Column: Blockchain can help achieve globalization

Rage Comment : With Brexit and the prevalence of US trade protectionism, the process of globalization is becoming increasingly difficult, and the world is forming a trend of deglobalization. However, globalization can undoubtedly bring many benefits to everyone, and decentralization will undoubtedly hinder the development of the world. However, blockchain can solve these problems, allowing global companies and non-global groups to engage in fair transactions without waiting for local rules to meet global legislative rules. Perhaps the language that helps us achieve globalization is not English, but automated binary language.

Translation: Nicole

Deglobalization is not just Brexit-driven, but also growing U.S. protectionism. There is a general negative attitude toward globalization, including a variety of spontaneous and sometimes hostile actions, such as anti-Western universalism in Eurasia, anti-federalism in Europe, Piketty-type neo-Marxism in Western Europe, and ISIS, and from the Mediterranean to Central Asia.

What is at risk now is the post-World War II intellectual reconstruction orientation, that if the peoples of different civilizations discovered the profits generated by exchange, they would become interdependent and would recognize humanity as a whole.

Globalization has suffered a setback and will soon turn into deglobalization - a fact that globalized economies will find hard to accept. The debate continues that in order to address inequality, governments need to restore sovereignty and eliminate national borders.

Inequality has been rising in recent decades. But this is not because of international trade or the movements of people; after all, cross-border trade and migration have been going on for thousands of years. So what is causing this? To answer this question, we have to consider what features of globalization benefit the rich? The answer is: the ability to cooperate.

At the heart of globalization is the careful recording of knowledge, and the necessary legal tools, to combine sovereignty and property rights over seemingly useless single assets (electronic parts, legal rights to produce, etc.) to ultimately produce complex finished products (such as iPhones), and the appropriate surplus value they generate.

As we all know, a clear and accessible record of knowledge on a ledger not only describes who controls what and where, but also the rules governing the underlying parts that can be brought together from ten countries and made into a wooden pencil in Germany; similarly, it takes hundreds of parts to assemble a Swiss watch and thousands of parts to create an aircraft navigation system.

It is also these records that allow us to know which institution has the right to regulate the exchange, who has the property rights to the assets and who can use these rights to use the assets at the same time. This is how we know what can be used and whether a certain document can realize the functions of complex components, including these investment collateral, credit collateral, certificates for receiving public services, and property rights containers that capture and store the surplus value created by the integration of components.

After 20 years of field work in 20 countries and with more than 1,000 researchers, my organization, the Institute for Liberty and Democracy (ILD), has determined that 5 billion people—7.3 billion people worldwide—are not recorded in national ledgers or in any way that can be easily compared, measured, or mixed. Instead, information about their entrepreneurial talent and the legal rights to their assets are recorded in hundreds of fragmented systems of records and rules that are difficult to share internationally.

By Hernando De Soto

The missing link between the legal chain and the blockchain

The lack of a unified record of knowledge—not transactional knowledge—is a major cause of global inequality. There is a huge disconnect between the lawyers and politicians who write and implement the laws and regulations that govern globalization and the people who implement policy, and who have little connection to the people who record or control the ledgers that record social contracts. In other words, the legal chain is missing some key link.

Based on the experience in Japan, the United States, and Europe, it takes a century (meaning a long time) to implement legal regulations that ensure equal rights and opportunities. But there is a faster way: Don’t think of these missing links as missing links in the legal chain, think of them as missing links in the knowledge chain.

ILD knows a little about knowledge chains. It took us 15 years to bring millions of people into the global legal system by bringing knowledge from marginal ledgers into the legal mainstream - without the need for complex software. But we don’t have decades to spend on this process; if we want to achieve globalization and reduce injustice, we need to quickly import information on billions of people. This process needs to be automated.

More than a year ago, ILD began—with seed funding from Omidyar Network and the patient guidance of Silicon Valley’s Bill Tai—to consider whether information technology, especially blockchain (the transparent, secure, and decentralized online ledger that supports Bitcoin), could enable more of the world’s population to participate in the globalization process. The answer is of course!

By translating the language of legal chains into digital language—requiring us to develop a 21-part typology—we created a system that does at least four important things:

First: identity authentication, locate and confirm any ledger in the world, and make the ledger public;

Second: putting all international contracts on a ledger (whether local or global) digitally can make compliance more efficient and can put the reputation of the contracting parties at risk;

Third, we can compress into 34 binary indicator questions that the computer must ask the captured ledger to decide what clauses should be implemented in current legislation, which can make the globalization process more fair;

Fourth, use these 34-bit indicators to write the missing links in the legal chain into "blockchain smart contracts", so that global companies and non-global groups can engage in fair transactions without having to wait for local rules to meet global legislative rules.

All things being equal, perhaps the language that helps us achieve globalization is not English, but automated binary language.

This column is a guest post by Hernando De Soto and appears online via Commentary. The opinions expressed in this article are solely those of the author and not those of Bitcoin Magazine.