[Paper Review] A trustless society? A political look at the blockchain vision

Rainer Rehak|arXiv (Cornell University)|May 9, 2024

FinTech, Crowdfunding, Digital FinanceBusiness, Management and Accounting3 citations

TL;DR

This paper critically examines the political and societal implications of blockchain technology, arguing that despite its promise of enabling a 'trustless' society by eliminating intermediaries like banks and notaries, it instead shifts power to new, unaccountable centers. The author contends that blockchain does not solve real-world problems effectively and should not replace democratic governance, urging a halt to further research in this domain.

ABSTRACT

A lot of business and research effort currently deals with the so called decentralised ledger technology blockchain. Putting it to use carries the tempting promise to make the intermediaries of social interactions superfluous and furthermore keep secure track of all interactions. Currently intermediaries such as banks and notaries are necessary and must be trusted, which creates great dependencies, as the financial crisis of 2008 painfully demonstrated. Especially banks and notaries are said to become dispensable as a result of using the blockchain. But in real-world applications of the blockchain, the power of central actors does not dissolve, it only shifts to new, democratically illegitimate, uncontrolled or even uncontrollable power centers. As interesting as the blockchain technically is, it doesn't efficiently solve any real-world problem and is no substitute for traditional political processes or democratic regulation of power. Research efforts investigating the blockchain should be halted.

Motivation & Objective

• To examine the political and societal assumptions underlying the blockchain vision of a trustless society.
• To investigate how blockchain technology redistributes power rather than eliminating it.
• To challenge the notion that blockchain can replace traditional democratic institutions and regulatory processes.
• To argue against continued research and development in blockchain technology on the grounds of its inefficacy and potential for creating new forms of unaccountable power.

Proposed method

• The paper employs a critical political theory approach to analyze the ideological foundations of blockchain technology.
• It draws on historical examples, such as the 2008 financial crisis, to illustrate the limitations of trusting centralized institutions.
• The author evaluates real-world blockchain applications to demonstrate the persistence of centralized control mechanisms.
• It contrasts the theoretical promise of decentralization with empirical evidence of power concentration in new, non-democratic structures.
• The analysis incorporates insights from sociology, political science, and technology studies to assess blockchain’s societal impact.
• The paper concludes with a normative argument against further research, grounded in democratic accountability and systemic reform.

Experimental results

Research questions

• RQ1 How does the blockchain vision of a trustless society reflect broader political ideologies about decentralization and autonomy?
• RQ2 To what extent do real-world blockchain applications actually eliminate intermediaries or merely replace them with new forms of control?
• RQ3 Why does blockchain fail to resolve systemic issues in financial and legal systems despite its technical promise?
• RQ4 What are the democratic implications of shifting power to unregulated, technologically mediated institutions?
• RQ5 Should research and development in blockchain technology be discontinued given its inability to deliver on its core promises?

Key findings

• Blockchain technology does not eliminate intermediaries but instead relocates power to new, often unaccountable, centralized entities.
• The 2008 financial crisis demonstrated the dangers of trusting centralized institutions, yet blockchain fails to address this by creating new, similarly unregulated power centers.
• Real-world blockchain applications show persistent reliance on central actors, undermining the claim of decentralization.
• The technology does not efficiently solve real-world problems and lacks the necessary political and institutional frameworks for meaningful societal impact.
• Research efforts in blockchain should be halted because they do not contribute to democratic governance or systemic reform.
• The vision of a 'trustless society' is politically misleading and potentially harmful, as it distracts from the need for democratic regulation and accountability.