Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
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NewsOpinionWould People Still Rely on Governments if Crypto and Blockchain Adoption Goes Mainstream
NewsOpinionWould People Still Rely on Governments if Crypto and Blockchain Adoption Goes MainstreamWould People Still Rely on Governments if Crypto and Blockchain Adoption Goes Mainstream
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Disruptive technology is the type of tech that radically changes the way consumers, businesses, and entire industries operate. Blockchain technology is one of the most disruptive technologies of the 21st century. It has completely revolutionized banking by eliminating 3rd party intermediaries like banks and money transfer firms with its peer-to-peer transaction support. No one would have thought of a day when banks aren’t needed in the financial world.
Consequently, customers have taken note, with adoption rates rapidly picking up. Yet its current use cases are just a scratch on the surface. Given the combative nature of governments to cryptos, they must be quite worried. Is it possible for people to no longer need their governments thanks to mass crypto adoption? Read on to find out.
Why Do We Need to Rely on Governments
To answer this intriguing question, one has to understand just what two variables are being compared. Thus, the starting point is knowing exactly what roles a functional government is supposed to play in society.
From there, one can review the ability of cryptos to perform the same roles. Below are the 6 key functions of a government as mandated by the people;
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Protect the Natural Rights of the People
The role of rights protection is probably the most basic primary function of the government. It is responsible for protecting all the basic human rights that make living possible in the first place. They are the right to life, the right to possess property, and the right to liberty.
They are termed natural rights since every human being deserves them, and everyone is assumed to have been born with these rights. Therefore, taking them away without their consent is a moral wrong.
How Cryptos Would Perform this Role
Cryptos would find it very hard trying to replace the government in this role. To safeguard the natural rights of all individuals, cryptos would have to morph from business and profit-leaning projects to selfless ones. And such a project would find it extremely hard to attract investments.
There is, however, a possibility of governments utilizing cryptos to enable the smooth functioning of institutions that enforce these rights. For example, a crypto project that funds the courts can be launched, with firms being given mandatory purchase quotas for the coins to ensure funding is available. The project could then utilize the unique metadata of Non-fungible Tokens to issue them per pending case. Thus, it would make funding for cases straightforward and transparent while also enabling easy tracking of progress.
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Provide for Conducive Economic Conditions
Every government is tasked with maintaining its respective country’s economic vitality. Therefore, it is required to ensure that an environment conducive to wealth expansion and economic growth is sustained.
Here, the various tasks of economic and financial policies are key. Inflation should be maintained at healthy levels, therefore requiring a stable currency. The government enables money creation while controlling the money supply, keeping it at a good balance. Issues such as consumer rights and property rights also fall here.
How Cryptos Would Perform the Role
Cryptos could have the best ability to perform this role with much efficiency. To maintain economic vibrancy, governments have to employ many economic analysts to monitor the entire economy frequently. They must assess the need for money creation and gauge the effects of increasing the money supply by a certain percentage on the currency’s value.
On the other hand, the supply of cryptos is purely based on demand and supply. There isn’t undue inflationary pressure since mining is based on transactions occurring, which necessitate the process. Specialized tokens like NFTs would also enable property rights by tying a certain token to a specific physical or intellectual asset.
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Protect Against External Threats
History is peppered with wars between countries, invasions, and more discrete forms of control like creating puppet states. In addition, there are many issues related to external threats that still affect relations between countries to this date, such as colonialism, slave trade, neocolonialism, and lopsided trade treaties.
It is up to the government of a country to protect its citizens against such threats. Unfortunately, countries without a strong or effective government will always risk falling to such external threats.
How Cryptos Would Perform The Role
Protecting a country from external threats is quite a difficult and complex process that even governments find hard to fulfill. It requires financing and maintaining armies that are neither profitable entities nor have vested interests in any portion of the nation. It also requires maintaining very complex trade agreements with about 200 other countries.
Governments can, however, use cryptos to help fund defense activities. For example, running a military blockchain project that requires all workers and firms to purchase a certain proportion of their incomes annually would enable better transparency and efficiency.
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Redistribute Income and Resources
It is the government’s responsibility to ensure income is redistributed to all. Without such actions, inequality would be very high and stark. It does so by heavily taxing the wealthy and able, redistributing the income and resources to the poor and less able in welfare.
How Cryptos Would Perform The Role
On their own, cryptocurrencies wouldn’t be bothered with income distribution since they heavily rely on investors. Investors, on the other hand, are profit-maximizing individuals, hence resulting in higher inequality.
Governments may, however, use cryptos to efficiently and accountable collect and account for all resources collected for redistribution. In addition, public ledgers allow for easier scrutiny of malpractices.
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Provide Public Goods
The private sector runs on one key principle, profit maximization. It can’t provide public goods such as infrastructure and social amenities as long as they don’t generate profits. The government provides these otherwise loss-making activities. It also provides basic goods which can’t be left to the private sector for monopoly reasons.
How Cryptos Would Perform The Role
There is a possibility of blockchain technology and cryptos making the provision of public goods more efficient. For example, a blockchain project that sells tokens strictly for funding public expenses would be more transparent.
Accounting for all receipts and their expenditures would also be easier compared to the current vague way of government accountability. In addition, purchasing the currency could be made compulsory, with violators facing a boycott for firms and exclusion from basic services for income-earning individuals.
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Prevent Externality costs
During economic activities, several externalities occur. These are costs or benefits that are generated from activities, which impact society. The most common externality cost is pollution from factories or mining activities. It is the government’s role to enforce policies that ensure such costs don’t harm society.
How Cryptos Would Perform The Role
Cryptos and blockchain technology have no way of solving externality cost issues yet. Not unless they morph into a form of a government body.
However, governments can use cryptocurrencies to enforce better policy and cost transparency. For example, if a government launched a stable coin, with the amount to be purchased being set for different scales of externality costs, it would be strongly disincentive to private actors. The figures due will also be well known and easily traceable.
Conclusion
Over thousands of years, human society has evolved to rely on a governing body to help improve lives and enforce rights. However, even though cryptocurrencies have an extensive use case, they haven’t proven to replace governments completely.
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However, they do have the ability to offer some services that people have mostly been reliant on the government to provide. And they could do these services more efficiently and effectively if given a chance. It is also important to add that use cases of cryptocurrencies are yet to be fully explored. Perhaps blockchain technology may have more under the sleeve that could even transform lives further.
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