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The Key to Unlocking Global Capital
A Universal Representation System
As we move further into the 21st century, we find ourselves on the precipice of a technological revolution, at the core of which is blockchain technology. The blockchain will become the world's formal representation system for all real-world assets. This migration will unlock value local to a community similar to the United State's early success in formalizing property rights, as described in The Mystery of Capital.
The blockchain, a decentralized digital ledger, has the potential to revolutionize how we think about asset ownership, tracing its roots to the fundamental principles discussed in De Soto's book. He argues that the success of Western economies is largely due to the formalization of property rights. Establishing a universally recognized system allows people to use their assets as collateral, generating capital. However, in emerging markets, property rights are often informal and unrecorded, thus unacknowledged universally, making them 'dead' capital.
Here, the blockchain technology shines through with its potential to provide a decentralized, transparent, and secure system for recording all real-world assets, not only properties. This universal system will unlock value by turning 'dead' capital into 'live' capital, which can be borrowed against or traded, similar to how the standardization of property laws across the US ignited an era of unprecedented growth and prosperity.
The Only Path to Global Formalization
The decentralized nature of a blockchain makes it the only viable pathway to formalize the representation of assets and processes globally. Because a blockchain is decentralized, no single entity controls the entire system, reducing the risk of corruption and enhancing the system's security. Each transaction is recorded across multiple nodes in the network, creating an immutable, verifiable history of all transactions related to an asset.
With smart contracts, the blockchain can automate transferring ownership, eliminating unnecessary intermediaries, reducing costs, and increasing efficiency. It is the only technology that has the potential to ensure two opposing countries, like China and the US, agree on the same standards and processes. These attributes make the blockchain the only viable technology capable of creating a universal ledger, facilitating the formalization of assets and operations worldwide.
Resurrecting Dead Capital
The blockchain's ability to formalize the ownership of assets worldwide can unlock a tremendous amount of 'dead' capital. As De Soto highlighted, more than 90% of Egyptians held their properties informally at the time of writing the book. They couldn't use these assets to secure loans or fuel economic growth because the ownership wasn't officially recognized or recorded — despite having potential for massive amounts of wealth generation.
By tokenizing these assets on a universally recognized blockchain, these assets would be transformed into 'live' capital. Owners can use their assets as collateral to access credit, fueling entrepreneurship and investment, thus spurring economic growth. Replicating the same effect globally that the US experienced through its standardization of property rights.
Emerging Markets Stand to Gain the Most
With their informal and regionally varying processes, emerging markets are especially in a position to improve their current status. This system will significantly reduce corruption and fraud by providing a universal, transparent, and secure method for recording asset ownership. This newly developed trust will enable global investments from around the world to pour into those markets. The blockchain will ignite a new era of global growth and prosperity by unlocking trillions of dollars worth of 'dead' capital in these economies and making it available globally for the benefit of those communities.
The Future of The Blockchain
The blockchain will become a formal representation system for the world. By standardizing the representation of all assets and processes, the world will unlock vast amounts of 'dead' capital, reduce the cost of transactions, build trust globally, and increase the efficiency of our economies. Like the universal ledger system in the US that led to unprecedented growth, the blockchain has the potential to do the same for the world. At Etherfuse, we begin this process by activating localities' users and their activity in payments, remittances, and banking on the blockchain. We will tokenize this dead capital and bring it to the blockchain, enabling markets to activate their uniquely natural resource — its people.