A (New) Blockchain Narrative, Curaçao edition
There is much debate about the paths to take to increase blockchain adoption. However, too much of the discussion is about blockchain by and for industry and business. As Deloitte noted in its recent global blockchain survey:
“More than anything, the 2019 blockchain survey revealed the emerging shared belief that blockchain is real — and that it can serve as a pragmatic solution to business problems across industries and use cases.”
With this kind of mindset, the focus is on improving existing (legacy) business operations and structures. Thus, the talk is around process efficiency and cost savings, which ultimately translates into use cases (e.g. payments, data-validation, and access/sharing) that end up benefiting just big business instead of the people they are serving.
Unsurprisingly, key investors in this space remain the financial sector (banking), which is exclusively driven by profitability and return of investment (ROI).
While companies continue keeping things business as usual, the catastrophic social and environmental challenges — which are a result of this way of thinking — facing societies today continue unchallenged.
Why we need a new narrative!
Take Curaçao, for example, considered by many a beautiful Caribbean island paradise — for those who can afford it — however, the reality for a significant number of people on the island is far from paradise-like.
Consider the recent statistics on the main health-related, social- and environmental problems on the island:
Degrading public health
The first thing noticeable is the poor overall health of people on the island. Over 60% of the population is either overweight or obese. Concurrently, 50% of the islanders report suffering from one or more chronic diseases (e.g. respiratory diseases, back and neck pains, diabetes, arthritis, heart attacks, coronary heart disease, etc.).
Degradation of social life
Second of all, the political and social environment on the island is degrading. The island faces increasing amounts of political and economic corruption. From money laundering to forgery and bribery, to even political assassination.
Also, crime and violence seem to be a massive problem on the island. Between 2003 and 2007 Curaçao found itself among the top three most violent island nations in the Caribbean. Moreover, according to a 2014 victims survey, 66% of Curaçaoans indicated being a victim of an unlawful act at some point in time.
Crime, violence, and corruption have disastrous effects on the quality of social life since they put people in an inescapable state of fear and anxiety. As a consequence, trust in each other and in institutions decreases, resulting in a reduction in social and community participation.
In Curaçao, 68% of the population indicates having strong feelings of fear or anxiety related to violence and crime. On top of that, trust is (predictably low) with just 32% of citizens agreeing with the statement: “Most people are trustworthy” and only 3% trusting the work of government, political parties and the parliament.
Additionally, it seems people are barely participating in activities that constitute social life. On average, a meager 8% of the population assumes an active participatory role in social-, political-, or religious institutions.
Environmental destruction
Finally, contrary to what tourism advertisements propagate, even the Island’s natural environment is taking a hit.
First of all, Curaçao is home to a 100-year-old, dysfunctional and environmentally polluting oil refinery that is in drastic need of an upgrade. The refinery has polluted the air to such an extent, that the island recently gained a spot among the top ten environmentally polluting countries in the world.
Similarly, severe pollution has led to a nearby lake to become entirely covered by asphalt. The ‘asphalt lake’ is the result of around 34 million tons of chemical waste from the refinery and has existed for over 70 years.
Next, the island’s marine resources are in decline, with some estimates showing a 50% reduction of coral reefs in just three decades, and a 90% decrease in reef fish (see figure below) as a consequence of human industrial activities, water pollution, and climate change.
Contrary to popular belief, these problems are not just the fault of immoral or irresponsible human behavior. Instead, they reflect a social system which associates success with accumulated wealth (e.g. money and material).
As you will later understand, Blockchain technology could play a significant role in constructing alternative-, democratic- and inclusive institutional structures. That allow workers and consumers to gain more economic control and thus challenge the inhumane values of our financial system.
Blockchain technology, just like any other technology, is a tool we could use to liberate ourselves from our indefinite demise. Still, it could also be used to limit us by allowing individuals to gain more corporate control.
If we want to use it to achieve the former, then:
“We need to think about a new blockchain narrative.”
What this entails is that we should focus on solving problems that affect us all instead of just business. We suggest that inequality is one such problem which could be tackled with the use of blockchain.
