Image Credit – Gold Bitcoin with ‘webbing’ underneath the logo – by Wikimedia
I recently stumbled upon this well-written Medium piece regarding strong “Independent Property Rights” for Bitcoin. In a nutshell, there is a general ‘trust problem’ when it comes to functioning societies worldwide. There is a need to exchange services, monies, etc. with multitude of people outside your immediate circle of family/friends.
The authors break down the trust problem into a hierarchic structure of property rights. In well developed countries, citizens can enjoy the fruits of their labor and exchange such fruits with other people and businesses in enjoying their lifestyle.
This hierarchy of strong property rights breaks down in less developed countries. Citizens of such countries enjoy less freedoms in regard to their individual production, savings, lifestyle, etc. They lose their savings and purchasing power significantly over a long period of time.
Enter Bitcoin to the rescue! Bitcoin is an asset that citizens can utilize in protecting their individualized savings/production from nefarious elements that present in less developed countries.
Bitcoin is a Still a Solution Looking for a Problem.
Bitcoin is a technology that can be used by anyone and almost anywhere. But, ultimately, it doesn’t solve the strong property rights problem as it was intended for. Well developed countries already have strong property rights. In that context, what does Bitcoin solve? The authors make a weak argument that Bitcoin would add competitive pressures to the fiat regimes undergirding well developed countries.
Already, well developed countries are regulating Bitcoin to some extent. They require Bitcoin businesses to ‘know your customer’ and require anti-money laundering reporting. Bitcoin’s power has been weakened and is subject to the strong property rights framework of such countries.
There is a powerful argument to be made for citizens in less developed countries. Holding bitcoin gives strength to the citizens, rather than such strength being siphoned off by government. Many citizens would need to utilize Bitcoin, sidestepping their countries’ banking systems. This critical mass would introduce severe pressures on less developed countries to reform their property rights regime to better align with the interests of their citizens instead the select few.
The Problem in a Nutshell
The central issue is the property rights structure of less developed countries. Even if a citizen has access to Bitcoin, he/she still lives in the less developed country. Yes, this person is shielding his/her money from hostile elements in the country. To what end? To improve the standard of living and have a better lifestyle?
Unsurprisingly, people who have the ability to earn money and to stash it in Bitcoin will seek to leave their less developed countries. Individual adoption of Bitcoin introduces capital flight, which may exacerbate the weak property rights regime of these less developed countries.
These people may successfully leave their less developed countries in favor of well developed countries. Now that they’re in a well developed country, they may not even need Bitcoin anymore. The plight of the population living in these less developed countries continue. Their production will continue to be exploited, impaired, and stolen. Bitcoin has the life changing ability to help the few at the expense of the rest.
Conclusion
This is why I think Bitcoin continues to miss the mark for suitability for mainstream adoption by the masses. Bitcoin promotes individuality and accountability. The benefits from such financial activity in Bitcoin flow mostly to individuals. They do not generally accrue collectively to local and larger communities all over the world. No wonder libertarians favor it and promote adoption.
I’ll admit to some bias against Bitcoin. I struggle to find any real use for it in a modern economy. I just don’t see the intrinsic value underpinning Bitcoin. Quoting Barack Obama, ‘You didn’t build that’ applies – there needs to be some collective benefits to society as a whole for the Bitcoin ecosystem to prosper. For those thinking of using and investing in Bitcoin, all I can say is… caveat emptor.
The usual disclaimer applies; This blog article is for entertainment purposes only. No express or implied warranty is offered, regarding any actionable information contained in this article. Laws governing investing are complex and varied. Personal finance is personal to you – no one else knows about your financial situation intimately. I encourage you to read and study information from other financial sources to gain the knowledge and expertise needed to manage your finances.
