What Are The Negative Effects Of Blockchain On The Global Economy?
How Does Blockchain Affect Social Life Negatively?
The blockchain is indisputably an inventive technological innovation in the world of business dealing with currencies business invented by Satoshi Nakamoto and has developed into a greater invention since its development (Treleaven & Batrinca 2017, pp.14-21); (Seppälä 2016, p. 34). The examples of blockchain include Bitcoin, Power Ledger, Ripple, Car Vertical, Ethereum, Wabi, Wanchain, and Dash. All these mentioned technologies allow people to transfer currency digitally without intervention of the third party and the transaction cost is a little bit lower compared to other forms of currency business like banks (George, McGahan & Prabhu 2012, p. 661).
The banks maintain their money balances and transfer by blocking some of the activities. For example, they can decrease the balance at the time money transfer is occurring and reopen the services after updating the other side. However, in blockchain the Google Docs app allows two parties to access the documents at the same time and all of them are able to see what is happening hence, reducing the corruption cases. According to Ciaian, Rajcaniova and Kancs (2016)’s research, blockchain cannot be run by any particular body and it does not fail at any point. Glaser et al. (2014, p. 78) reported that the blockchain system is durable and reliable. However, studies have failed to look at the damages blockchain bring to the world of economy and the social world. Blockchain cannot be traced which means terrorists and other criminals can use the innovation to conduct their illegal activities and the law enforcement agencies cannot find them because they are untraceable. The research proposal herein will fill the gap by looking at the negative effects of blockchain the society. The study will look at how the innovation has negatively affected the currencies, if the innovation is reliable and how the social lives of the people have been affected by the invention. Some governments do not recognise the innovation because they do not levy taxes on the people running their businesses using blockchain (Anderson et al. 2015). The research that was done in the first assignment only focuses on the benefits of the system and forgets the disadvantages of the innovation. Therefore this study will fill that gap by researching on the negative effects of blockchain.
The main purpose of the research is to investigate the negative impact of blockchain on the world economic and social life.
The study targets the governments and the business people who want to engage in blockchain business. The study can help the governments to decide whether to legalise blockchain or not. The study can also help the business people in making decision on whether to engage in the business.
According to Garcia et al. (2014) blockchain is a technological way of decentralising business activities thus solving the issue of trust which makes it good for economic purposes. The innovation provides methods in which transaction data can be recorded and get secured by a ledger system that is public. The publicity of the ledger systems provides transparency and accountability therefore, reducing the cases of corruption in the cryptocurrency business (Yli-Huumo et al. 2016). The data secured by the system cannot be edited, furthermore, the blockchain system is not owned by anybody or any firm, it is a public system run by the public. The system has impacted the financial market by introducing its first app “the bitcoin” which is digital money where a person can send or received unlimited quantity of cash without the help of the third party. Other applications invented because of blockcahin system are Power Ledger, Ripple, Car Vertical, Ethereum, Wabi, Wanchain, and Dash (Petrella 2010, p. 257).
Sharples et al. (2016) reports that blockchain has changed how business are done from traditional systems where a business person could waste too much time to queue for transactions services to digital system where transactions are done faster in a secure method. Research done by Polasik et al. (2015, p. 10) suggest that the blockchain usage will increase at a higher rate in the future in that it will be used for many purposes in many trade activities including stores and shops (Polasik et al. 2015, p. 10). However, researchers have concentrated in the positive sides of the system and forget to study its disadvantages and negative impacts on the economy and social life. The research herein will fill the gap by studying the negative influence of blockchain on the economy.
The blockchain technology has been described by some of the economic experts as the major disruptor of the business process globally. First, the blockchain through its cryptocurrency applications like bitcoins is challenging the standard of dollar in the stock exchange market (George, Schillebeeckx & Liak 2015, p. 270). According to Hassan Al-Tamimi (2012), the world economy relies on the stability of the dollar standard. Almost all the international traders and businesses use United States dollar for financial activities. Therefore, if the dollar standard is lowered then the global economy is affected badly. Brunel (2018, p. 1-3) reported that the cryptocurrencies transactions do not benefit the United States dollar in any way hence reducing its value in the market. The introduction of over 1000 bitcoin cryptocions has affected the U.S. dollar standard according to (Doran et al, 2017, p. 33).
The second impact of blockchain is where it has cut the middleperson from business. The financial businesses globally need the services of bodies like banks, SWIFT, and clearing houses who take some fees in turn for providing such services. But, the blockchain protocols like Bitcoin and Dash have cut the use of middlemen to process and authenticate transactions. The action has disrupted the normal global money transfer protocol where the middle firms check and authenticate the payments to reduce money laundry and terrorisms funding. The main reason why governments have allowed middlepersons to authenticate and oversee transactions is to prevent transactions for illegal ammunition activities, drug trade and other criminal activities. Middlepersons also ensure that anybody who involve in business transactions pays the taxes to his or her government but the blockchains does check the person conducting transactions. It also becomes too hard for law enforcement agencies to trace any illegal transactions from the cryptocurrency data because the system protects the participants (Doran et al, 2017, p. 33).Garcia et al. (2014) reported that the cryptocurrencies will disrupt the functions of central banks because the firms have no control over the applications.
