliminating the middleman and directly connecting people. Particl is a new competitor, as an “open source, decentralized privacy platform, built for global person to person and business to person eCommerce.” What role or influence does the government have here? None.
Government becomes obsolete
All these phases are technically feasible, and we have the technology to achieve this utopia. Thanks to this system and applications, we can move to DAOs, peer-to-peer societies, where anyone can offer services to anyone in a trusted and reliable way. All taking place without the need for a third party – aka the government.
Peer-to-peer societies benefit from reputation systems. Just as in Uber or Airbnb, users of the network can be rated and given feedback. It provides a truthful and constructive review allowing for other users to make a choice with whom to interact.
Escrow services eliminate the need for centrally enforced government’s laws and regulations in transactions between strangers by acting as a moderator. A mutually agreed upon third party regulates the payment between two parties in a financial agreement. For example, you send your crypto-cash to the escrow service, which notifies the seller to ship the product or provide the service. Once the product is confirmed to arrive, and the buyer checks its quality, the escrow completes the transaction by releasing the funds directly to the seller’s digital wallet. Thanks to this it is possible to achieve a mutually trusted market, and provide services or products in an anonymous and honest way while significantly reducing frauds.
The moral of the story: we don’t need controlling and immoral governments. Especially for doing trusted and reliable businesses.
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Journalist, editor, and graduate of anthropology and international relations. Interested in culture, economics, philosophy, politics, travel, music and art