Blockchain — Careful What You Wish For
By Chul Kim on The Capital
There’s no doubt that the blockchain will change our world. It’s not even a matter of question, but only a matter of when. The better question to focus on is its impact on our society because, among many of its wonders, there lies a danger of amplifying the existing problem, which can be disastrous for all of us.
Before I get into why, here are the ways I believe that blockchain technology will transform our lives at the most fundamental level.
You may have heard of similar illustrations before, but please bear with me as it is crucial to my reasonings later.
Blockchain will change the world in two fundamental ways:
1.Structural change in Labour
At the heart of blockchain technology, there lies a concept of the ‘smart contract.’ In a nutshell, ‘smart contract’ enables transparency on the outcome/rewards when predefined conditions/requirements are met.
Once the conditions/requirements and its outcome/rewards are established through blockchain, it becomes tamper-proof. Furthermore, as long as the requirements can be fulfilled, anyone can claim its rewards.
As the concept of ‘smart contract’ becomes prolific along with the expansion of blockchain technology, there will be fundamentally changing in labour contract between employers and employees.
For instance, let’s imagine that ‘company A’ wants to create a new website within a total budget of $5000. It defines all the requirements for the website as well as the reward of $5000, using ‘smart contract’ on a blockchain network. Once it has established, anyone who can fulfil the requirements for the website can claim the reward of $5000. While this is a rather simplistic scenario, but applying the same concept to much more complex labour tasks will not be challenging given the current rate of technological growth.
Essentially, the smart contract will eliminate the issue of trust between employers and employees — for employees, there’s no risk of not getting paid for his/her work, and for employers, there’s no issue of paying for the service that doesn’t meet their requirement.
Through smart contracts, the costly process of interviewing/hiring disappears along with the need for signing a lengthy labour contract. The labour providers(employee) no longer limited to a single employer and can work for multiple employers simultaneously.
Eventually, the price of Labour (salary) will be determined not by the number of hours worked but purely by the results/outcome delivered. Therefore, the supply of Labour will no longer bound by physical office space or time zone.
As the structure of Labour will transcend national boundaries, we will witness a tremendous leap of overall labour efficiency on a worldwide scale. I’d even go further to argue that this is the second stage of the industrial revolution.
2.Distribution of Capital
Firstly, there will be a dramatic increase in capital flow efficiency. The neutrality of blockchain technology, combined with its tamper-proof nature, will enable the seamless transaction between individuals/platforms without the aforementioned issue of trust.
We will be able to transfer our money between different countries much cheaper and faster via crypto assets. It will lead to a fundamental change in capital structure and its distribution channels.
Secondly, the way we own assets will change. There will be tokenisation of assets in all forms (buildings, classic cars, paintings by the master artist to name a few) through blockchain. Imagine a world where you can own a small piece of Van Gough’s Starry Night and see its value go up as the total value of painting increases over time.
The wide range of asset diversification will protect those with capital and increase their returns through alternative investments. In other words, for those with enough money for investment, the full potential of their capital will be realised.
3. It won’t be all singing and dancing
Isn’t it all a good thing? Isn’t increased in the capital and labour efficiency the ultimate fantasy for every economist (dead or alive)?
The answer will be a ‘yes’ if we are living in an ideal world. But we are living in the real world. Given the current state of the global wealth distribution, it’s highly unlikely that there will be a paradise for us all.
We are living in a world where the wealthiest 1% owns 44% of this planet’s total wealth. According to the World Economic Forum, the world’s 22 richest men own more money than all the women in Africa combined. And Africa is freaking huge.
It has happened over a few decades, in a world with far less than perfect capital flow. I can’t even begin to comprehend what the above-mentioned capital efficiency increase brought by blockchain will do to the inequality gap between those with money and those without, which is already on its tipping point.
Sure, some benefits of increased efficiency will trickle down from the wealthy to the bottom of society. It may create more jobs and opportunities in the economy, and the overall economic pie may grow as a result.
However, at the same time, we are heading towards the era of Artificial Intelligence, Machine Learning, and Automation. Robots and algorithms will replace a vast amount of human labour jobs. And that’s a hard fact, no matter of opinion.
And it’s already happening. For an example, look no further than your local supermarket. The self-checkout in supermarkets replaced the need for many human cashiers while automatic voice program has replaced phone operators, robot cleaning machines are replacing traditional cleaners, so on and on, the current examples are endless. And it will only accelerate further.
It is particularly a problem for low skilled population, or worse, those who never had the right opportunities for a good education. The aforementioned structural change in Labour will put added pressure, especially on low-skilled labours in developed countries who will face increased competition with those from developing countries. Furthermore, eventually, all labour providers will have to compete against super-intelligent machines that can teach themselves.
We might end up in a world where there are only a few rich people and their machines. And without a doubt, blockchain technology will fasten this process.
The extreme level of inequality threatens the very existence of capitalism itself. According to Karl Marx, capitalism and socialism are not mutually exclusive. In fact, he saw the former as a necessary step towards the ultimate goal, the socialistic society. He believed that the heightened inequality driven by capitalism would lead to violent class conflict, which will spark a revolution from the bottom that will eventually bring socialism.
On a personal note, I don’t believe in socialism because it’s prone to the oppression of individual freedoms and basic human instincts. I’ve witnessed what this un-realistic textbook fantasy can do to a nation, its people, and their freedom.
Capitalism is not a perfect system, but it’s the best we’ve got so far. I’d support it as long as it sustains coexistence for all those within the system while guarantees basic freedoms, rights, and equality in opportunities.
The extreme inequality fueled by Blockchain technology can threaten the very existence of capitalism.
4. It’s not all doom and gloom — a way forward
We cannot stop the emergence of blockchain, nor we should. Technology itself is neutral — there’s no such thing as inherently good or bad technology because it’s only a tool. How we wield it will determine our fate.
There has been increasing awareness on inequality in recent days, through arts, media (such as the recent film like Parasite which addresses this very issue of coexistence: see my recent review of the film here — https://medium.com/eyagi/parasite-what-it-all-means-431922322b16 ) and academic studies. But we need more. Much more.
On the other hand, there has to be a more open conversation about this transformative technology and its impacts, without getting distracted by swinging Bitcoin price or getting turned off by its complicated concepts.
There has to be more investment in education for those at the bottom of society, and structural training has to be provided for those with limited skill sets. The current education system needs a serious revamp- it is too outdated to be relevant to the ever-changing world of today. It needs some serious reforms from left and right, top and bottom.
There has to be more research on tax system reforms, economic policy reforms that will be relevant to the world driven by de-centralisation. It requires a deep foresight from those in politics, academia and power.
And all these initiatives have to be driven on a national level by the governments because their very existence depends on it.
5. Conclusion
Capitalism is a social construct as much as it’s an economic one. We shape capitalism as much as it shapes us. Blockchain will enable us greater control over many aspects of our life without the need for a centralised system. Put it simply, it will give individuals more power. And, it’s our responsibility to address the issue of inequality before the arrival of Blockchain.
As Peter Parker once said, ‘with great power comes great responsibility.’
