Blockchain: everyone’s a capitalist!

With blockchain one can divide up any object into countless pieces and sell or rent out these pieces, and keep track of everything in a way that is as safe as the old-fashioned land registry, but infinitely cheaper. All the buyers of these pieces become co-owners of the object. The blockchain does the work, from making and receiving payments to managing decisions on the future of the object. Everyone can invest like this.

How does it work? Let’s take André Rieu, the famous Dutch violinist, as an example. He finally wants to play his ultimate Stradivarius. Which costs EUR 10 million. A unique instrument. With a drum kit and the Stradivarius, his millions of fans will help him to a top turnover. Small problem: Rieu does not quite have the money. But his fans do. The instrument is linked to the blockchain. His fans buy pieces of the Stradivarius. One million Dutch people chip in EUR 10 each. Everything is recorded in the blockchain. As owners of the violin, the fans receive rent or royalties from Rieu. Paid and administered in the blockchain. The fans vote on, say, the maintenance of the violin through the blockchain. And if Rieu quits bowing at some stage, the fans will sell the Stradivarius on. And collect their profit…

Or let’s take a new Rembrandt. The Rijksmuseum wants to acquire it, but does not have the money. The blockchain makes it possible. The blockchain owners lend the painting to the museum for a period of ten years and then sell it on…

And the law? At first sight, civil law seems equipped for this new challenge. From ship partnerships to buying a barrel of whisky: clubbing together is as old as the hills. There does need to be a precisely worded agreement in order to steer clear of the pitfalls of our property law. That agreement? That is recorded in the blockchain. Noblesse oblige…

That is, at first sight. Right now, house-sellers, for instance, remain in limbo in the blockchain. Through the blockchain they sell pieces of the beneficial ownership of a house and divide the rental income over the many buyers. That beneficial ownership is separated from legal title. Logically so: the land registry could never register hundreds or thousands of individual owners cost-effectively. But beneficial ownership is not true ownership, as every lawyer knows. And that constitutes a risk for the buyers. Especially when the (overly) ambitious seller goes belly-up.

Moreover, something is missing: the fact that the Stradivarius is recorded in the blockchain only means that all owners who participate in the blockchain can prove their participation in the blockchain. Not that the Stradivarius really was the seller’s property. Nor that he did not buy a much cheaper violin instead. And it also does not mean that Rieu, short of money because of the high interest and rental costs, cannot simply go and sell the Stradivarius and pocket the money. Somebody needs to establish the connection between reality and the blockchain. And exactly therein lies the risk.

That brings us to the issue of government oversight in this new world. The AFM, the Dutch financial markets regulator, has yet to get to grips with blockchain. Which oversight? What kind of oversight? Do we need oversight? Before all that has been decided, the world will inexorably have changed to such an extent that the regulators will have to settle into that new reality, reluctantly or not.

Because I also want a piece of the Stradivarius. I want a piece of Rembrandt. And of Van Gogh! A piece of Manhattan! All of a sudden, we can all be a bit of a capitalist. From as little as a few euros a month.

Jetse Sprey