Blockchain and the Kleptocracy
Have you ever wondered why some of the world’s most resource-rich nations happened to also be some of the poorest? Why commodity boom after boom can come and go and the general living standards of the citizens of these respective nations never seems to improve. There are a number of causes one could point to in order to explain this contradiction, but the biggest cause in this humble writer’s opinion is the C word. That’s corruption for those still guessing. Corruption is the all-pervasive ill that has turned many a former colonial outpost and soviet satellite state into what can only be described as hellish worlds of grinding poverty and sporadic violence.
Who, you ask, is at the helm of the cesspools in which many of these banana republics, dictatorships and failing states emerge from? Well that would be the Kleptocracy, a cabal of elites, who bleed their respective nations dry of any wealth amassed from windfalls accumulated by natural resources, taxes or aid. The same cabal who revel in crony capitalism, which leads to rigged markets, entrenches poverty and stifles innovation. The kleptocracy are not hard to spot, they look like you and me. The modern kleptocrat could be an unscrupulous health minister diverting funds away from a vaccine program into his personal offshore account in the Caymans. Oh, isn’t the world of modern finance exciting. Before those of you who worship at the altar of capitalism descend upon the comment section, demanding that I return to the People’s Socialist Republic of who knows where, I to myself am a capitalist. However the bastardised version I see currently being practiced, especially in developing nations is a disgrace.
Now I have established an apocalyptic backdrop, it’s time for a hero to come and save the day. In swoops the “BLOCKCHAIN” with amazing powers such as “Smart Contracts”, “Cryptocurrencies” and the game changing “Distributed Ledgers.” This is the superhero movie the world deserves. Thor has his hammer but can he produce a digitized record of who-owns-what? The Incredible Hulk may have super strength but can he facilitate, verify, or enforce the negotiation or performance of a contract? The answer to both is a resounding NO! Personally the Avengers don’t have a thing on a Software Development team, but alas the movie-going public would rather see Robert Downey Jr be paid the GDP of a small nation to squeeze himself into some CGI generated suite.
A little background on our hero, the Blockchain is the decentralized public ledger technology that runs everyone’s favourite cryptocurrency — unless you’re a central banker — Bitcoin. The open source nature of the Blockchain allows developers to augment Blockchain technology enabling it to be used to create any sort of distributed ledger structure that requires a consensus mechanism to validate a transaction. The Blockchain can be put to work fighting the scourge of corruption firstly through the use of smart contracts, which are irrefutable Blockchain-based digital contracts. Smart contracts could enable citizens to receive access to land titles, a defence against land grabbing. Secondly distributed ledgers could ensure votes are recorded on a publicly accessible ledger enabling transparent and fair elections, strengthening the democratic process.
Alas, the Blockchain like all great vigilantes is flawed, by a lack of accountability. Who or what governs the distributed ledger, what are the rules of blockchain. The Blockchain is expected to use a distributed network in order to enforce the rules, in order to prevent abuse of power by a third party, but who is exactly making the rules in which its suppose to enforce? Take the Bitcoin Protocol for example, a set of rules enforced by the Bitcoin Network (a distributed network of computers), who exactly makes up the Bitcoin Network. Who makes the rules matters as much as who enforces them, and the apolitical nature of the Blockchain may be scant consolation if the rules arbitrarily change. So there we have it, the Blockchain, the flawed hero of our story, with the potential to knock the modern kleptocrat down a peg, however whose true identity remains a mystery.