Since it was first used in 2009, blockchain technology has changed significantly and can now be used for more than just financial transactions. Blockchain is used in many fields, like shipping, healthcare, real estate, and managing supply chains. The use of blockchain technology in these sectors is slowly diminishing the relationship between the government and these sectors.
The business sector and the government have always been intertwined with and reliant upon one another in various ways. Undeniably, entrepreneurs and businesses drive the economy of a nation. They generate revenue for the government, which it uses to fund its projects.
In return, the government, directly and indirectly, controls its operations and shapes the business practice by implementing laws and regulations. However, since the introduction of blockchain technology into the business sector, the government’s influence over the industry has dramatically reduced.
This article highlights how blockchain technology has distorted businesses’ and government relationships.
What Is Blockchain?
Blockchain is a shared distributed database or ledger between computer network nodes. It works as a database that digitally stores information electronically. Blockchain technology is most famously used for keeping a secure and decentralized record of transactions in cryptocurrency systems. Blockchain promotes trust without the need for a responsible third party. It ensures the accuracy and security of a data record.
Blockchain Decentralization
Decentralization in blockchain describes the transfer of control from a centralized entity (an individual, an organization, or a government) to a global network.
Blockchain aims to prevent people from using power or influence over one another in ways that would harm the network’s functionality.
How is the Government involved in the business?
There are two significant ways in which the government gets involved in the running of businesses. These include:
1. Taxes
The government controls how businesses operate by taxing them. Depending on their entity (sole proprietorship or Limited Liability Company), size, location, and industry, businesses must pay a specific tax percentage to the state and local governments. The government’s amount of money from companies increases with the tax rate.
Taxes are crucial to the government because they are the primary funding source for the federal, state, and local governments’ operations. You are required to send a specific portion of your profits to the government of the nation in which your company is registered.
2. Federal Laws
The government can control and affect the economy through federal law, set monetary policy, and promote financial transactions. These laws also encourage businesses to maintain product quality while keeping prices within the desired range, thereby preserving competition in the market. The government controls what companies produce and how they produce it.
These laws are made to make it easy for investors, business owners, and business-oriented persons to conduct their affairs, as well as to protect the interests of the clients of customers of these businesses.
How Can Blockchain Reduce Government Involvement In Business?
1. Loss of Control
Traditional banking systems and currencies like the dollar, the euro, the Yuan, etc., are subject to governments’ authority. With this authority, they can change the monetary policy to govern the economy. They can monitor how money flows through the economy, which results in earnings and appropriate taxation.
Through the control of the currency, the government can affect the economy, set monetary policy, promote financial transactions, and do other things. Also, they can easily follow any fraudulent or illegal conduct involving fiat currencies.
However, with the inception of blockchain, the government no longer has total control over the blockchain monetary system because of its decentralized nature. Since the fundamental operation of blockchain technology forbids the use of a central authority for any transaction, the government has little or no power to control monetary policy.
2. Technical Aspects
Many companies are trying to adopt blockchain technology into their system to avoid office work that wastes a lot of time and reduces profit margins. Banks believe that by fully utilizing blockchain technology, they will be able to cut operating costs. The aim is to improve effectiveness in the sectors where you will use blockchain.
Let’s take the Real estate sector, for instance. When an individual purchases a property, after the necessary paperwork for transferring property ownership and land rights is completed, the local government officials usually keep this data on paper or in a computer system.
If blockchain is brought into the system using smart contracts, you can store this information on the blockchain system. This will save time when the need for this information arises, as you can quickly obtain it from the blockchain system.
When this is done, this sector will no longer be operating under the local government. With blockchain technology, it will no longer need to involve the local government as its information storage system.
Conclusion
Since its inception, blockchain has grown beyond its function in cryptographic transactions to other sectors, including the business sector. It assists various global industries in transforming and improving their modes of operation. Due to its decentralized nature, blockchain has removed the need for intermediaries and trust before users can carry out transactions. Greater confidence reduces duplication of effort, which increases efficiency.
Blockchain is changing supply chains, the distribution of food, financial services, and more. Various business sectors are using blockchain technology to ensure work efficiency and effectiveness. Consequently, this has led to a reduction of government influence in the running of such sectors.
Finally, due to its decentralized nature, blockchain has seized total control over the business sector from the hands of the government, which is probably why most governmental officials are against blockchain technology.
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