Inequality as part of the narrative
Inequality refers to the unequal distribution of wealth, income or opportunity among people within a neighborhood, community or society.
It is widely understood by economists and psychologists that inequality is detrimental to health, society and the natural environment. The more unequal a society is, the worse it scores on a range of health and social issues (see figure below).
As epidemiologists Richard Wilkinson and Kate Pickett explain in a review of over 300 research papers studying the relationship between inequality and health:
“The body of evidence strongly suggests that income inequality affects population health and well-being. The major causal criteria of temporality, biological plausibility, consistency and lack of alternative explanations are well supported.”
It is important to note that inequality does not affect all issues in the world. Instead, it influences problems that have social gradients (see figure below), — i.e. problems that become worse with each step down the socio-economic ladder — most of what we call health or social issues have social gradients.
Alarmingly, inequality is growing globally (see figure below), according to the world inequality lab:
“Since 1980, income inequality has increased rapidly in North America, China, India, and Russia. Inequality has grown moderately in Europe. From a broad historical perspective, this increase in inequality marks the end of a postwar egali-tarian regime which took different forms in these regions.”
The severity of the global inequality problem was recently brought to light by Oxfam, pointing out that 26 people own the same as 3.8 billion people in the world. Even the United Nations (UN) acknowledged the seriousness of this issue, placing its reduction among their 17 sustainable development goals to be achieved by 2030.
“But how does inequality lead to worse health and social issues?”
Inequality and the degradation of public health!
The growth in inequality leads to more status competition because of increased status differences (i.e. status matters more). Social status is an indication of your self-worth and reflects your capacity to gain access to human and material resources — which are essential for your long term survival.
We communicate social status to others through the Jobs we choose to work at, the things we buy, the clothes we wear, the neighbourhoods we chose to live in etc. All these things form an important part of not only who we think we are, but also how others perceive us.
More unequal societies have an increased number of people dealing with social stress. Social stress relates to status and is associated with how others judge your self-worth (i.e. stress related to social evaluative threats (SET).
Recent studies have demonstrated that SET’s are the most critical factors that induce cortisol stress responses in citizens of modern-day societies. These kinds of threats are usually experienced outside of the conscious mind leaving many people unaware of the phenomenon.
One of the many SET’s is called status anxiety, which refers to the constant fear of being seen as (materially) unsuccessful. Status anxiety is more common societies where status matters more i.e. unequal societies (see figure below).
Being regarded as unsuccessful induces a feelings of shame and contributes to you feeling socially rejected, the fear of being socially rejected induces feelings related to low self worth and damages our self-esteem — it goes together with thoughts of ‘im not good enough’, ‘im dumb’, ‘im not smart’, and so on.
It’s one of the reasons why so many of us choose to follow the predetermined path created for us by our society. And when we fail in acquiring achievement, we blame it on ourselves.
Social exclusion, status anxiety and low social status are all stressful conditions and long term exposure to stress leads to mental health issues and chronic disease (e.g. diabetes, heart-related diseases, cancer, etc.).
Inequality leads to the degradation of the social environment!
Contrary to damaging self-esteem, people respond to social evaluative threats by ‘bigging up’ themselves (self-enhancement bias). It’s a similar response to what some animals do when faced with a threat.
Self-enhancement bias is a false form of self-appraisal, it is an attempt to exaggerate once capabilities in the face of other peoples judgment.
This kind of response is tied to immense feelings of pride, self-importance, a willingness to take advantage of others, a lack of empathy, and so on. All of which are considered as narcissistic personality traits. Traits ever-present in (dominant) leadership roles of economic and governmental institutions.
Self-enhancement bias increases with inequality (see figure below). A rise in this psychological response not only validates the importance of social evaluative threats. But it also leads to narcissism becoming more common in more unequal societies.
Higher incidences of narcissistic personality traits (especially in leadership) positions generates an environment in which environmentally destructive and antisocial behavior (e.g. corruption and violence) are more likely to occur.
Consequently, community life degrades as people lose trust in each other and their institutions as a result of ensuing corruption and violence.
