We may look back a few hundred years from now and see this current industrial revolution as a result of the Internet, just as the first industrial revolution was a result of the Columbian Exchange. It is at its heart a computer revolution, after all, where the payoff is going to scientific knowledge and forms of technical knowledge. Blockchain technology does not theoretically need the Internet to function, but certainly exists because of the Internet and in practical use the Internet or at least a closed internet is required. The necessities and practical foundation of blockchain technology are significant because they remind us how civilization is meant to build on its prior successes to outdo their predecessors. As weaker technologies and practices become outdated, new more powerful ones take their place to perform tasks with greater efficiency and effectiveness. In regard to the Internet, blockchain technology may be the more efficient enhancement the world needs.
Efficiency, profits, and trust are what’s at stake. The world is undoubtedly becoming more globalized where the predominant overlying economic system is predicated on capitalism. Capitalism demands increasingly faster returns on the investment and a shorter distance between the investor and the investment. Blockchain technology can deliver the ends of capitalism with a faster and more efficient push toward a completely globalized world wherein the maximum number of people have access to information, commerce, and trust.
The importance to trust
The first and perhaps most important component that’s at stake in regard to globalization is trust. Fukuyama describes trust as social capital when used in an economic sense. His comparisons of societies with high social capital, such as the USA and Japan, and societies with low social capital such as China and France become somewhat obsolete if we factor in blockchain technology as the element of trust between parties. Via smart contracts and immutable records on the blocks, permission-less blockchains remove many of the hurdles companies within and between societies encounter when trying to make deals with each other.
The record printed on the blocks cannot be altered by one or even many computers. This all but eliminates the likelihood of moral hazards and reduces asymmetrical information since data is completely transparent. Asymmetry of information and moral hazards are major deterrents to companies trying to tap into unexplored markets or deal with low-credit economies that were before unavailable but are now available due to globalization. A company’s cost of capital is significantly increased when there is greater asymmetry of information among traders of a stock. The same principal can be applied to trading cryptocurrencies. Although it is common for traders to share information, insider trading in the financial industry is strictly prohibited by the SEC, but not in crypto trading. Insider trading is a noted hazard in trading cryptos “when it comes to the listing of new coins and speculators receiving the earnings. Coins can be purchased using cryptocurrencies and even though [some] transactions are anonymous, regulators have methods to discover the identity of bad actors.”
Smart contracts remove social capital from the discussion altogether when used the same way a typical business contract would be used. When two companies write and execute a smart contract, they don’t need to worry whether the other party performed a duty or provided a good because the entire process is automatically supervised by elements of the blockchain. “The check’s in the mail” is no longer a trope that can be cited to delay a penalty or otherwise deceive the other party because one can gain access to the data stored on the blockchain that pertains to their smart contract. The smart contract governing the deal at hand monitors the progress of the other party’s completion of their obligations.
To be continued as part of a series. Yujia Liu, et al. The Payoff to Skill in the Third Industrial Revolution. American Journal of Sociology, vol. 118, no. 5, (2013) pp. 1331.  M. Kearney, The Local and the Global: The Anthropology of globalization and transnationalism. Annual Review of Anthropology, Vol. 24, (1995), pp. 550.  Francis Fukuyama, Social Capital and the Global Economy. Foreign Affairs, Vol. 74, (1995). pp. 89-92.  James Choi and Hongjun Yan. Information asymmetry raised the cost of capital for corporations. (voxeu.org, 01/25/2013).  Bitcoin Exchange Guide News Team. SEC Insider Trading Lawsuit Settles as Cryptocurrency Crackdown Continues. (bitcoinexchangeguide.com, 08/11/2018)