As we pave the way towards stronger and more scalable blockchain use cases, we need to ensure that in an attempt to decentralize power from modern overbearing institutions, we do not empower them instead. When thinking about unequal distributions of control in society and one’s loss of individual efficacy, our thoughts tend to gravitate towards governmental institutions. However, much of modern-day leverage lies in the hands of large corporations, most of whom will directly benefit from the use of blockchain-based technologies or who are inventing it themselves.
As a society, we have come to implicitly accept the rule of corporate institutions with little to no resistance. This governance comes in the form of the shiny new technologies that we accept and integrate into our lives, while conveniently turning a blind eye to the personal data we pour into them. For those of you who believe incognito mode is saving you, think again. Your personal data is an invaluable resource being used by powerful institutions to anticipate, analyze, and influence your actions. We fail to realize that through this centralized control, we are building our own invisible cells, being watched and controlled under the pretense of autonomy. And we are fully vulnerable to the corruption of said entities. Blockchain’s central principles advocate for true self-governance in the form of privacy, data ownership, and anonymity. As depicted by the aforementioned trends, a world in which major blockchains are controlled by dominant corporations and middlemen could quickly slip into authoritarianism.
In the past decade, 84% of companies have experimented with blockchain, giving this industry an expected market of $20 billion in 2024. The advent of such a nascent technology into the public sphere brought along a slew of assumptions and misconceptions, including the one where blockchain is a fast-moving train which businesses need to hop on in order to “stay relevant.” Meanwhile, large companies such as Microsoft, Walmart, Amazon, and IBM have begun to favor, and even create the private enterprise blockchain. For example, Amazon’s Managed Blockchain for corporations is permissioned and controlled largely by the entities which create them, while compromising any sense of anonymity. Accenture has even gone as far as creating an editable blockchain, which is highly vulnerable to corruption. These are qualities that go against the definition of blockchains themselves, and the jury is still out as to whether private blockchains are even as effective as other methods of data storage. Private blockchains are also more vulnerable to attacks, due to the few numbers of nodes and probable knowledge of their location. Such amorphous “blockchains” are later marketed as legitimate in order to gain the trust of shareholders while withholding key details and security concerns.
Quite ironically, banks such as JPMorgan have taken a special interest in blockchain technology, with almost 70% of financial institutions dabbling in the field. This is mostly in pushback to the effect which truly decentralized cryptocurrencies can have on their control of monetary policy. Such happenings undermine the notion that blockchain should be used to decentralize power since it has ended up mainly benefitting large institutions instead. Rather than eliminating the middlemen, blockchain technology is propping them up, and putting the fate of individuals in their hands more than ever before. For those who entered the field seeking to escape the governance of such autocratic organizations, they seem to have created the weapons of their own destruction.
Mining Inequality
As more transactions are added to the public blockchains of cryptocurrencies such as Bitcoin, more mining power is required to verify transactions. This need for increased computational power has prompted the centralization of mining activities, and therefore, the collection of transaction costs as well. When centers are created specifically in dedication to computational power for mining processes, this could be inherently dangerous since the monopolization of mining power can lead to the ability to tamper with the blockchain data in what is known as a 51% attack. The integrity of the blockchain thus relies on the distribution of mining power amongst various individuals in the network. True decentralization prevents the risk of corruption and removes the existence of a central point of failure.
Currently, over 80% of Bitcoin’s mining activities are conducted in China, with four large mining pools controlling over 51% of mining power. Collusion could have fatal implications for the network, and this vulnerability to attack is created largely due to the Proof of Work consensus protocol, which prioritizes mining power in the block creation process. The high expenses of such mining equipment effectively put mining power in the hands of the wealthy. Alternative consensus protocols such as Proof of Stake do not offer much relief in this inequality, since those with the highest amount of value staked are most likely to aid in the creation of new blocks. Such consensus mechanisms which implicitly or explicitly prioritize wealth create a centralized network which mainly yields benefits for the already privileged, or those with the most resources. This creates an environment that is unfriendly to those it intends to uplift. Consensus mechanisms such as pBFT (Practical Byzantine Fault Tolerance) offer less variance in transaction rewards since all nodes participate in voting for the next block, though this protocol is less scalable, and more vulnerable to attacks from a fewer percentage of malicious nodes. Addressing such tradeoffs is an important part of building more equitable consensus algorithms today.
Conclusion
Blockchain is the by-product of a world dissatisfied with the concentration of power in our modern society and governments. Though modern-day blockchain use cases are riddled with holes and potential pitfalls, the scope and potential of this technology cannot be ignored. As with many new and revolutionary technologies such as the TCP/IP internet protocol, real applicable use cases may only be defined years after the advent of the technology, and become mainstream sometimes decades after. What is pressing is that we are now in the time period where blockchain as a technology is being defined for its future use, and where its core principles are being discovered. As this technology’s scope and use cases grow in the coming years, great attention should also be paid to the potential for further centralization of power and resources based on its usage.
If blockchains were only usable by the rich, then the whole space would be much less interesting.
— Vitalik Buterin, Founder of Ethereum
Efforts to reconcile blockchain’s ideological goals with its trajectory as a field should eliminate current barriers to adoption which hinder those who are less privileged from harnessing the benefits of this technology. Fostering trust in this initiative requires greater education, and perhaps even international and open source efforts such as the Libra Association’s movement for a financially inclusive global payment system. It includes developing or adopting consensus protocols which are more conducive to true decentralized control, instead of reinvigorating few affluent populations.
Fortunately, the days in which problems were thought to be solved simply by throwing a blockchain at them are fading fast. This leaves plenty of room for those concerned with blockchain technology’s true ideological goals to take action, and bring us closer to a society in which individuals can preserve their sovereignty and self-governance–no matter their socioeconomic class. Let us take inspiration from sincere efforts such as Humaniq’s blockchain platform for the unbanked in Africa, and Bitland’s smart-contract based land registration blockchain– both of which exemplify a world of empowerment and individual control. Let’s start building the blocks toward this future.
