On May 22, 2010 programmer Laszlo Hanyecz paid 10,000 BTC for two Papa John’s pizzas. Today, this humorous anecdote is an integral part of the Bitcoin lore, but behind the veneer of playful naivety, it masks a more sinister truth.
With projects under way in many developing countries to register property and people’s homes on the Blockchain, are we courting a disaster? If a sophisticated programmer is so woefully unaware of the value in such a newfangled digital asset, can we expect that a person new to the idea of Blockchain, and new to the idea of title itself, can hope to do any better? If the answer is anything less than an unequivocal yes, the consequences will be disastrous.
De Soto’s vision
The idea of registering title, property rights, on the Blockchain is touted as a mechanism for fostering social inclusion on a mass scale by the likes of Hernando de Soto, founder and president of the Institute for Liberty & Democracy. De Soto’s vision is that by giving people a legal claim over their residence, they will have a viable avenue through which they might participate to a greater degree in the larger global economy, for instance, by using their home as collateral in a loan application.
Blockchain boasts a consensus mechanism that makes its application in this domain seem very appealing. On one hand, a corrupt government official is likely to allocate property capriciously. However, in a local community, for example in the Brazilian favelas, the local residents should in theory be able to determine democratically who lives where, and based on this majority opinion, aid in establishing a legal claim of ownership. Thus, shanties that have served as individual homes for years and have clear de facto proprietors, but have had no official, viz. governmental, de jure recognition could give their residents immutable claims to ownership.
Title registry in the hands of this newly minted property class has the potential to afford access to vast stores of global capital hitherto unavailable to them, since they had no property to use as collateral. This has the potential to spawn new and previously unimagined economic growth, or conversely to wreak havoc.
In the Republic of Georgia, efforts by De Soto in conjunction with BitFury and Georgia’s National Agency of Public Registry (NAPR) are currently implementing a platform for Bockchain-based title registration. Papuna Ugrekhelidze, chairman of the NAPR, remarked in a public statement that “by building a Blockchain-based property registry and taking full advantage of the security provided by the Blockchain technology, the Republic of Georgia can show the world that we are a modern, transparent and corruption-free country that can lead the world in changing the way land titling is done and pave the way to additional prosperity for all.”
Students of history should be aware of the fact that this is not the first time a wave of mass privatization has swept post-soviet countries. Beginning in 1989, a large-scale privatization of formerly state-owned enterprises resulted in the highly inequitable economic topologies of former USSR territories.
One particularly acute example is the case of MMМ, a Russian “company” that in the 1990s executed what has been called one of the largest Ponzi schemes of all time, defrauding as many as 40 million people to the tune of $10 bln. The case of MMM did not involve title-registration but can be thought of as an historical analogy to illustrate the danger of what might happen when people come into possession of complicated assets that they neither fully appreciate nor comprehend.
Privatization across the crumbling socialist republics often took the form of vouchers, exchangeable for partial ownership of large hitherto state-run institutions, distributed amongst local populations, in places such as the current Republic of Georgia. Scam artists at MMM proved highly adept at convincing unsuspecting proprietors to part with their new and complicated assets for the equivalent of peanuts.
Bitnation’s Experiment in Land Registry
In the 2008 film Che, Ernesto Guevara states that “a country that doesn’t know how to read and write is easy to deceive.” In the current situation we are likewise talking about literacy, private property literacy and Blockchain technology literacy. Educating people in these disciplines will be hard work, but it’s nothing that blockchain registry proponents should shy away from; rather, these should become focal points of any efforts going forward.
“Property literacy” is a term we need to understand to mean an appreciation for the system of land registration and ownership as commonly understood through the lens of modern global capitalism. The West African nation of Ghana is a country where “property literacy” is not yet pervasive through all levels of society, as indicated by the fact that 70 percent of land lacks proper title.
In keeping with the conceptual framework of De Soto, the organization Bitnation which positions itself as a catalyst to streamline governance processes through the use of Blockchain technology, has implemented a Blockchain-based land title registration system in Ghana. Founder and CEO, Susanne Tarkowski Tempelhof, explained to Bitcoin Magazine the benefits of these efforts.
“As Bockchain applications such as recording trading and physical assets (land, cars, metals etc) emerges in the mainstream, there's a fear of people not understanding the value of the Blockchain asset record, and recklessly trading with it, or lending money against it.”
“While this is certainly something to be concerned about during the first years, (probably even decade on the market) I believe it's worth the risk, because the upside is economic empowerment for millions of people, particularly in developing nations with none or weak previous access to create verifiable and immutable ownership records.”
“The ability to seamlessly trade assets like land with each other, and lend money against those assets to finance personal educational or entrepreneurial undertakings will dramatically increase the speed and quality of economic development in frontier and emerging markets, while giving the population a better chance of recourse in case predatory entities such as national governments or local extortion rackets attempt to hijack private property.”
As we endeavour to introduce experimental foreign institutions to people and lands where they are unfamiliar we might also do well to bring them the golden rule of modern capitalism - “caveat emptor” or “let the buyer beware.” And to those who claim that their efforts will help the disenfranchised of this earth we offer the message “primum non nocere” or “first, do no harm.”