Trust & Blockchain
Posted on . 3 min read
Once the current crypto boom & bust cycle blows over, property rights can be an area where technology underlying crypto can potentially benefit the society by reducing costs and increasing velocity for certain transactions.
How would it work?
In a nutshell, the existing societal trust in systems and practices will translate to the adoption of new technologies, such as blockchain/ledger/smart-contracts. However, these technologies cannot create trust out of thin air. Trust can not be created by technology, but can be transferred from one process to another (i.e. human lawyers + standard contracts to smart contracts or blockchains). At the same time, trust can easily be destroyed by poorly understood/implemented technology.
How will it be used?
Property Rights: The average Joe in the US would no longer need to incur thousands of dollars in title insurance expenses (typically 1% of property value) when buying a property because the title will be on the ledger for everyone to verify. There will be no need to pay for a possible fraud getting detected at a later stage. At the same time though, the average Jai in India might not get much benefit until property rights in India rise to the level where they are immutable.
Smart Contracts: The average Jane in the US wants to start a food truck business to sell delicious tacos & pupusas. She wants to raise $15,000 from friends and family, and if the business grows and she graduates to a restaurant or a franchise chain, she wants to reward her early financial backers and loyal customers by giving them equity in the expanded business, maybe putting an upper limit, and also putting a few conditions in place. Right now, structuring such a contract would cost thousands of dollars and involve spending days & weeks with lawyers. With smart contracts, this can be done in minutes with a fraction of the money.
Contract Automation: A software or media company can draft a partner contract and put it on the blockchain where anyone can adopt it and become a partner instantly rather than reviewing an agreement via lawyers and traditional documents - costing time and money. This is similar to a software startup like ourselves using Amazon Web Services (AWS) by signing standard contracts with no lawyers involved. To some extent, AngelList is doing some of this (although not on blockchain) with angel investing and initial startup setup processes, and YCombinator did it with SAFE agreement for making investing standard. Once SAFE is on the blockchain, the costs will go down further.
Who will benefit from it?
Developed countries are likely to benefit sooner because property rights (for art, music, media, software, land, houses etc) in these societies are already tightly enforced, which will likely make the transition easier.