September 27, 2024
In the span of the last decade, we've seen a digital revolution unfurl before our very eyes. Blockchain innovation and adoption, once a niche curiosity, has exploded onto the global stage. According to Statista, an estimated 295 million individuals were engaging with crypto by the end of 2023, a staggering increase from a mere 1.5 million just 10 years prior.
Blockchain technology has ushered in a new paradigm that allows us to transact directly with one another, eliminating the need for traditional centralized entities. For a more in-depth exploration of how this technology works, check out my previous article, Blockchain Demystified Part 1.
In today's piece, we're diving into how this disruptive technology empowers us with the capability to take back control of our own data, assets, and personal rights, and what that means for privacy, financial freedom, and autonomy.
First, a personal anecdote about a scary experience I had with my brokerage.
A few years ago, I logged into my brokerage account (who shall remain unnamed) to move some of my stock to a different account. But, for some reason, I was prohibited from moving the stock. After spending hours researching help center articles, I finally called customer support, who told me that my stocks were under an escheatment process, which is why I can’t touch them.
What is an escheatment process? In short, escheatment is a process where the state takes over unclaimed property or assets for an individual, typically from the company that originally held the asset, or owed money to the individual.
Unclaimed assets can be a bank account, stocks, check for a refund, or unclaimed paychecks. It can also be physical items like heirlooms or jewelry. If the owner has not demonstrated any interest, or has not made contact, for a period of time, then the asset will be determined as unclaimed. The period of time is known as the dormancy period, which differs by state. In California, it is 3 years for most assets.
But why would companies put assets through escheatment? Companies, at one point, was closing inactive accounts and kept the assets for themselves. So states created the escheatment process, and took on the responsibility to hold and provide a way for consumers claim their assets.
All states require companies to report unclaimed property, and turn them over to the state, which then converts it to cash (because they don’t want to manage a portfolio of assets). By the way, you can check if you have unclaimed assets via https://www.missingmoney.com/.
States can use the money to support local programs and services, turning unclaimed funds into another source of revenue, until it is claimed. In fact, it is the fifth largest source of revenue for California, and the third largest for Delaware.
In my case, a database error led my brokerage to believe I hadn't accessed my account for three years, triggering the escheatment process. Thankfully, I eventually regained access to my stocks. However, not everyone is as fortunate, as the case of Walter and his Amazon shares demonstrates.
I first heard about Walter on Planet Money. He was a shop owner who saw competition coming from Amazon early in the 90s, and realized his store could never compete. He decided that if he couldn’t beat them, he’d invest in them. So, he bought $6000 worth of Amazon stock and did what all good, patient investors should do. He held them for the long term.
Fast forward 20 years, Walter decided to check on his investment, expecting to see a sizable nest egg for his retirement. Instead, he found an empty account. His shares had been sold as part of Delaware's escheatment process, netting him a mere $8000 for shares that should have been worth $100,000+
Walter's predicament brings us to a vital lesson from the crypto sphere: "Not your keys. Not your coins." This is because whoever has the private keys has the authority to transact, and therefore owns the assets (see our article here).
Centralized entities hold the "private keys" to our assets, which means they effectively have ownership. This creates a single point of failure and a trust-based system, which, as we've seen with Walter's case, can have disastrous outcomes.
The trust we place in centralized entities can be violated in numerous ways, from corruption and misuse of power to poor management.
Consider the malicious intent behind Bernie Madoff's Ponzi scheme in 2009 which defrauded investors of approximately $65 billion, or the corruption behind Cambridge Analytica, who harvested the personal data of millions of Facebook users without consent.
Giving a single entity the ability to control information and transactions and they may use it to manipulate situations to their advantage or silence dissent. In Canada, the government exercised Emergency Powers to pressure banks and donation sites to freeze or restrict accounts associated with the trucker protest. In Iran, the government can freeze bank accounts of women who refuse to wear a hijab.
Our personal data is also at risk when we trust it to companies and governments, exposing them to abuse, surveillance, or theft. This was painfully evident in 2017 when Equifax, a multinational consumer credit reporting agency, fell victim to a colossal data breach, resulting in the exposure of personal and financial data of 147 million individuals globally. Similarly, in 2020, the US Federal Government, and several global organizations, suffered a data breach unleashing personal and other information to hackers.
Equally, trust can be undermined through poor management. Case in point, mismanagement of risk at Silicon Valley Bank triggered a bank run, necessitating the intervention of Federal authorities. Another striking example is Lehman Brothers, whose reckless handling and greed set off the 2008 financial crisis. Incidentally, this crisis served as the catalyst for Satoshi Nakamoto to release the groundbreaking Bitcoin whitepaper, introducing us to the technology that could enable us to move away from centralized banking systems.
While blockchain technology can't solve all trust issues, it does offer a path towards greater control and self-sovereignty. It is rooted in the philosophy, "Don't trust. Verify". It assumes that no single entity can be trusted, and instead, relies on cryptography, math, and a large network of computers to verify data and validate transactions.
By distributing control and decision-making across a network, it becomes significantly more challenging for any single entity to manipulate or censor the system. The result? A technology that enables us to protect our own data, assets, and personal rights.
Imagine a communication platform that is both decentralized and secure, impervious to censorship. In such a platform, there would be no single source to shut down, making it impossible to suppress information or ideas. This is precisely what blockchain technology offers.
For those in countries where free speech is restricted or under threat, blockchain-based journalism apps, like Mirror, offer a lifeline. This decentralized blogging platform enables users to publish content on a network that is immune to takedowns, and where control of distribution rests solely in the hands of the content creators.
Financial freedom and equality are also within reach, thanks to blockchain technology. Traditionally, high-quality investments and low-interest loans have been reserved for the wealthy, exacerbating the wealth gap. However, Decentralized Finance (DeFi) platforms are leveling the playing field. They offer equal access to financial services, such as trading, borrowing, and lending, independent of traditional banking systems.
For instance, Aave is a DeFi lending platform where users can borrow against their own assets with no credit score or minimum wealth requirements.
Or consider Uniswap, which is a decentralized exchange that operates 24/7, free from geographical restrictions or banking hours.
Lastly, the combination of blockchain and zero-knowledge proof (ZKP) technology can offer robust protection for personal data. ZKP is a cryptographic method that allows proof of knowledge of specific information without revealing the information itself. In other words, it's like proving you know a secret without actually telling the secret.
This technology can be used to create decentralized identity solutions that authenticate identity and personal information without sharing any data with third parties. In a world where privacy is under constant threat, blockchain with ZKP provides a secure, decentralized, and tamper-proof platform where individuals have control over their data, enhancing personal privacy.
Blockchain technology has the power to catalyze seismic shifts in how we manage our finances, preserve our privacy, and resist censorship. By granting us greater independence and self-sovereignty, it places the control of our future back into our own hands.
