Blockchain and cryptocurrencies emerged as a libertarian dream, as users wanted money that was not controlled by banks and the government. Nine years after the appearance of Bitcoin, Satoshi Nakamoto's values are starting to look more and more like a fairy tale. Every year, state regulators are tightening the chokehold on crypto instruments, traders, and organizers of ICOs.
The most experienced users, however, are not frightened by this. On the contrary, they are afraid that the authorities can use blockchain to take total control over the population. We are talking about the so-called central bank digital currencies (CBDC) issued by central banks.
Advantages of CBDC
On the one hand, cryptocurrencies from a central bank have many advantages over conventional money. To begin with, they would allow full automation of taxation, as all fees could be withheld upon receipt or spending of money.
The profession of a tax inspector and an accountant will disappear, since there simply will not be any need for them. As a result, governments and taxpayers will save a huge amount of money. For example, the American economy loses about $233 billion precisely because of the complex and long process of tax calculations.
The introduction of a CBDC into the state budget will significantly increase the credibility of politicians because any pre-election promise can be prescribed in smart contracts. The expenses of any agency will become transparent. This will completely eradicate corruption and increase the effectiveness of public administration.
That is why the officials of many countries often speak in support of the CBDC. For example, the U.S. authorities are considering the possibility of creating a hypothetical cryptocurrency, the FedCoin, issued by the Federal Reserve System (FED).
Not so Simple
Nevertheless, such a coin has a downside, as it gives the state too much power. Network paranoiacs are sure that sooner or later, governments will find a way to take full advantage of digital money without losing control over them.
Everything will begin with the creation of a national cryptocurrency emitted by the central bank. At the same time, a backdoor code will be left in the code of the blockchain, as a software loophole allowing access to users' resources. This will allow the state to seize and freeze funds without waiting for a court order or bank decision. In parallel with this, complete destruction of independent cryptocurrencies like Bitcoin, Ether, and other altcoins will take place. Cash will also be removed from circulation, as it too is difficult to monitor and control.
Despite the fact that the above sounds like a script for a dystopian novel, the gloomy future is closer than it seems. For example, China has long been developing a system of "social rankings.” Residents will be awarded points from 350 to 950. The number of points determines the value of a person as a citizen. Each violation of the law will reduce the rating, and at the same time block access to various material goods, services, education, and so on. "Low ranking" citizens will not be able to travel by train and fly on airplanes, send children to good schools, or take loans from the bank. It is noteworthy that the points are deducted not only for offenses but also for friendship with people who have a low rating, as well as for "wrong" purchases.
To implement such a large-scale surveillance system of the population, the Chinese government has installed a vast number of cameras and introduced a system of face recognition capable of "seeing" an individual even in a crowd of thousands. A few days ago, there were eerie reports about drones disguised as birds that circled above cities and watched citizens. At the moment, the Chinese are testing a system of total surveillance in two cities. For example, facial recognition has been used in schools for tracking inattentive or cheating pupils.
It is assumed that the social rating system will start working in 2020. The Chinese authorities are lacking only one element for its full implementation, and that is a controlled monetary system. Alas, that hindrance will be overcome soon enough, as the digital currency laboratory at the People's Bank of China is actively developing its own cryptocurrency which will one day replace fiat money. This week, the agency filed more than 40 patent applications for technology which will form the basis of the future coin. It remains to be seen how soon the experience of the Chinese will be appreciated by the governments of other states.
Blockchain technology can give mankind an independent financial system that is not controlled by any government. Unfortunately, Satoshi Nakamoto's dream is very easily perverted, and governments are already molding digital money into an instrument of surveillance and dictatorship.
Blockchain can be compared with nuclear energy, which can power our cities, or turn them to dust in no time. Obviously, the widespread introduction of cryptocurrencies is inevitable, but only we can decide how to use them.