Finance Indaba attendees discover how the blockchain is redefining ownership.
The road to the blockchain revolution is paved with complexity and acronyms, but head of blockchain and cryptoverse research at the University of Johannesburg, Professor Steven Sidley, treated Finance Indaba attendees to a thought-provoking session about how this technology is changing everything – including the way we think about ownership.
Steven, who co-authored the book Beyond Bitcoin: Decentralized Finance and the End of Banks, gave valuable insights into how the blockchain is reshaping entire industries, including finance. He was quick to point out, however, that the blockchain goes beyond Bitcoin and DeFi (decentralised finance), and crypto refers to everything from the metaverse to NFTs.
Blockchain technology was created in 2008 by Satoshi Nakamoto – an individual (or possibly individuals) whose identity remains a mystery (although Steven maintains it’s a man, he’s American, and his name is David Chaum). Initially serving as the transaction ledger for Bitcoin, it is a distributed (shared) ledger on a network that allows its members to record the origin or trade of any digital asset. The ledger is immutable, meaning that an asset’s records, like transactions or tracking, can’t be changed or deleted. The blockchain is decentralised, so no single entity or third party has control over transactions or records.
Rethinking what ‘ownership’ means
A significant aspect of the blockchain involves ownership, emphasised Steven. He explained that in about 1100 AD, deeds of possession became the default to indicate ownership – and it’s remained relatively unchanged until now. Your home, car, receipts – these things all indicate that something belongs to you. But ownership can be stolen or forged.
“Turns out, almost all crimes are insults against possession; your stuff can be stolen, and that includes your identity. Possession is part of being human. That’s why we’ve used authorities to attest to our ownership of things, but even a deed title doesn't guarantee ownership – look at the hijacked buildings in Hillbrow,” said Steven.
According to Steven, the blockchain eliminates this problem as it’s underpinned by something called asymmetric cryptography, which means you can “lock up” a secret (or proof of ownership) and someone else who has a separate ‘key’ can open it – but they need that particular key. This is called the public-private key pair, and the entire blockchain is based on it.
Trust doesn’t come into the equation
For many years, we have trusted custodians such as banks, lawyers, and stock exchanges with our assets. “They are middlemen and trustees, but the problem is that humans are involved, and you must give over your trust to them, and they extract fees for that trust. You pray that your trust isn’t violated, but in every case of fraud there is a breach of trust,” he said.
Steven added that with the blockchain there is no middleman; it is built on a system of mathematics where no trust is required (“2 + 2 = 4, you don’t need to trust that’s the answer, it just is,” he added). As the world has become increasingly digitised, so too has it become harder to define and secure ownership – but, for Steven, the blockchain is entirely redefining what it means to own something.
For example, he explained, you do not own your money. The government can print more money and debase yours – Lebanon and Cyprus are good examples of this, as when their banks ran out of money, and they were simply shut down. “The Central Bank doesn’t make decisions in your interests – did you know that every single nation state that has gone bankrupt has simply printed more money? Central Banks don’t want a parallel currency; they want your taxes.”
NFTs, DAOs, and magic
NFTs have become a buzzword but they have the potential to redefine ownership, too. According to Steven, an NFT is basically a digital receipt that gives the owner the full rights to own and sell an asset (sometimes it’s just a graphic). “It’s an enormous industry. Push aside the art for a moment and it is an absolutely secure binding of ownership. In fact, the first house was recently sold via NFT: there was no paperwork, lawyers, or transfer deeds,” noted Steven.
Another example Steven cited was a DAO (a decentralised autonomous organisation), an organisation built on the blockchain with ownership shared via tokens. There a several large venture capital companies in Silicon Valley who have thrown away their articles of incorporation and are now DAOs, and according to a New Yorker article, in November last year, a group called ConstitutionDAO raised $47 million in cryptocurrency to bid on one of 13 original copies of the United States Constitution. Other DAOs have announced plans to buy an NBA team and purchase land.
Steven concluded that although the blockchain is still new and complicated – and misinformation about it abounds – it holds promise to completely transform our lives. He quoted Arthur C. Clarke who once said, “All sufficiently advanced technology is indistinguishable from magic,” and for Steven, the blockchain is akin to magic.
“I predict this technology will be alongside the internet, the transistor, and the TV as one of the most transformative technologies in human history.”