If your assets could be arbitrarily confiscated, would you still invest the resources to improve it? If private property rights were fairly and rationally applied, does it inevitably lead to growth?
Many modern institutions (e.g. World Bank) operate on the core assumption that clear property rights are a prerequisite for progress. Property rights are enforced through the court of law which is in turn supported by a government’s monopoly on violence. Formal recognition of private property rights enables asset monetization and more complex contractual arrangements that underlie capitalism.
The extent to which the above holds true also boils down to the implementation of private property rights. Are courts impartial or do favors and bribes help oil the legislative machine?
Private property is the foundation of crypto but enforced on credibly neutral infrastructure. While there is no singular solution, will this lead to greater progress or are we doomed to repeat capitalism’s failures?
*Property here is defined as to the rights over things/objects.
Private Property & Progress: Idea vs Execution
The ability of crypto to guarantee neutral enforcement of verifiable private property rights is likely the most important step forward in validating the relationship between private property and progress.
For simplicity’s sake, progress here refers to the ability of an individual to be the author of their own life story. Rather than quantitative measures, this is more an exploration of the concept given the difficulty in isolating private property as a sole cause of progress.
Much of the discourse surrounding private property has practically been muddied as actual implementation relied heavily on subjective enforcement which are prone to errors or worse, biases. How does crypto change this?
For more details on what “self-custody” actually means:
Crypto: Anarchy Supported By Private Property?
Enforcement via immutable code sits at the heart of crypto ideology. Crypto recognizes that third-parties are not infallible and therefore trades supposedly impersonal intervention with guaranteed code objectivity.
Instead of legalese, crypto assets are defined by smart contract code (i.e. tokens). Instead of certified professionals, disputes are enforced via network consensus. Instead of custodians, users have full autonomy over their own assets.
Bringing Ideas Closer To Reality
- Codified rights: Property definitions and its usage are defined in code which is deterministic and objectively interpreted.
- Credibly neutral execution: As long as transactions involving the property are permitted in code, all transfers involving the property will be executed impartially with a publicly viewable receipt.
- Transparency of rights: Property ownership and usage terms are publicly available and therefore verifiable.
- Opt in participation: Property definitions can be easily created but real underlying value is only realized through wider adoption of stated definitions.
- Property interoperability: Through adoption of open standards, anyone can build new use cases for the tokenized property where value can flow seamlessly without requiring any permissions.
In effect, the technology and corresponding incentives underlying crypto advances the execution of private property rights by implementing it in its purest form.
The Power To Coerce In An Alternative System
The codification of property rights bodes well for personal autonomy but this comes at the expense of the state. When anyone can easily define, transform, and transfer private property, this changes the foundations of many modern social contracts.
Arguably, one of the most important features of fully on-chain private property is that it enables anyone to freely transfer value between various sovereign systems without coercion. This access to an alternative financial system independent of any state significantly shifts the power balance in favor of individuals.
While the above is usually framed negatively in terms of enabling the funding of nefarious activities, it must also be noted that regulatory arbitrage has been utilized by the largest private companies as well as high net worth individuals. Moreover, transaction privacy via a public blockchain pales in comparison to the privacy afforded to select parties in many major traditional financial centres.
More importantly, as this alternative system is now open to individuals of any size, it acts as a significant lever to keep the incumbent government in check. As the barriers to migrating private property have been lowered, the economic base of a ruling party is dependent on their continued fulfilment of the expected social contract.
Closing Thoughts: Idea vs Implementation
Arguably, the comments against crypto are more a commentary on the concept of private property itself rather than its implementation. The technology underlying crypto offloads dispute resolution to credibly neutral parties while significantly improving settlement efficiency.
Modern societies are upheld by a collective understanding of the social contract specific to their culture, history, and geography. Crypto shifts the power balance towards individuals ensuring more consensual participation without violent coercion.
Crypto technology brings implementation one (big) step closer towards the idea of private property. Whether this results in real progress depends on how governments take on their new role as partners rather than directors of an individual’s life story.