Furthermore, because of the fear people experience for (potential) negative judgement of others (social evaluative threats). They close themselves off and become less participatory in their communities, in a desperate attempt to avoid social stress.
Inequality leads to the degradation of the environment!
People cope with social stress (e.g. status anxiety, social evaluative threats and low social status ) through destructive consumerism.
We consume for comfort (e.g. salty and fatty foods, sugar, status goods, etc.) or hide our social insecurities by buying status goods. Recent research has uncovered how internet search for status goods tend to be more common in more unequal societies.
A rising inequality leads to more pressure to keep up with the rest because of our status anxieties. As a result, we work a lot, borrow even more and end up dying early for the sake of ‘keeping up with the Joneses’.
That debt increases with inequality were also demonstrated in a 2008 study looking at household debt and the growth of inequality in America (see figure below).
On another note, more unequal societies tend to have loose, or in some instances, a complete lack of environmental regulations or the enforcement thereof. Thus companies are more likely to pollute and be less involved in sustainable activities compared to more equal societies.
Curaçao’s social and environmental problems are related to inequality!
Many would blame the health and social problems on the island on the declining economic growth (in terms of GNI) — i.e. a decline national income per capita — the country has experienced in for almost two decades already.
We suggest that the health, social and environmental problems on Curaçao— which are all problems with social gradients — are the result of high Inequality on the island which — just like most Caribbean islands - stems from the island’s colonial history.
In fact, based on World Bank data and the most recent census data, Curaçaois ranked among the top 25 most unequal countries in the world (see figure below).
What is interesting to note is that the inequality on the island is following the rising global trend mentioned earlier, especially in the past three decades, and it is only going to increase.
Given that, according to the 2011 census, at that time 25% of the population lived under the poverty line. In that year the unemployment rate hovered at 10%, in contrast, 21% of the population is currently unemployed.
All these developments will contribute to rising inequality, which will lead to a rise in the competition for status and thus undermine the state of the public, social and environmental health even further.
A Different Narrative
Many prominent economists, sociologists and epidemiologists like Thomas Piketty, Richard Wilkinson, Kate Pickett, and Danny Dorling, to name a few. Stress the importance of implementing what they call economic democracy as a measure to combat inequality.
Economic democracy is a philosophical idea that suggests a shift from centralized decision making to decentralized decision making. Where the decision-making power rests in the hands of workers, customers, suppliers, neighbors and the broader public, instead of just executives, directors and shareholders.
However, before we can achieve economic democracy, it is important to introduce more radical forms of institutional and financial transparency. On top of that, it is essential to create avenues that can be utilized to influence decision making with more frequency and ease.
“Without real accounting and financial transparency and sharing of information, there can be no economic democracy. Conversely, without a real right to intervene in corporate decision-making (including seats for workers on the company’s board of directors), transparency is of little use — Thomas Piketty.”
What is the current situation?
According to Transparency International, information disclosure practices of the top 100 multinationals in emerging markets and of the top 124 global multinationals are weak overall, scoring on average 3.6 out of 10.
Information disclosure practices include corporate actions which involve the disclosure of information regarding organizational structure, anti-corruption policies (e.g. bribery and corruption) and financial information.
“It is disconcerting to observe that emerging market multinationals, with an average score of 48 per cent, had barely registered improvement in the disclosure of their anti-corruption programmes since 2013, when their average score was 46 per cent. Once again, they trail behind the top global publicly listed companies assessed in 2014 — Transparency International.”
Furthermore, concerning the contribution of cooperatives to the global economy. In 2014, cooperatives made up 17% of today’s global GDP. Currently, they globally employ approximately 10% of the world population (280 million) and generate a between 2–3 trillion USD yearly.
However, cooperatives usually operate on a local level which means that their reach limited compared to multinational companies.
How could economic democracy lead to more equality
“revealing income influences the sanctioning (punishment) behavior of individuals and leads to decreased inequality and increased social contributions”.
This is because, the disclosure of financial information (e.g. accounting data, corporate holdings and spending, individual income, etc.) are essential contributing factors to people’s perceptions on how financial resources should be used.
However, this example is only anecdotal, and thus, additional data analysis is required to establish whether there is a (causal) relationship between financial transparency and inequality.
