Blockchain and the Failed State: How mistrust of major institutions led to the rise of blockchain

People build trust with their established government or state through legitimacy of services. When a government fails to provide services such as infrastructure, security, and autonomy it loses legitimacy in the eyes of its denizens. Failures of the state contributed to blockchain and bitcoin’s popularity in both the Eurozone, as well as the Middle East and Africa.

The magic of the blockchain, is that it will ideally put the transaction process in the hands of a distributed ledger, eliminating the need for institutions like central banks and other middlemen. The development of this technology was to bypass distrusted big banks. Bitcoin was the first successful implementation of blockchain tech, and it came right in time for the financial crisis of 2007-08. After the failure of most major U.S. banks.

The crisis led people to question these once stalwart authorities of finance. The effects of the financial crisis have lingered. It has influenced the mindset of many young investors who have suffered, or whose parents have suffered due to financial mismanagement at the top. This timing has led to bitcoin, and blockchain tech’s growing popularity and usage amongst both ordinary citizens, and financial institutions.

Technological hubs in the U.S., such as Silicon Valley, were the first to realize blockchain’s potential for bypassing lengthy transfer times, and transaction fees associated with using intermediaries. While the crisis of 2008 drove interest in the U.S., other failures would set the stage for blockchain in the Eurozone and other developing nations.

A dated example would be the Cyprus bailout of 2013, as well as the Greek debt crisis. The EU and IMF were forced to intervene and use over 100 billion euros on each respective bailout. These events caused frustrations in the Eurozone that are somewhat similar to the anger felt at the bailouts of 2008 in the U.S. Just like in the U.S., the bailouts left a general mistrust of both central banks, and the Euro for the generations effected.