Bitcoin and Property Rights

Property Rights Built Civilization

Economists have long agreed on one fact. Societies where property rights are firmly protected prosper, while those where they are not remain in poverty. The reason is simple. When people are confident that the fruit of the tree they plant today will be theirs to harvest next year, they plant trees. If the machine you build could be taken from you tomorrow, there is no reason to build it.

Peruvian economist Hernando de Soto argued in his book The Mystery of Capital that poverty in developing countries is not due to a lack of resources but a lack of property rights. He demonstrated that the poor in Peru actually held billions of dollars in assets, but because those assets were not legally registered and protected, they could not be used as collateral for loans or investment. Without property rights, capital becomes “dead capital.”

The prosperity of Western civilization is deeply connected to the gradual establishment of property rights protection following the Magna Carta (1215). England’s Glorious Revolution (1688) restricted the king from imposing taxes or confiscating property without the consent of Parliament, and this became the foundation for the Industrial Revolution. Once long-term investment became safe, people began building factories and developing technology.

But when you look more deeply into the history of property rights, an uncomfortable truth emerges. While the state protects property rights, the state itself has been the greatest threat to property rights.

No Asset Was Beyond the State’s Reach

Throughout history, those in power have taken citizens’ property through various means. The most obvious method is direct confiscation. Henry VIII confiscated church property through the Dissolution of the Monasteries beginning in 1536, seizing an amount equivalent to roughly one-quarter of all land in England. Stalin forcibly confiscated the land and property of the kulaks (wealthy peasants), and millions died in the process.

But there are also more sophisticated methods. The 1933 U.S. gold confiscation is a prime example. In the midst of the Great Depression, in April of that year, President Roosevelt issued Executive Order 6102. This order forced American citizens to surrender their gold coins, gold bullion, and gold certificates to the government. The price was fixed at $20.67 per ounce. Non-compliance could result in a $10,000 fine or up to 10 years in prison.

Interestingly, the year after collecting the gold (January 1934), the government revalued gold to $35 per ounce. Citizens who had surrendered their gold to the government then bore a purchasing power loss equivalent to the 69% price increase. People who had saved gold as a safe store of value had most of their wealth taken by the government overnight. This gold confiscation order remained in effect until 1974.

In the modern era, there are even more refined methods. Bank accounts are frozen with a single court order. During the 2013 Cyprus financial crisis, the government forcibly cut deposits exceeding 100,000 euros by up to 47.5%. This was called a “bail-in” — shifting losses to depositors in order to rescue the banks.

Real estate isn’t safe either. Most countries possess the right of eminent domain — the ability to expropriate private property for “the public good.” Compensation is promised, of course, but the government decides what’s adequate. In China, tens of millions of people have been forcibly displaced for urban development and infrastructure projects.

And the most covert yet most widespread violation of property rights is inflation. When a central bank issues more currency, the purchasing power of existing currency holders decreases. This is a method of extracting citizens’ savings without direct taxation. Venezuela’s bolivar recorded inflation of approximately 1,300,000% (1.3 million percent) in 2018 alone. A few months were enough to turn a lifetime of savings into toilet paper.

How Bitcoin Changes the Nature of Property Rights

Bitcoin makes a fundamentally new proposition about property rights. Property rights that require neither the state’s protection nor the state’s permission. How is this possible?

First, Bitcoin is physically impossible to confiscate. To be precise, only someone who knows the private key can move Bitcoin, and the private key is nothing but information. As long as you memorize a seed phrase of 12 or 24 words, that Bitcoin exists only in your mind. Physical force cannot steal a thought. Of course, torture could be used to force someone to reveal a seed phrase (the so-called “$5 wrench attack”), but this is not a problem unique to Bitcoin — it applies to any secret. The best defense is to ensure that your Bitcoin holdings are not publicly known. The key point is that confiscating property on an institutional, large-scale basis — like breaking into a vault or seizing a bank — is impossible with Bitcoin.

Second, Bitcoin has no borders. Refugees fleeing across borders cannot carry gold bars. Bank accounts are blocked by capital controls. But 12 words in someone’s mind are beyond the reach of any customs inspection. When the Taliban took over Afghanistan in 2021, countless people lost access to their banks overnight. Banks either shut down or restricted withdrawals, and the Afghan central bank’s foreign assets were frozen by the United States. But those who self-custodied Bitcoin could still access their assets from other countries. Simply by remembering 12 seed words, they moved their wealth across borders.

Similar cases emerged during the Russia-Ukraine war. Shortly after Russia’s invasion in February 2022, some Ukrainians used Bitcoin to rapidly transfer assets out of the conflict zone. The Ukrainian government itself received tens of millions of dollars in international aid in Bitcoin and cryptocurrency. In a situation where traditional international remittance systems were slow and complex, Bitcoin crossed borders in minutes.

Third, Bitcoin’s rules are transparent and extremely difficult to change. Bitcoin’s 21 million supply cap, 10-minute block interval, and halving schedule are clearly defined in the source code, and tens of thousands of nodes worldwide simultaneously enforce and monitor these rules. No government, no institution, not even Bitcoin’s developers can unilaterally change these rules. No property system in history has ever operated with such transparent and predictable rules.

The Implications of a Property Rights Revolution

The new form of property rights that Bitcoin guarantees has implications beyond simply protecting individual assets — it carries broader social significance.

Historically, the threat of state confiscation has driven people to hide assets or avoid investment. This is why long-term investment is difficult in countries where confiscation risk exists. If Bitcoin becomes a truly global standard of non-confiscatable assets, it could provide a new foundation for making long-term plans regardless of a country’s political situation.

Of course, there are limitations. Seed phrases can be physically stolen. Bitcoin purchased through exchanges still falls under government surveillance. Large-scale mining infrastructure is concentrated in certain countries, making it potentially vulnerable to political pressure. It is premature to conclude that Bitcoin is the perfect solution for protecting property rights.

But the direction is clear. As Hernando de Soto demonstrated, prosperity comes to places where property rights are firmly protected. Bitcoin is an attempt to provide those property rights based on mathematical law rather than state protection. In all of human history, there has never been property that could not be taken by physical force. Bitcoin is implementing that possibility in reality for the first time.

That said, self-custody relying solely on a seed phrase carries the limitation that assets can be permanently lost if the owner dies. It is important to establish a multisig (multi-signature) setup or a reliable inheritance plan alongside it.