Matthew Raikes is reading Arabic & Politics at the University of Exeter. In 2018 he was a John Locke visiting scholar in Princeton. He was a member of the John Locke internship programme in Byron Bay, Australia, in 2019.
Distributed ledger technology (DLT) is gaining momentum. DLT is a peer-to-peer digital database that is shared across multiple devices. The likes of blockchain and other decentralised technologies are making waves in many domains and bringing autonomy and liberty back to the individual. Denationalisation of currency, voting processes, peer-to-peer contracts and financial inclusion are just some of the many applications of such technology. Classical liberalism promotes economic freedom, a limited government and individual liberty – all of which may be attainable upon mass adoption of DLT.
Blockchain technology indicates the beginning of the era of the self. Classical liberals treasure individual liberty and seek to ward off any form of unjustified coercion; cryptocurrency seemingly presents a viable solution. The decentralised technology undermines nation-states’ ability to control a plethora of mainstream policies in our daily lives. Among the top themes, cryptocurrency threatens the government’s ability to control money flows and the democratic voting process. The code behind cryptocurrencies allows for the coder to determine the maximum supply of a coin, if coded in such a way that, unlike fiat currency, it cannot be “printed” on the orders of a politician. An added benefit of this fixed supply is that it also protects those holding the digital currency from hyperinflation – in contrast to the bolívar, forint or dollar, for example, in Venezuela, Hungary or Zimbabwe. In the case that monetary policy needs to be revised the open-source nature of cryptocurrencies allows for suggestions to be made to the blockchain, which in turn can then be voted on by those that hold (known as having a stake in) the currency. Controlling the money supply is an incredible source of institutional power. The denationalisation of money would cripple much of the institution’s ability to control the economy and would therefore diminish the preeminence of the nation-state.
Introducing the idea of digital voting is contentious. Engagement in the political process is severely stunted, whether by apathy or as a result of questions about political legitimacy. Traditional voting is outdated and in need of reform. DLT could do away with booth rigging, current vulnerabilities in online voting systems and other issues. Blockchain reduces waiting times to zero, is transparent, (quasi)anonymous, immutable and secure. This means that voters are not identifiable, the votes are encrypted, and the entries cannot be tampered with (as of yet the largest cryptocurrency to run on blockchain, Bitcoin, has not succumb to data tampering. This new-age voting would have unprecedented voter turnout as it significantly reduces the barriers to entry in voting and increases the security within the democratic process, which is of particular importance when considering less economically developed countries.
DLT also has implications beyond money supply and voting; it can also serve as a medium for smart contracts. The amount of time and money needed to hire third parties to create, uphold and enforce a contract is egregious; to the delight of classical liberals, DLT provides a means to engage in peer-to-peer contracts without third parties or the government. Say you decide to buy a Tesla Model S. You can’t buy it outright, so you enter into a smart contract with the current owner to pay monthly instalments. A smart contract would work in the following way: for every monthly payment you make on the smart contract, you continue to use the car. However, if you default on a monthly payment the contract will recognise this and the smart contract will execute an order which prevents the engine from starting the car. Through satellite connections the car is in constant communication with the blockchain’s smart contract to ensure that no clause has been broken, and if one is broken then the smart contract sends an instruction to the car not to start the engine. Other applications for smart contracts include the provision of public goods and peer-to-peer lending. These are just a few of many examples whereby smart contracts reduce or eliminate the role of a third party thereby increasing the individual’s sovereignty.
"Blockchain technology indicates the beginning of the era of the self."
Another principal purpose of blockchain technology is financial inclusion. The two billion citizens of the world that are underbanked or unbanked are unable to find economic stability in their lives due to traditional services being inaccessible to them. These individuals make unsuccessful applications for loans, mortgages, savings accounts and a range of other services that are necessary for stability. However, those that previously needed to provide a flood of documents to set up an account with a bank can now set up a cryptocurrency wallet with a smart device and an internet connection. Not only will this technology introduce a wave of economic growth into the global market, but on a microeconomic scale these newly “banked” individuals will experience greater economic opportunities to lift themselves out of poverty as they begin to have access to a new financial ecosystem. Moreover, cryptocurrencies like Bitcoin provide low transaction fees, flexibility, security against fraud, low barriers to entry, and they are accessible twenty-four hours a day all year round. Comparatively, brick and mortar institutions are slow and bureaucratic; they are closed most of each day and part of every week, they be inconveniently located, and they may impose insurmountable barriers to potential customers.
Shifting towards a more ethically inclined domain, DLT can lay bare irresponsible business practices from corruption and money laundering to violations of environmental good practice. An important feature of blockchain technology is its immutability; this means that a transaction or information put into the blockchain is extremely difficult to tamper with. This has unprecedented implications for data provenance and supply chain accountability. Just by scanning a QR code, not only can companies hone their inefficiencies through meticulously tracking each stage in their supply chain, but consumers can also view this information, keeping firms accountable to responsible environmental and ethical practices.
I am not suggesting that DLT is the solution to all problems – and it certainly has issues of its own – but it is a viable route to living in a world with more individual autonomy and freedom. It brings trust into an otherwise trustless environment through cryptography, gives individuals authority over their own lives through decentralisation, and provides economic freedom to everyone with an internet connection (including the unbanked). Distributed ledger technology could be the biggest evolution towards realising classical liberal ideology since its inception in the 19th Century.