Blockchain: A Libertarian Panacea?
By François Masquelier, Head of Corporate Finance and Treasury, RTL Group and Honorary Chairman of the European Association of Corporate Treasurers, and Simon Masquelier, Postgraduate student
Blockchain, the technology underpinning bitcoin, has given partisans of the libertarian movement unlooked for backing. This technology and its offshoots will soon give rise to a number of solutions, over and above cryptocurrencies. Surely we are at the dawn of an economic revolution? What might its consequences and implications be? Who would use these applications and lay down the legal framework that would govern these blockchain solutions? These are a few examples of some of the questions that we ought to be asking ourselves.
The start of a revolution?
Over the last few months, a profusion of articles, reports and other presentations have come out on this fascinating new blockchain technology. Its best ambassador is none other than the bitcoin which has now reached highs that would have been unimaginable a few years ago, with one bitcoin at the time of writing equalling about 15,000 USD. It is often said that this technology could spark a complete revolution in many sectors of economic activity, just as the internet did for all business activities. What is more, it could even take the very way our modern society is structured and turn it on its head. However, going beyond the purely technical workings of blockchain, which are difficult to explain because they are so complicated, nobody is raising questions about some of the implication of its ever-widening spread. Blockchain was developed as the result of a venture driven by libertarian ideas, with the underlying idea, initially, of side-lining intermediaries, such as central banks and even some government bodies. Might this decentralised system lead to a partial withdrawal of governments and their ancillary institutions from the role of intermediary?
Could blockchain become an instrument to serve libertarianism?
Blockchain technology is an innovation that operates in a decentralised way to make permanent records of transactions, such that they cannot be deleted. Each transaction has an encrypted block, containing one or more transactions and the data relating to them. These blocks are recorded in a digital blockchain, each of which has been approved by the group. Before a block can be added, each node in the network must validate and approve it. What is more, the data stored in a blockchain can never be deleted.
Blockchain could therefore be described as a sort of accounting general ledger or unchanging register of transactions that stores blocks of data shared on a network of computer nodes. This is often seen as having the merit of simplifying transactions, increasing transparency, reducing costs and reinforcing reliability. However, the most fascinating aspect of blockchain is perhaps the way it can do away with the intermediary in dealings between parties to a transaction. Parties to a transaction who do not necessarily know each other can deal with each other, without supervision, with no intermediary and with no centralised third party. This is a totally new way of sharing value, money, information or contracting securely for ownership rights, while at the same time saving on administrative formalities.
The features of this decentralised register mechanism, which gives users more power, clearly chime with certain claims and values advocated in libertarian political philosophy. Sakashi Nakamoto, the creator of the blockchain, and the consortium that developed bitcoin, certainly had libertarian aspirations and wanted to break free from the conventional monetary system. Nonetheless, it would be a mistake to go so far as to think that all bitcoin users were libertarians. However, and sometimes without realising it, they may be using a technology that has major features that dovetail with certain aspects of the ideal libertarian society. Blockchain might therefore be the technology that demonstrates the technical feasibility of taking some powers away from governments and passing them to individuals.
Libertarianism is currently in fashion
Libertarianism is alive and well, especially in the United States. This political and philosophical movement fundamentally regards individual liberty and individual property as natural rights. It also advocates free markets. Libertarians therefore put an overwhelming emphasis on liberty and deplore any unlawful infringement of it. From this perspective, governments ought to confine themselves to a minimalist role, so as to keep any infringement by them of individual property rights to the lowest possible level. The most obvious form of this infringement is taxes. This movement has taken tangible shape in the form of a Libertarian Party in the United States, drawing the main thrust of its programme from this ideology. During the last election it established itself as the third largest party. Its results have improved steadily over the last few presidential elections. In 2016 the Libertarian candidate won 4,489,221 votes, or 3.28% of the ballot, whereas the 2012 candidate won 1,275,971 votes, or 0.99% of the ballot. Its partisans claim to transcend traditional political divides.
The merits of the blockchain seem to fit in well with libertarian ideology. However, while it may lead to the state losing some of its influence in certain spheres, the impact may be more nuanced, and we even need to allow for the possibility of it having the opposite effect.