How Blockchain Technology Could Help Developing Countries Part 11

Blockchains as an example of positive incentives. Situational psychology and corruption.

 

The importance of blockchain technology in the discussion of corruption

One of the reasons why blockchain technology is so important when it comes to the discussions about corruption and the way societies operate is that modern cryptocurrency networks have figured out a way to operate outside of the realm of the existing legal systems.

There is no authority that governs the existence of the Bitcoin blockchain or other public cryptocurrency networks. The networks exist because the members of the ecosystem have incentives to participate in their operation. This model could serve as an example for developing countries because it does not require supervision of the members. With cryptocurrency networks such as Bitcoin and Ethereum, transparency and positive user incentives are a part of the model of how the networks exist and operate. There is no need for a third party to be changing incentives or providing the monitoring of the activities on a network.

On the Bitcoin network, users have an incentive to send each other funds because of the low fees, independence of the network from any governments and 24/7 accessibility. As the price of the Bitcoin has grown, the network has been becoming more and more attractive for sending large payments, which is a part of why some people today refer to Bitcoin as digital gold. For example, if someone needed to send, let’s say, USD$1,000,000, from a person in one country to a person in a different country it is very likely that they would have to fill a large amount of paperwork at their bank, submit forms from the tax authorities and need to wait for all kinds of approvals. None of this is needed on a cryptocurrency network such as Bitcoin. The network functions without any legal limitations.

Miners on the network compile transactions into the blockchain, seal them with hashes and get rewards for doing so. On the Bitcoin blockchain, miner rewards is how the network adds new coins into circulation.

Satoshi Nakamoto, the creator of the Bitcoin network, has created the network in such a way that it can only have twenty one million bitcoins. For the first 210,000 blocks of the network, the miner reward for creating a block on the network has been 50 bitcoins. Then, it divided in half for the next 210,000 blocks and became 25 bitcoins. Currently, the reward is 12.5 bitcoins.

The Bitcoin network tries to create a block of its blockchain every ten minutes, which means that up to date it has added over seventeen million coins into circulation, which is over 80% of all Bitcoins that will ever exist. To see how many bitcoins exactly there are in circulation as you are reading this article, visit http://www.bitcoinblockhalf.com/.

 

How blockchains could help developing countries fight corruption and other problems

An important part of the fight with corruption in the developing world is transparency because according to the situational psychology, people steal (or cheat, or take bribes, or commit some other crime) when three things happen at once.

The first one is a need, want or perceived need. A person who is not hungry is not interested in getting more food, unless, of course, it is possible to store the food. The problem with needs or perceived needs, especially in the case with corruption, is that there is always someone who has more, who drives better cars, lives in a better home, and so on. For this reason, it is easy even for people who have a lot of money and resources to convince themselves that they simply need more and, because of that, taking bribes is okay.

The second one is rationalization. Nobody in the world would be stealing anything if they did not believe that they deserve more what they are getting. This is what rationalization is about. It is a way for someone to take a bribe or steal, yet still come up with a story about how he or she is a good person and why stealing in his or her instance is okay. In the case with corruption, a government official could tell himself or herself a story about how hard she or she works and how small the salary is, and so on.

The third one is the belief that the illegal action will go unnoticed. No criminal would ever commit a crime if the criminal were to believe that he or she would get caught. For this reason, committing a crime also has to do with the belief of an individual about getting caught.

Getting caught and paying for the illegal actions is the foundation of the legal system in the countries like the United States. The main idea behind the legal system in the West is that people need to realize that their actions have consequences and if they commit a crime, they will have to pay in some way, shape or form, be it financially with a fine or in some other form, such as spending time in jail.