#2. Hijacking the Blockchain

Whilst Blockchain technology was created to free people from Government overreach, the Governments aren't ready to yield their control.

Blockchain is perhaps most famous as the ‘buzzword’ behind Bitcoin [BTC] & cryptocurrencies and therefore associated with a highly speculative, volatile and largely unknown industry. But what is blockchain and how will it affect our future?

Blockchain Defined

Blockchain is a distributed digital ledger that uses cryptography to record transactions across a network of computers. It allows for a decentralised system in which multiple parties can add new transactions to the ledger without the need for a central authority or intermediary. The decentralised nature allows users of the network to transact and operate within a permissionless system. This provides much needed sanctuary for vulnerable people such as political dissidents, the unbanked and those in areas of hyperinflation.

The Original Blockchain Wars

The Blockchain Wars occurred during a period of increasing competition to the original blockchain protocol, Bitcoin. Bitcoin, launched in 2009, enjoyed a relative period of dominance as the sole blockchain in the space until the likes of Litecoin [LTC] and Ripple [XRP] entered the space. Soon after, it’s main competitor, Ethereum [ETH] would launch in 2013 with a different use case that would shake up the industry. All of a sudden, the cryptocurrency industry had a variety of blockchains competing with each other for marketcap.

Bitcoin ultimately won the battle, until now.

The Real Blockchain Wars

In recent years, blockchain technology has been the subject of a "blockchain war" between Bitcoin and fiat. Bitcoin is a form of alternative currency and its value is determined by market forces. The issuance and transaction of the Bitcoin gives users of the network control of their money. It removes the need of a Central Bank from making monetary policy decisions resulting in period of high / low inflation and economic boom and busts.

Fiat currencies, on the other hand, are issued by central banks and governments and are backed by the full faith and credit of the issuing authority. These currencies have been used for generations and are accepted by the populace as the main medium of exchange.

However, with the advent of blockchain technology, governments and central banks have begun to explore the use of digital currencies that operate on blockchain networks, known as central bank digital currencies (CBDCs). These digital currencies would be issued and controlled by central banks and governments, and would be used in the same way as traditional fiat currencies.

This development has led to concerns that blockchain technology, which was created as a decentralised and open system, may be hijacked by governments and central banks to restrict financial freedom.

For instance, governments could use CBDCs to track and monitor citizens' financial transactions, creating a surveillance state. With digital currencies, governments would be able to see how people spend their money, where they spend it, and their balances across multiple accounts.

It’s important to distinguish that presently, the government has no right to know how much money you have, how you spend it and where you spend it. They are only able to access this information through law enforcement by way of obtaining a warrant under the reasonable belief that a citizen is involved in criminal activity.

The government having unfettered access to the populace’s financial accounts creates immeasurable concerns.

The Dangers of Losing the War

In 2021 Rishi Sunak, now Prime Minister of the UK, kicked off a taskforce to research the implementation of CBDC which would also include the ability to be “programmable”. This part of the equation is the piece of technology that is capable of tipping digital, decentralised currencies into a highly restrictive Orwellian nightmare.

A programmable CBDC could enable governments to impose caps and limits directly on citizens' money, potentially limiting their ability to purchase certain goods or services, or even limiting their ability to move money out of the country. Think how this affects citizens of authoritarian regimes such as China, Russia, North Korea, Belarus, etc.

Additionally, governments could use CBDCs to create a "cashless society" in which physical cash is phased out, making it more difficult for citizens to keep their money and transactions private. The government also has power to freeze the transactions and access citizen's data if they suspect any illegal activities.

Another problem with CBDCs is that governments could use them to implement negative interest rates, which is a monetary policy tool used to stimulate economic growth by encouraging borrowing and spending. But negative interest rate can be a burden for individual savings and businesses, it can be detrimental for their cash flow, leading to default and bankruptcy. You would effectively be charged by the bank to keep money in your wallet. In a cashless, restrictive world, where are you meant to put your money to avoid this?

The use of CBDCs could also lead to a concentration of power in the hands of a few large banks and financial institutions, which would be responsible for maintaining the network and verifying transactions. This could create a centralized system that undermines the decentralization and security of blockchain technology.

Furthermore, the use of CBDCs could create a new form of financial repression, where governments would be able to control the money supply and interest rates, potentially leading to inflation and economic instability.

Another concern is the idea that during times of economic distress, the government may require citizens to either spend or risk forfeiting portions of their savings if they are not spent in a certain timeframe. A trial run already occurred in Malta during the Covid pandemic using Government issued vouchers.

So we know that CBDCs provide the Government with total control of the storage, visibility and utilisation of your money. But what else can be done using the blockchain?

The Everything App

WeChat has become synonymous with Chinese society. You cannot leave the house with having a phone since you need WeChat for practically everything. For those who are up to date with Chinese society, the people of China are graded on their societal behavior, think Black Mirror. A bad rating excludes a person from parts of society. This could be restricted from making taking loans or a mortgage, purchasing plane tickets, renting a car etc… This is happening in China today.

So what does this mean for us?

Well blockchain or Digital Ledger Technology [DLT] are not just for currency transactions. Information, Intellectual Property, Contracts, and a myriad of other data can be transacted within a block. Your own personal wallet could contain your personal identification [KYC / AML requirements], your medical history, your financial statements, your passports [vaccine too], your contact list, your family tree. Think of anything and it can be applied to your wallet. So every detail whether past, present or even future can be attached to your wallet and available to the Government. Your wallet is the Everything App and the government owns it.

CBDCs are the Trojan Horse to ultimate State control. Imagine a scenario where all citizens have a carbon tracker attached to their wallet. The carbon tracker records the emissions of your purchases and movements. If you drive your car, the emissions for that journey are calculated and added to your usage. Go on a vacation, emissions added. Buy meat, emissions added. You will have a limit set by the government. As you approach your limit you will be lucky to have one of two options; 1) Purchase extra allowance from either an open market or from the government directly [this semi happens in London with congestion charge] or 2) your wallet will not authorise or worse, cancel any pending purchases for items deemed as high emission purchases.

This is simply one scenario of the CBDC control. There are in fact a myriad. Imagine protesting and having your wallet disabled for a week as punishment. Canada famously leaned that way in the beginning of 2022 with the “Truckers Protest”. Imagine criticizing the government or looking into their shady activities and having your mortgage cancelled and being evicted. We may see these as far fetched, but they have already happened in some form already. CBDCs just make it easier.

And if you’re thinking that your government won’t do this, simply ask yourself, why would they want a programmable currency that CAN be used for nefarious reasons?

You already know the answer.

The Blockchain is Hijacked

In conclusion, although blockchain technology has the potential to revolutionise the way we think about money and transactions, the emergence of CBDCs has raised concerns about the potential for governments to use this technology to restrict financial freedom and impose caps and limits directly on citizens' money.

In the coming years, we will hear more about CBDCs and blockchain wallets being issued by governments. At first it will be an option, an alternative to the existing payment methods. This will be a slow process of migrating users from traditional payment methods to the CBDC. Soon after you will have to use your wallet to sign into Government services, pay taxes, book appointments etc. The shift from a monetary gateway to an Everything App is where ultimately the majority will trade their sovereignty for convenience.

And that’s Blockchain. A revolutionary technology that had the potential to free the people from the shackles of financial slavery has been hijacked to do the exact opposite.