Blockchain Applications Will Thrive, but Only With State Support

Blockchain has a much better chance of changing society if coupled with the state, but the relationship between the two

This article was written by Rupert Hackett, Community Manager at, a wholly Australian owned and operated bitcoin company.


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It is 2016 and the awe of the success of Bitcoin as a non-government censured, anarcho-capitalist currency is gradually giving way to the realization that distributed public ledger technology, known as ‘the blockchain’, has a vastly greater opportunity to change society when coupled with the state.

The Economist, a weekly magazine with over 1.5 million subscriptions, featured an article on the blockchain on the cover of its issue of the last week of October 2015. The article’s title, ‘The trust machine’, sought to capture what the blockchain is all about.

The Economist: “The blockchain lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority. Simply put, it is a machine for creating trust.”

Rupert Hackett
Rupert Hackett

Blockchain-built solutions are turning out to be everything from distributed exchanges, smart property, transparent and reliable public administration and identity platforms.

The blockchain is a solution for everything!

In the wake of this realization, established companies and startups alike are rising up to claim a stake in the technology. Philips, Chain, Blockstream, eBay, Etherium, Nasdaq, Barclays, BNP Paribas…. the list keeps growing longer each day.

It goes without saying that this embrace from investors has put those in the Bitcoin community in a buoyant mood. However, the relationship between the technology and the state, the other major stakeholder, is still uneasy.

This can be attributed to regulators around the globe still not understanding what this technology is all about. A few legal jurisdictions have taken legal positions, ostensibly to protect consumers with industry codes of practice, but most have turned out to stifle this innovation. A case in point is Bitlicense, which has seen the state of New York hemorrhage Bitcoin business in the form of brands and startups that have sought bases elsewhere.

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An ideology could stand in the way of technology

Even with accommodative regulation, the problem between the state and blockchain technology has to do with the vision of the early Bitcoin adopters, bearing in mind that the majority of them were libertarians.

Initial users expected ‘Blockchain technology’ to break big government through the application of smart contracts and oracles, creating distributed autonomous organizations (DAOs) which would usher in a new ‘golden-age’ of libertarianism.

While this narrative still has a place in the Bitcoin community, it is gradually dawning that they may have expected too much of the technology. Whilst Blockchain technology definitely has the potential to revolutionize banking and governance, its true power may only be realized with support from the incumbents.

It is important that state does not fight the blockchain

Even more importantly, it is becoming apparent that the government could play a major part in making Blockchain applications thrive- beyond not interfering with it.

This is because even in a situation where the Blockchain seems it could succeed alone, there are many things that can go better with government support.

Let’s take smart contracts and property for instance. Suppose a car is registered on the Blockchain and is controlled through a public- private key mechanism. In order to sell the car, the owner and the buyer will create a smart transaction on the blockchain in which the seller’s Bitcoin and the car’s private keys will exchange automatically and both parties will be happy.

However, what happens in a situation where the seller does not hand over government issued car documents along with the private keys to the buyer? The seller could launch a complaint in a court of law and seek to regain ownership of the car through the authority of the state.

While how the court will handle such a case is subject for debate, it is clear that state-recognized blockchain transactions would help validate their claims when they appear in court. Indeed, almost all applications being built on the blockchain will only thrive in the presence of government, and not in its absence.


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