The third effect of blockchain on the economy is crowindfunding. The blockchain has made crowdfunding process simple. Crowdfunding is the process of finding capital for inventions, ideas or any other innovation through the internet. The blockchain has made crowdfunding easy in that the blockchain apps are used as the platform to connect the inventor and the funders. Many entrepreneurs have basically ignored the government agencies in that they do not register their innovations therefore, the inventions do not get taxed. The inventors seek for funders in the internet through the blockchain apps and fund their products which would never have seen the light because of poor quality. The crowdfunding does not represent equity in the world of economy.
The activities of blockchain have contributed to some activities that affect the human life socially. The blockchain apps have increased the drug trafficking with affect the health of human beings. The drug cartels do their financial transactions in the blockchain platforms because of its privacy and anonymity. The law enforcements are given hard task to track the criminals who use the blockchain apps. The system largely supports money laundry, drug trafficking and terrorism. Terrorist can buy fire arms from the platform because of its anonymity and privacy. The mentioned activities affect human life negatively for example, terrorism disrupts peace.
The study is relevant because it is going to tack the problem about blockchains that most of the researches have not looked at. Most of the scholars concentrated in the positive sides of cryptocurrencies while the study will focus on the left gap negative impacts of blockchains. The study can help people and government to make decision on how to handle blockchain technology.
There herein study is expounding and evocative and will involve various methods of collecting data which are both qualitative and quantitative to come up with findings. The main purpose of the study is to explore the negative effects of blockchain in the economy and social life of people in the world. The study will use surveys, interviews, and observations to find primary data and secondary data will found using Google Search Engine by searching “the negative effects of Blockchain in the world economy and social life”.
Qualitative research is a method used to collect data using unstructured methods like interviews, observations, surveys, interviews and documents to find solution for the problem statement (Ngoc Nguyen & Stewart 2013, p. 268). The methods do not just let where and when, it details the motives, attitudes, and behaviours of the problem (Jamal Zeidan 2012, p. 70). In the study qualitative research method will be used to collect data. The steps that will be followed include one, deciding the problem statement. The problem of the study is “the negative impact of blockchain on socioeconomic”. Second, the literature review of the problem will be done to find the gap among other researches. Third step is determination of sampling size depending on the budget of the study. Bitcoin will be used as a blockchain sample to monitor and observe how transactions are done. The study will also interview the four people from the department of health in United Kingdom to establish if they tax the blockchail business. The study will also survey and interview law enforcement agency of England to find their views on how the system affect their job. The fourth step is data collection. The study will collect data through direct observation, interviews, document analysis, and surveys. Fifth, there will be data analysis. The qualitative data will be analysed through coding of financial records, using descriptive statistics which help to describe information to highpoint patterns. Content analysis will be used to analyse the documents from the tax departments, financial departments and law enforcement departments. After analysing the data collected a report will be written.
A quantitative research stresses the objective measurement of mathematical, statistical, and numerical data analysis through surveys, polls, or by using computers to manipulate the pre-existing information. The research method focuses on the numerical data (Garcia & Schweitzer 2015). A researcher must have the following in mind when using quantitative method, discus and explain the information collected, explain data collection techniques, give the assumptions, and report unexpected actions when data was collected.
In the research herein, the following steps will be followed to conduct quantitative research. First, identification of the problem statement which already there, “the negative impact of blockchain on socioeconomic”. Second, review the literature for the research problem. Third step is determining the theory that underlies the study. Diffusion of innovation theory will be used to explain the rate at which people are accepting blockchain innovation. Fourth step is coming up with sampling method. In the study stratified method will be used to choose the participants. The respondents will be chosen based on their rank in the case study departments. For example, the head of tax department will be interviewed to know if they tax the blockchain business. The fifth step is data collection methods. Data will be collected using questionnaires, interviews and observations. The data will be then analysed in the sixth stage to come up with findings. The results will be recorded and discussed in step seven. Step eight I will be conclusion where the researcher will conclude the study and write the summary. The recommendations and need for future research will be noted in this step.
The lack of information for the research is one of the limitations of the study. Very few scholars and the economic experts have done research on the topic. Hence, it will be difficult for the study to find enough data for literature review. The sample size used in the study is also small because of insufficient finance to fund transport to find more people and places to study. The third limitation of this study is that the data can be self-reported without authentication. There will be no organisation or authority to confirm the findings. Other limitation is getting access to relevant people to the study will be difficult because they are not easy to find and interview. Biasness can also affect the findings of the research. The researcher loves blockchain and can interfere with the results of the study not to tarnish the cryptocurrencies. Other limitation is finance. There is limited money to fund the study yet it requires many operations in finding results. The research needs the researcher to travel from place to place to find the respondents for the study. The limited funds have made the researcher choose few people for the study. The last limitation on the study is time allocated for it. The study has little time of two years and the work to be done is heavy and requires more time. The researcher can conduct shallow study to limited time.
