Bitcoin Indivisible? No, But It Is Indefeasible.
Blockchain cats. You read it correctly. Here’s the link. You can’t make this stuff up. But, even amidst all the hype about bitcoin, blockchain and…virtual cats, I at least have a working hypothesis on WHY this is happening. A deep dive into minutia that turns out to be really important.
The first successful block ledger, Bitcoin’s great grandfather, started Southern Australia in 1858. Yes, this was before computers. It’s the Torrens Title System. If you went to Law School in the US you may have spent a whole 30 seconds on the Torrens System because it’s barely used. But it’s a work of genius.
To make a long story short, Australia had a land title problem. The gold rush and poor recording practices had made as much as 70% of land titles to be considered “doubtful.” The solution was to take each of property and assign it a number. Those numbers were held by the government as a public ledger. If your name was recorded next to that number you were the unquestionable owner of the property. When you sell it, that number gets a different owner.
Sensible right? Simple Public ledger number representing land. But what Torrens created was something spectacular that had not existed before: Indefeasible Ownership. It’s a legal term of art. A thing that “can not be defeated, revoked or made void.”
Your ownership of land in Australia is said to be indefeasible because, if your name is on the ledger, there is nothing that can put your ownership in question. There’s no room for fake titles, or sales from people who never owned the land in the first place. The whole history of the property is right there in the ledger. Indefeasible.
Now you might be thinking. Hey, what’s the big deal. I barely pay anything for title insurance even under our cruddy grantor/grantee index. That’s true. But think about a region where, due to bad management, just 5% of the titles were found to be bad. The real estate value would quickly collapse. No one would buy there. In short, where proof of ownership gets cloudy values collapse quickly.
So why blockchain cats?
It’s because Bitcoin and the blockchain form indefeasible ownership in things. Bubble-wise this is a new and different animal. Let’s say for example that there is a beanie baby bubble. Someone has just bought a “truly unique” stuffed panda for $75,000. The entire premise of “truly unique” turns on the promise of the manufacturer. But what is to stop its rogue employees from turning out just one more. What’s to stop clever manufacturers from turning out knock offs. At the end of the day left with is a Beanie Baby worth 50 cents. So maybe you have never been into beanie babies but go ahead and think of any asset you own. Now prove it to me that you own it. So, you bought the Mona Lisa? It’s in your hands with a bill of sale from the Louvre. Now comes the onslaught of allegations that it’s a fake; that the Nazi’s stole it; that its provenance was faked; that the experts were paid off. Had the art been recorded on blockchain your title and the provenance of the painting would be indefeasible. Blockchain cats? Yea, they are just paying a game based on indefeasibility.
Whether you love Bitcoin or hate it, Bitcoin proposes a question guaranteed to bake your noodle:
If I truly and indefeasibly own something. But that something is actually nothing. Does it have value?
This is the proposition bitcoin proposes. Those who can’t stand Bitcoin say that it must collapse because it is…. nothing. Nothing at all rests behind the coin. Indefeasible or not, at the end of the day you own nothing. Bitcoin promoters, on the other hand, say that the indefeasible ownership, even of absolutely nothing, forms a perfect medium for exchange, and therefore, holds value. The value is equal to the consensus attributed to it by the market.
How Bitcoin Can Stab Itself
Right now, at this moment, indefeasible ownership of nothing is in fact something. $16,000 or so worth of something. Consider it an achievement. But as Bitcoin moves further into the mainstream, discussions about making changes to the underlying technology are, in my opinion, absolutely toxic. I’d argue that Bitcoin has “crossed the Rubicon” in this sense. Anything that actually or conceptually diminishes the supply or even “brand” of Bitcoin serves only to undermine the value. Push this too far and confidence will collapse. Listen, I get it. You might be a SegWit2X advocate; you might be a Bitcoin Gold proponent. Technically, you might even be in the right. But, Bitcoin has a good thing going. If you like the direction that Bitcoin is going …leave it alone.
