Blockchain and democracy: Challenges and opportunities of blockchain and smart contracts for democracy in the distributed, algorithmic state

Abstract

This contribution analyses whether blockchain as a distributed ledger technology and smart contracts as rule-based algorithms could contribute to safeguarding important public values of democracy and the rule of law in a world characterized by hyper-complexity and hyper-connectivity of public and private actors. Blockchain technology is often used as an underlying technology supporting the automatic and secure execution of rules by smart contracts. It is said that the technology could make the traditional pivotal role of trusted third parties redundant, though realistically the technology often rather enables a reorientation of their role. The use of distributed technology and algorithms has the potential to raise trust and legitimacy concerning the functioning of public institutions. However, at the same time their use pressurizes some essential principles of democracy and the rule of law, such as safeguarding fundamental rights like the right to privacy, as well as the proper functioning of checks and balances, including effective judicial review. Nonetheless, blockchain could also help generating trust and legitimacy regarding the composition of democratic institutions. Fair, secure political campaigns and voting procedures are a prerequisite of sustainable democracies. Therefore, this chapter also explores the opportunities and challenges of using blockchain technology that could contribute to the proper functioning of democracy by improving reliability and efficiency of the voting procedure and the monitoring thereof. Looking at the other side of the coin, the contribution examines the need of awareness that blockchain-based cryptocurrencies could be abused to evade political campaign finance rules due to anonymity and a lack of sufficiently effective national and supranational rules and oversight.