The role of blockchain technology
We suggest that blockchain technology could play a significant role in reducing inequality. Since the tool could be used to introduce institutional transparency and democracy (e.g. economic democracy) on a structural level (by design).
Blockchain technology provides transparency by design because all transactions (e.g. all transactions that represent something of value) between agents are stored on a public, cryptographically secured ledger (database), that can be accessed by anyone.
Furthermore, so-called smart contracts allow for the creation of institutions on top of the blockchain equipped with their own systems of governance, which are represented by internal voting and reputation models.
Institutions like these could be powered by (social) currencies which can be utilized to create localized economic models for continued (self) funding, and that reward incorporate values decided on by the community.
“Basically, these new institutional forms can be seen as cooperatives on steroids.”
These institutions are known in the blockchain space as Decentralized Autonomous Organizations (DAOs) or Distributed Cooperatives (DisCo’s). Not only can they be fully transparent since they rest on the blockchain. But they are also unbound by fictitious borders, or physical meeting spaces, as a result of their distributed and decentralized nature.
We created a basic conceptual design for a DAO showing the most essential elements that such an organization is comprised of (see figure below).
The bottom layer represents the blockchain. Next, the middle layer refers to the different smart contracts (pieces of code) that enable the functionalities of the DAO. Finally, the top layer points to the features (e.g. escrows, reputation systems, voting, digital currencies, etc.) and agents.
Examples
There are a few blockchain examples already of these new forms institutions, what follows is just a brief explanation of some of the existing (pilot) projects which introduce new forms of economic democracy.
Liquid Democracy In Uruguay
One way that blockchain help reduce inequality is by introducing greater transparency and democracy to existing governmental and private institutions.
One example is the case of the Digital Party in Uruguay, who aims to bring greater political transparency and direct citizen participation in the democratic process.
They have recently announced that they will be applying blockchain technology to streamline the voting process. The application of this technology will not only allow people to vote more securely and anonymously. But they will also be able to observe and influence the voting behaviour of the members in parliament.
The Genesis Alpha
As one of the first DAOs, constructed with Alchemy, a fund management application created by DAOstack. In Genesis Alpha, members can propose ideas which can then be voted on, once the votes are passed, the funds are automatically released to the agents of the accepted proposals, who then get rewarded reputation upon completion of the project.
Reputation refers to a social crediting system that reflects your contribution or involvement in the organization. Your reputation increases as your contributions increase, the higher your reputation the more your vote counts.
Members can also hold each other accountable by creating proposals to slash reputation from other members and thus reduce their influence.
While still in the experimental phase, this DAO is an example of what governance could look like in democratic institutions of the future.
CuraDAO
As the Caribbean Blockchain Network, we were interested in experimenting with these alternative forms of organizing and (co) created the CuraDAO.
CuraDao does not drastically differ from the Genesis DAO in that it uses the same social crediting system. The only difference is that this organization focuses on sustainability, and thus members of the organization propose ideas in the context of sustainability. Anyone can become a member by creating a proposal requesting some reputation for voting.
Closing thoughts
Its is obvious enough that to potentially increase wider adoption of blockchain technology we should focus more on problems that affect all of us and that all of us can relate to. Inequality is a problem with far-reaching consequences to health, society and the environment in general, it affects all of us.
Blockchain technology could be applied in current or new institutions to facilitate transparency and the collective ownership and governance of the commons (economic democracy).
If applied wisely, it could be used as a tool to transcend old economic thinking (based on scarcity, competition and individual ownership) and introduce new economic values of abundance, cooperation and sharing, collectively constructed and adopted through direct community participation.
This tool could help us usher in a new era of (border-less) democratic institutions, able to scale up just like traditional centralized institutions and more cost-efficient in maintaining the high levels of productivity common to conventional cooperatives.
But first and more importantly, if applied wisely, this tool can help us to achieve a level of freedom and equality, only witnessed in the times of our early “hunter-gatherer” ancestors.
Let’s build the future together, join the Caribbean Blockchain Network.
Join us at www.caribbeanblokchain.net/node/
