Blockchain Revolution

SOMETHING IS ROTTEN IN THE STATE
In his Gettysburg Address in 1863, Abraham Lincoln said that society’s greatest goal
was a “government of the people, by the people, for the people.” Twelve decades
later, President Ronald Reagan said in his 1981 Inaugural Address, “Government is
not the solution to our problem; government is the problem.” Many in the nascent
blockchain ecosystem agree. In a 2013 survey, over 44 percent of bitcoin users
professed to be “libertarian or anarcho-capitalists who favor elimination of the
state.”
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Libertarians of all stripes tend to support bitcoin. It’s decentralized and free from
government control. It’s anonymous and difficult to tax. It resembles gold in its
scarcity, and libertarians favor the gold standard. It’s a pure market, driven by supply
and demand rather than quantitative easing. Not surprising, the first 2016 presidential
candidate to endorse bitcoin for campaign payment was Rand Paul.
The libertarian bent has given opponents of digital currencies fodder for
dismissing blockchain technologies outright. Jim Edwards, founding editor of
Business Insider UK, wrote of the libertarian paradise he called Bitcoinistan, a
country like Somalia “with as little government interference as possible, in a market
free of burdensome laws and taxes.” He described the paradise as “a total
nightmare . . . characterized by radical instability, chaos, the rise of a boss-class of
criminals who assassinate people they don’t like, and a mass handover of wealth to a
minority even smaller than the one percent that currently lauds it in the United
States.”
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Certainly, we live in a crisis-racked world. “The world has not seen this much
tumult for a generation. The once-heralded Arab Spring has given way almost
everywhere to conflict and repression,” wrote Kenneth Roth, executive director of
Human Rights Watch, founded in the 1970s to support citizen groups. “Many
governments have responded to the turmoil by downplaying or abandoning human
rights,” using the Internet to spy on citizens, using drones to drop explosives on
civilian populations, and imprisoning protesters at mega public events like the
Olympics.
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That’s the wrong response to turmoil, according to renowned Peruvian economist
Hernando de Soto. “The Arab Spring was essentially and still is an entrepreneurial
revolution, people who have been expropriated,” said de Soto. “Basically, it’s a huge
rebellion against the status quo,” and the status quo is serial expropriation—the
repeated trampling of citizens’ property rights by their governments until they have no
choice but to work outside the system to make a living.
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So trampling more rights is the worst possible response because it pushes more
people—such as journalists, activists, and entrepreneurs—outside the system. During
the past twenty years, voter turnout has dropped in most Western democracies,
including the United States, the United Kingdom, France, Germany, Italy, Sweden,
and Canada. In particular, young people are looking to bring about social change
outside the system, certainly not by voting. Most Americans think their Congress is
dysfunctional and deeply corrupt. And for good reason: as in many countries, U.S.
politicians are beholden to wealthy contributors and interest groups, and many
members of Congress go on to become lobbyists. Case in point: 92 percent of
Americans want background checks of people buying guns, but the rich and powerful
National Rifle Association thwarts any legislation to effect change. So much for a
“government of the people, by the people, for the people.”
The more citizens don’t feel their political institutions reflect their will and
support their human rights, the more these institutions overstep their authority, the
more citizens question the legitimacy and relevance of the institutions. Political
sociologist Seymour Martin Lipset wrote that legitimacy is “the capacity of a political
system to engender and maintain the belief that existing political institutions are the
most appropriate and proper ones for the society.”
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And increasingly young people
look to bring about change through means other than governments and even
democracy. The bumper sticker “D
ON’T
VOTE!
I
T
ONLY
ENCOURAGES
THEM
” tells the
story.
“For individuals, it might not be desirable for them to be in a searchable,
verifiable database of recorded history that governments could potentially use to
exploit or subjugate people,” de Soto said. “The legislation of most of the countries in
the world is so badly done, so unwelcoming, that the cost of coming into the legal
system doesn’t make sense to poor people. And a country with too many poor and
disconnected people causes too many problems.”
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As legitimacy fades, libertarianism ascends. But it’s not the answer to what ails
the body politic. In this troubled world, we need strong governments, and ones that
are high performance, effective, responsive, and accountable to citizens.
What should governments do? “Build, streamline, and fortify the laws and
structures that let capitalism flourish,” de Soto wrote in The Wall Street Journal. “As
anyone who’s walked the streets of Lima, Tunis and Cairo knows, capital isn’t the

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problem—it is the solution.”
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So what’s the problem? “Getting their people
identified,” he told us. “There is no way a government can go in and force people
inside the system. So I think that governments all over the world right now are willing
to turn the system around.”
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That’s where the blockchain comes in. The design principles of the blockchain
should drive this transformation as it supports and enables higher levels of the
following: