Like many new technologies, the blockchain represents both an opportunity and a risk for governments.

“Blockchain technology can be utilized by governments in myriad ways. As it allows for encrypted, hack-safe data transfers, Blockchain can be used to revolutionize interactions between citizens and government. Some countries have readily embraced Blockchain, while others remain curious but more cautious.”

The Governance Post

Estonia, India, Singapore and the USA are all either heavily funding or actively piloting government schemes utilizing the blockchain protocol. Any process that is at risk for fraud or that requires the transfer of sensitive data could potentially benefit from blockchain. Think medical records, filing taxes, land registry and cybersecurity. That’s not to mention the obvious, bank transfers and stock market transactions.

Companies and governments alike are racing to figure out how to apply blockchain technology to the many administrative, legal and bureaucratic problems facing the global financial system. The Panama and Paradise Papers have shown the public just how vast tax avoidance is, on a global scale, encompassing the largest corporations on earth, public figures, celebrities and many others.

This is where the risk of the blockchain revolution for government becomes clear.

For the generation of voters who came of age in the Financial Crisis, distrust and outright hostility to elites has become widespread. This generation is over-educated and under-employed and seem to receive constant criticism. They are, to put it mildly, very unhappy with the status quo. As a result, well-established candidates and political parties are finding it harder to win elections. Outsider candidates — even incredibly unsuitable outsiders — are popping up all over the world.

Figuring out how to bring trust back to the institutions that manage finance and governance is one of the most pressing challenges facing democracies. Otherwise we can expect to see more destabilizing elections and more unsuitable candidates.

The blockchain might be a technical solution to that challenge. Or it might be the technology that replaces the entire system.

A growing clamour for direct democracy

The prevailing system of democracies for the past century has been representative: voters elect individuals to represent their views. Representative democracy has had a very strong run. It is easily the most successful form of democracy in terms of widespread adoption. It has also outlasted, for the most part, competing forms of government such as authoritarianism, various varieties of communism and colonial rule.

(If you want to read more about the processes behind the development of flexible democratic governance that outlasts its rival systems, check out the fantastic Why Nations Fail.)

Despite this record, there are increasing calls for representative democracy to be replaced by direct democracy: democracies in which individuals vote on policies themselves, rather than letting representatives do it for them.

When people lose trust in go-betweens like politicians and political parties, the base support for representative democracy disappears. Why can’t we just do it ourselves? As the Y Combinator backed Democracy Earth Foundation put it:

“With the rise of open-source software and peer-to-peer networks, political intermediation is no longer necessary. We are building a protocol with smart contracts that allows decentralized governance for any kind of organization.”

In this episode of Connected & Disaffected, financial writer and Bitcoin enthusiast Dominic Frisby talks about the potential importance of blockchain for online identification and voter registration. His point is broadly anti-government: people can do more without the intervention of governmental bureaucracies as long as we have technologies to verify who we are and what we decide.

And he isn’t alone.

A much shared article in Quartz this year argues that direct democracy is the only ‘true democracy’ because it is the only system that allows full participation in governance. A new Australian party dedicated to blockchain backed direct democracy — Flux - also base their platform on the corrupt, out of touch nature of representative democracy:

“Our politicians say one thing to get elected and then do another. Horse trading and back room deals have become more important than good policy, and the will of the people. Powerful lobby groups, and international corporations wield enormous political power, while ordinary Australians have little meaningful say in their country.”

Blockchain alone won’t be enough

The possibilities of blockchain technology to remake the world of politics are certainly there. But I want to add a note of caution for anybody getting swept away by tech utopianists preaching for a world without government.

The central problem of direct democracy is not technological. It is whether or not people would take up the extra effort and responsibility required to make it work.

Regardless of what neoliberal true-believers say, governance is an extremely complicated and time-consuming task. Policies are developed, proposed, tested and (ideally) re-jigged in the face of the evidence gathered. This entire process is scrutinized by citizens, the media, opposition politicians and special interest groups. It isn’t a side-project! Very few people grow and process their own food from scratch because it would take basically all of their time and attention. The same is true of governance.

Voters can be manipulated, as we have seen with targeted advertising and botnets during Brexit and the 2016 US Presidential Campaign, or end up using their votes to simply vent their frustration rather than address the issue in question. Even simplified first past the post Presidential elections are contested and confusing. Asking people to vote on obscure or technical issues is unlikely to lead to clear outcomes.

In fact, plebiscites do not have a great record. Majorities often vote on the basis of exclusionary ideas that punish minorities. Many of the great human rights victories of the last 200 years — abolishing slavery, ending the death penalty, expanding rights to women and minorities — would certainly not have happened as early as they did if the majority had voted on it. In Switzerland, where plebiscites are very common, there are small turnouts on most issues. That means fringe groups of highly motivated campaigners dominate — hardly a vision of full participation.

The problems of direct democracy aren’t solved by a technology that allows people to vote without the risk of voter fraud.

In fact, by opening up a route to direct democracy, blockchain unearths many problems that have already been addressed by representative democracy. And that means applying the blockchain to governance is an opportunity and risk for all of us, not just the elites we’re so unhappy with.

You know the drill:

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