Planning how you will conduct your research is important because it makes you know what to do at a specific time. The herein study will take period of two years and it will have five phases which include first, coming up with research purpose and research strategies which will take two months. At this phase the research will develop study objectives and questions, find out where to conduct the research, and come up with research methodology. The second phase is getting permission from the school and tutor to go ahead and do the study which will take one month. The third phase is conducting the research which will take one year. The fourth phase will be data analysis which will take four months and the last stage is writing the report which will take three months.
Conclusion
Blockchain is indisputably an inventive technological innovation in the world of business dealing with currencies and it is threatening the existence of banks and other financial institutions. The governments in the world should come up with ways to regulate the activities of blockcahins. The blockchains also affect the social fives of people.The study herein will look at the effects of blockchains by conducting research using both qualitative and quantitative methods. Questionnaires in the appendix below will also be used to gather data for the study.
Reference List
Treleaven, P. and Batrinca, B., 2017. Algorithmic regulation: automating financial compliance monitoring and regulation using AI and blockchain. Journal of Financial Transformation, 45, pp.14-21.
Seppälä, J., 2016. The role of trust in understanding the effects of blockchain on business models, p. 34
George, G., McGahan, A.M. and Prabhu, J., 2012. Innovation for inclusive growth: Towards a theoretical framework and a research agenda. Journal of management studies, 49(4), pp.661-683.
Ciaian, P., Rajcaniova, M. and Kancs, D.A., 2016. The economics of BitCoin price formation. Applied Economics, 48(19), pp.1799-1815.
Glaser, F., Zimmermann, K., Haferkorn, M., Weber, M. and Siering, M., 2014. Bitcoin-asset or currency? revealing users’ hidden intentions, p. 78
Anderson, M.L., Chiswell, K., Peterson, E.D., Tasneem, A., Topping, J. and Califf, R.M., 2015. Compliance with results reporting at ClinicalTrials. gov. New England Journal of Medicine, 372(11), pp.1031-1039.
Garcia, D., Tessone, C.J., Mavrodiev, P. and Perony, N., 2014. The digital traces of bubbles: feedback cycles between socio-economic signals in the Bitcoin economy. Journal of the Royal Society Interface, 11(99), p.20140623.
Yli-Huumo, J., Ko, D., Choi, S., Park, S. and Smolander, K., 2016. Where is current research on blockchain technology?—a systematic review. PloS one, 11(10), p.e0163477.
Sharples, M., de Roock, R., Ferguson, R., Gaved, M., Herodotou, C., Koh, E., Kukulska-Hulme, A., Looi, C.K., McAndrew, P., Rienties, B. and Weller, M., 2016. Innovating pedagogy 2016: Open University innovation report 5.
Polasik, M., Piotrowska, A.I., Wisniewski, T.P., Kotkowski, R. and Lightfoot, G., 2015. Price fluctuations and the use of Bitcoin: An empirical inquiry. International Journal of Electronic Commerce, 20(1), pp.9-49.
Petrella, G., 2010. MiFID, Reg NMS and competition across trading venues in Europe and the USA. Journal of Financial Regulation and Compliance, 18(3), pp.257-271.
George, G., Schillebeeckx, S.J. and Liak, T.L., 2015. The management of natural resources: An overview and research agenda. Academy of Management Journal, 58(6), pp.1595-1613.
Hassan Al-Tamimi, H.A., 2012. The effects of corporate governance on performance and financial distress: The experience of UAE national banks. Journal of Financial Regulation and Compliance, 20(2), pp.169-181.
Brunel, J.L., 2018. Editor’s Letter. The Journal of Wealth Management, 21(1), pp.1-3.
Sutherland, W.J., Barnard, P., Broad, S., Clout, M., Connor, B., Côté, I.M., Dicks, L.V., Doran, H., Entwistle, A.C., Fleishman, E. and Fox, M., 2017. A 2017 horizon scan of emerging issues for global conservation and biological diversity. Trends in ecology & evolution, 32(1), pp.31-40.
Ngoc Nguyen, T. and Stewart, C., 2013. Concentration and efficiency in the Vietnamese banking system between 1999 and 2009: a structural model approach. Journal of Financial Regulation and Compliance, 21(3), pp.268-283.
Jamal Zeidan, M., 2012. The effects of violating banking regulations on the financial performance of the US banking industry. Journal of Financial Regulation and Compliance, 20(1), pp.56-71.
Garcia, D. and Schweitzer, F., 2015. Social signals and algorithmic trading of Bitcoin. Royal Society open science, 2(9), p.150288.
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