Sam Abbassi is the founder and CEO of Hoseki, the Bitcoin asset testing service.
De Soto dreams of electric money
Countries in the Global South are not poor because of culture, collective IQ, lack of entrepreneurship, or market orientation; they are poor because they lack formal frameworks around property rights. Hernando de Soto deals extensively with these issues in the “the mystery of capital.” The ability to formalize and express ownership of property is the foundation of capital and wealth generation, and if you think it has something to do with culture, try (as de Soto says) getting into a taxi in Addis Ababa, Ethiopia , or walk through a bazaar in Tehran, Iran, or approach the Golden Temple in Amritsar, India without anyone trying to make a deal with you. The notion that the people of these regions lack the creativity and the “right” culture to generate wealth is inhumane, absurd and totally unconvincing. When you walk out the door of the Hilton hotel in Lima, Peru, you’re not leaving the wonderful world of mobile technology, antibiotics, the Internet and refrigeration behind. The people of Peru have all those things. What you are leaving behind is the magical world of legally enforceable property rights transactions.
The unfortunate reality that exacerbates the condition of people in these countries is that they are actually quite wealthy in their assets. The problem is that the assets in these regions are locked. Its citizens cannot represent the assets they own and cannot live the same parallel and invisible lives that they can live in the Global North. These assets, in effect, represent dead capital.
In the Global North, you can pledge your home for a loan, you can use credit scores to gain access to loans, you can own shares in a company through legally enforceable contracts, enjoy limited liability and insurance policies, take advantage of property they fix and store capital, all of which can be passed on to their heirs through hereditary succession. You can do all of these magical things in a world where the property records you own give you (the owner) and everyone around you (other market participants) access to general equity rights.
Bitcoin is a developing country
Countries in the Global South do not have these frameworks and neither does Bitcoin. Bitcoin suffers from much of the same malaise it inflicts on contemporary developing countries, such as mass migrations, explosions of extralegal activity, political and civil unrest, and general discontent with an antiquated system. Our migrations are digital, our extralegal activity is dictated by the country we live in, political and civil unrest have a story told that show no signs of abating and the antiquated system that we are unhappy with is maintained by a kleptocratic class of elites that express no responsibility for those who impose it.
The America of old (the America we love) used to be a developing country that, according to de soto, was “trying to deal with the law and disorder of immigrants, squatters, gold diggers, armed gangs, illegal entrepreneurs, and the rest of the colorful characters that made the colonization of the American West so wild and, if only in hindsight, so romantic.” Like the early American settlers, the prevailing English common law system did not work. It did not take into account new forms of access to property without an established titling system and generally accepted. This was specifically a problem when it came to cases involving dubious titles. Property in England was so well formalized, demarcated, and understood that there was no framework for handling newly discovered or established property. The great abundance of land in British North America presented the first settlers with unfathomable opportunities in Europe, both in the collective psyche vat of people as in the law. The colonists eventually formed their own rules that varied greatly by jurisdiction expanding on the principles of English common law. This form of self-government often clashed with the authorities, but as Peter Charles Hoffer emphasizes in “The Law and the People in Colonial America:”
“In theory they were part of the personal domain of the king [and subject to his laws]But the fact is ahead of the theory. Far from England, sparsely populated, rich in natural resources, and occupied by men and women who knew what they were thinking and took a deal when they saw one, the colonies moved closer to self-government.”
Ultimately, Western nations came to recognize social contracts born outside of official law as legitimate sources of law, making the law a tool at the service of popular capital formation and economic growth.
Bitcoin is at a similar point to where the United States was after its founding, and to the same point that developing countries are today.
Bitcoin brings Hernando de Soto’s dream to its ASIC-powered reality. Bitcoin is unique in that it natively enforces its own proprietary rights without a monopoly on violence which enforces most other assets. Bitcoin also has no jurisdiction; its jurisdiction is cyberspace and it is not tied to the imagined boundaries that make up physical space. What do you get when you have an asset without jurisdiction, asserting its own proprietary rights regardless of color, creed, country, language, gender, or vaccination status? You get a new world.
That’s what we see in Hoseki. We, like many of our friends, probably including the reader, see a new world where the best money earns. We are tired of the bland, soulless and amoral money systems that permeate and dictate our current lives.
Human potential is limitless, and limiting it with monetary discretion and central planning is on the level of psychotic, if not genocidal. Bitcoin gives us a solid foundation to build on that avoids the pitfalls of systems of the past. It is through this base that we can generate solid capital. Unlike the current system that emboldens rampant debt, anesthetizes itself through bailouts for those closest to the system, and sadistically brutalizes those on the fringes, Bitcoin offers something more. Bitcoin rewards good behavior, low time preference, high savings, planning, and responsibility. Without strong incentives to exploit, we are embraced by a self-righteous future with support beams built and maintained by a global collective, not a cabal of regional experts. It offers a world that promotes saving for the future of you and your family, one that will connect you to your locality and allow you, your family and your community to plan for generations. Bitcoin advances human potential through the emotionless application of consensus-based rules that provide us with predictability and, by extension, reliability.
Hoseki fix this
Bitcoin has built-in property rights. Just like the services offered by the brilliant Bitcoin companies today, which use the functionality that Bitcoin offers natively, namely multisignature Custody quorums, Hoseki is also wrapping something that Bitcoin offers natively. After multigrade, signature verification seems to be one of the most underrated features that the Bitcoin protocol provides. We at Hoseki are taking up the torch and expanding on this core functionality. We want retail users to know that Bitcoin not only allows you to be your own financial institution by taking custody of your property, but also allows you to express ownership of that property. A framework around the expression of ownership of property is the fundamental component of strong property rights. It is also a way to unlock all the capital that is currently captured in your locked assets.
Hoseki it is a financial plumbing to transparently and privately express ownership of bitcoin to another counterparty. Proving ownership of an asset is a basic feature of any asset class, whether it’s stocks, bonds, cash in your account, or real estate. Like our brothers in Peru, Egypt, Myanmar, and Afghanistan whose physical property is stranded, we are facing a similar reality where our digital property, bitcoin, is stranded. Bitcoin is isolated across exchanges, mobile wallets, and hardware wallets. People hold bitcoin in different ways and in different places, so expressing ownership has become a challenge. There is no easy way for a broker, lender or underwriter to assess and verify your assets when trying to get a loan. You have the assets, they are quite valuable, but you cannot get any services. You’re not expected to move or sell your shares to finance your home purchase, but that stipulation exists when you try to use bitcoin. This is particularly frustrating because it has the most pristine asset in existence, but like property on the US border that has yet to be formalized, Bitcoin lacks a formal framework to express its natively enforceable property rights.
Today you are chained. Tomorrow you will be released. Hoseki is building a system that allows him to manifest the full potential of his bitcoin. It enables the world to benefit from Bitcoin and seeks to act as a bridge between the old world and the new as we shift to a global monetary regime running on a bitcoin standard.
This is a guest post by Sam Abbassi. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.