Blockchain: Blueprint for a New Economy

overseers (in the form of a human-

subjects research Institutional Review

Board). 190 Other self-regulating

industries include movies, video games,

and comic books.

There is the possibility that the entire

blockchain industry could just collapse

(either due to already prognosticated

problems or some other factor as yet

unforeseen). There is nothing to indicate

that a collapse would be impossible.

The blockchain economy does have a

strong presence, as measured by diverse

metrics such as coin market

capitalizations, investment in the sector,

number of startups and people working

in the sector, lines of GitHub code

committed, and the amount of

“newspaper ink” devoted to the sector.

Already the blockchain industry is

bigger and better established than the

previous run at digital currencies

(virtual-world currencies like the

Second Life Linden dollar). However,

despite the progress to date and lofty

ideals of Bitcoin, maybe it is still too

early for digital currency; maybe all of

the right safeguards and structures are

not yet in place for digital currencies to

go fully mainstream (although Apple

Pay, more than any other factor, may

pave the way to full mainstream

acceptance of digital currencies). Apple

Pay could quite possibly be enough for

the short term. It will be a long time

before Bitcoin has the same user-

friendly attributes of Apple Pay, such as

latency of confirmation time.

Government Regulation

How government regulation unfolds

could be one of the most significant

factors and risks in whether the

blockchain industry will flourish into a

mature financial services industry. In the

United States, there could be federal-

and state-level legislation; deliberations

continue into a second comment period

regarding a much-discussed New York

Bitlicense. 191 The New York Bitlicense

could set the tone for worldwide

regulation. On one hand, the Bitcoin

industry is concerned about the

extremely broad, wide-reaching, and

extraterritorial language of the license as

currently proposed. The license would

encompass anyone doing anything with

anyone else’s Bitcoins, including basic

wallet software (like the QT wallet). 192

However, on the other hand, regulated

consumer protections for Bitcoin

industry participants, like KYC (know

your customer) requirements for money

service businesses (MSBs), could hasten

the mainstream development of the

industry and eradicate consumer worry

of the hacking raids that seem to plague

the industry.

The deliberations and early rulings of

worldwide governments on Bitcoin raise

some interesting questions. One issue is

the potential practical impossibility of

carrying out taxation with current

methods. A decentralized peer-to-peer

sharing economy of Airbnb 2.0 and Uber

2.0 run on local implementations of

OpenBazaar with individuals paying

with cryptocurrencies renders traditional

taxation structures impossible. The usual

tracking and chokehold points to trace

the consumption of goods and services

might be gone. This has implications

both for taxation and for the overall

measurement of economic performance

such as GDP calculations, which could

have the beneficial impact of drawing

populaces away from being overly and

possibly incorrectly focused on

consumption as a wellness metric.

Instead, there could be an overhaul of

the taxation system to a consumption-

based tax on large-ticket visible items

such as hard assets (cars, houses).

Chokehold points would need to be

easily visible for taxation, a “tax on

sight” concept. A potential shift from an

income tax–based system to a

consumption tax–based system could be

a significant change for societies.

A second issue that blockchain

technology raises with regard to

government regulation is the value

proposition offered by governments and

their business model. Some argue that in

the modern era of big data, governments

are increasingly unable to keep up with

their record-keeping duties of recording

and archiving information and making

data easily accessible. On this view,

governments could become obsolete

because they cannot fund themselves the

traditional way—by raising taxes.

Blockchain technology could potentially

help solve both of these challenges, and

could at minimum supplement and help

governments do their own jobs better,

eventually making classes of

government-provided services

redundant. Recording all of a society’s

records on the blockchain could obviate

the need for entire classes of public

service. This view starkly paints

governments as becoming redundant

with the democratization of government

features of the blockchain.

However, just as there might be both

centralized and decentralized models to

coordinate our activities in the world,

there could likely be roles for both

traditional government and new forms of

blockchain-based government. There

might still be a role for traditional

centralized governments, but they will

need to become economically

rationalized, with real value

propositions that resonate with

constituencies, shrink costs, and

demonstrate effectiveness. There could

be hybrid governments in the future, like

other industries, where automation is the