A Private Utopia: Anarcho-capitalism, DLT, and Cryptocurrencies

In case you didn’t know this, cryptocurrencies and most of their related technology weren’t created only to be yet another digital payment platform. Nor to be any sort of investment or get-rich-quick scheme. The people behind them, the cypherpunks and crypto-anarchists, thought of them as a freedom tool for a looming digital future. On the other hand, the Anarcho-capitalism supporters could say this is the final piece to finish their puzzle.

Anarcho-capitalism (also known as “Ancap”) is a political and economic philosophy that advocates for the abolition of the state and the establishment of a purely voluntary society based on private property, free markets, and individual liberty. It is quite similar to crypto-anarchism, just that the latter is more focused on using privacy-enhancing technologies to protect personal data from governments and corporations.

Key features of anarcho-capitalism include the privatization of all functions typically associated with government, including the provision of security, legal services, and infrastructure. Instead of relying on a monopolistic state to provide these services, anarcho-capitalists argue that competing private firms and voluntary associations would emerge to fulfill these roles more efficiently and effectively through market competition.

Additionally, anarcho-capitalism emphasizes the importance of private property rights as foundational to a free society, asserting that individuals have the right to own and exchange property without interference or regulation from the state. If this is starting to sound like something cryptocurrencies do, well, yes. That’s why anarcho-capitalists could use cryptos and other decentralized technologies for their purposes.

Crypto + Anarcho-capitalism

In a modern society, the implementation of anarcho-capitalist principles would entail a radical transformation of existing political and economic structures. However, Distributed Ledger Technology (DLT), cryptocurrencies, and other decentralized systems could facilitate the emergence of voluntary, decentralized forms of governance and dispute resolution.

These cryptographic tools hold the potential to facilitate a functional anarcho-capitalist society by providing decentralized mechanisms for governance, transactional transparency, and secure exchange of value. Imagine a community where individuals voluntarily engage in transactions and contracts without relying on a central authority —because they don’t need it. DLT ensures that transactions are recorded securely and transparently across a network of nodes, eliminating the need for a central entity to verify and authorize transactions.

Cryptocurrencies, as a key part of such an ecosystem, would serve as mediums of exchange within this society. Unlike traditional fiat currencies, cryptocurrencies (when done right) are not controlled by any single entity or government, making them immune to manipulation and censorship. Individuals can freely store and exchange value with one another without intermediaries, fostering a truly free market environment. The only middleman is a computer code.

Some concerns

That’s the theory. Everything has its downsides, after all. In a world where only money would matter, preventing abuse against the weakest links on the chain would require some kind of authority and rules. It wouldn’t be a government, per se, but it would still be a company —a centralized party. Insurance firms or private defense agencies would be chosen by property owners to defend their rights. These entities would function competitively, assuming the roles of traditional state institutions like courts and law enforcement.

They wouldn’t hold any right to censor, seize, or block properties because everything would be auto-custodial. Nevertheless, not everybody would likely be able to pay them to defend their rights. It’s also probable that a small number of these hypothetical insurance firms would grow much more than others, creating another kind of power concentration.

Without government intervention, monopolies and authoritarian city-states could form, limiting competition, freedom, and innovation. Moreover, the nature of anarcho-capitalism could lead to difficulties in coordinating collective action and addressing societal challenges, such as environmental protection and social welfare.

So, while anarcho-capitalism presents an enticing vision of a society based on voluntary interactions and individual freedom, it also raises significant concerns regarding power dynamics, justice, and the ability to address societal needs effectively. The application of DLT and cryptocurrencies can offer some benefits and solutions, but they may not fully mitigate these fundamental challenges.

The Tale of Bitcoin Citadels

A quite radical example of how anarcho-capitalism could end badly is in the tale of Bitcoin Citadels, published in 2013 by the Redditor Luka Magnotta. He pretends to be a time traveler from the future, trying to warn about the consequences of fully adopting Bitcoin to completely transform society into what seems to be an anarcho-capitalist system.

In this future, Bitcoin's value has soared exponentially, leading to a society where wealth is concentrated among a privileged few, especially among big companies and authoritarian monarchies. The wealthiest individuals reside in Bitcoin Citadels —isolated gated cities protected by sophisticated security measures and automation, born out of the fortifications used to safeguard Bitcoin mining facilities.

Governments have become obsolete as Bitcoin transactions evade taxation, and the global economy stagnates due to minimal incentive for investment. Terrorist movements emerge, targeting those with significant Bitcoin holdings, leading to societal breakdown and widespread suffering. Desperate measures, including global destruction by nuclear bombs, are considered.

Of course, this is quite bleak, drastic, and unlikely. Back when this Redditor wrote the story, new solutions like smart contracts barely were in their infancy. Smart contract tools could ensure fair and transparent governance by automating contractual agreements without the need for intermediaries, reducing the potential for corruption and inequality. Additionally, decentralized governance models could empower communities to collectively address societal challenges, fostering collaboration and accountability without reliance on centralized authorities. Just as in the network states model by Balaji Srinivasan.

No More Mining

Maybe Luka Magnotta wasn’t exactly the best at telling the future, but the harsh criticism against Bitcoin mining could be justified. It not only gives an inconvenient amount of power over the network to a few mining companies, but it’s also an ecological issue. The more energy produced and taken (for mining), the more negative emissions sent to the atmosphere. It may not be a significant problem currently, but Bitcoin keeps growing. This could become a long-term sword of Damocles hanging over the world.

Luckily, the development of different distributed ledgers hasn’t stopped. That’s how Obyte was born, trying to solve the initial downsides of Bitcoin and other crypto coins as well, including potential centralization and censorship that miners could apply, and environmental issues. Unlike Bitcoin, Obyte utilizes a consensus mechanism that doesn't require mining and doesn’t rely on any other powerful players like miners. This design significantly reduces the carbon footprint of the network, making it more environmentally friendly and sustainable, while offering a higher level of resistance against censorship and manipulation.

Moreover, Obyte's smart contract capabilities could serve the advantages of anarcho-capitalism, offering a platform where individuals can engage in voluntary exchanges without reliance on centralized authorities. The network's decentralized nature empowers users to transact freely and securely, fostering a peer-to-peer economy based on individual autonomy and voluntary cooperation. Additionally, Obyte's smart contract functionality enables the creation and execution of automated agreements, further enhancing individual autonomy and reducing the need for third-party intermediaries.

Besides, Obyte's ArbStore provides a mechanism for dispute resolution, providing a marketplace for inexpensive arbitration services. This platform allows users to resolve disputes fairly and impartially, ensuring that contractual agreements are upheld without the need for traditional government-run legal systems. We can say that Obyte offers a comprehensive solution that embraces the best parts of anarcho-capitalism and crypto-anarchism while promoting transparency and individual freedom within the network.

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