In recent news, China ordered all Bitcoin exchanges to stop trading as cryptocurrencies exchange are banned in the country under the government’s orders. This regulation reflects the traditional institution’s nervousness about distributed trust technologies. The popularity of blockchain is increasingly apparent as cryptocurrencies are actively traded globally. Blockchain serves as a key technology which reduces the need for central third-party institutions such as banks, governments or large institutions to regulate the flow of money.
The concept of distributed trust enables an organization to exist without having a central authority figure. This is a huge step ahead from current financial institutions which are heavily regulated by a central figure, such as a bank or a government. Using the blockchain, power is given to the party which traditionally has less power.
There is an ongoing debate on how governments around the world should regulate distributed trust technologies. Many people believe that the development of distributed trust technology is an eminent threat towards the national currency. The popularity of cryptocurrencies focuses on the main cryptographic currency, Bitcoin.
Decentralisation of Bitcoin
Many regulators today are struggling to find their way around this fundamental shift in market structure. National central banks around the world are searching for the best strategy to regulate the distributed trust technologies which can severely disrupt the current financial system. One of the countries that have taken steps towards regulating cryptocurrencies is China. They have effectively banned different types of distributed trust technologies and is launching its own non-distributed, centralized digital currency.
Meanwhile, in Japan, the government is making Bitcoin a legal payment method. Major Japanese banks are also following suit with the Chinese government’s step by creating their own digital currency called the J-Coin. This digital currency is pegged to the Yen which can be built on the blockchain technology.
Initially, Russia treated the digital currency as an illegal trade, but they are now considering to regulate cryptocurrencies instead of completely banning them. Besides these countries, powerful organizations around the world, such as governments and technology powerhouses are spending billions to figure out how to effectively utilize and control distributed trust technologies.
To explain the transition towards a decentralized financial institution, the concept of the organizational theory is used. Distributed trust technologies are organized in what can be termed as a community form (C-Form) organization. C-form organizations are not new. This type of organization been around since the early 1800s when the Oxford English dictionary was created by a distributed community of volunteers.
The rapid growth of the C-forms is accelerated through technology development. This encourages inexpensive peer-to-peer communication. In the global shift towards more distributed information creation platforms, the C-form organization has come into focus.
Linux is an example of a computer operating system, which is an open source software. The difference between Linux and Microsoft Windows is Linux utilizes the sharing of information between individuals in a C-form organization. The creation of websites such as Wikipedia was created by individuals in a C-form organization instead of a centralized publishing house.
Another example is the creation of videos and content on Vimeo, which was produced and shared by individuals in a C-form organization. From these examples, we can see how distributed trust technologies are quickly shifting the organizational landscape of how trust is produced and managed. Fundamentally, this is done to decentralize the source of power.
Shift to distributed forms of trust
Many of the assumptions about formal organizations are fundamentally challenged with the global transition towards distributed forms of trust. Today, individuals can easily enter into a peer-to-peer exchange with a stranger. There is no need for a bank or a financial institution to vouch for the credibility of the parties involved in the transactions. Blockchain enabled microcredit located in Brooklyn is already allowing individuals to use the system to sell excess solar energy directly to the neighbors without using a central utility company. The creation of the blockchain is a revolutionary technology which will undeniably change how markets and society are organized.
This is different from most of the Silicon Valley organizations which are created by centralized platforms. Most of the organizations on the market today capitalize on the power and legitimacy of enabling trusted interactions for one another.
As distributed trust technologies are emerging, major platforms around the world are at risk of losing the power that they currently have. In the near future, these powerful organizations may no longer be needed to regulate transactions that occur around the world. However, many of those who are currently in power will try to hold on to their authority for as long as possible.
There is a mixed response towards distributed trust technologies. JPMorgan Chase CEO called out Bitcoin for being a fraud. He also stated that the government would inevitably close down cryptocurrencies. However, proponents of cryptocurrencies believe that he is deliberately trying to spread false and misleading information.
What is the future of cryptocurrency?
In the past, a centralized organization held a large amount of power. However, this is starting to change with the emergence of the blockchain. As distributed trust technologies continue to grow, there is an undeniable power shift in our economies, markets, and governments. Now, we need to question the role of centralized organizations in the shift towards distributed trust technologies.
The key to progress in the usage of blockchain technology is to use insights from organizational theory and sociology to shape our societal future. It is entirely possible for the role of powerful central institutions to be kept at a minimum. The creation of the blockchain has enabled people to dream of a more equitable future for everyone.