A New Framework of Ownership
Ownership of crypto assets is about control. ‘Owning’ a crypto asset allows the holder of the private keys to control future transactions of those crypto assets. Ownership of crypto assets doesn’t feel the same as ownership of other assets, which usually comes with physical possession and/or legal rights.
Let’s look at an Ethereum transaction. I provide Bob my Ethereum public address and he sends me 5 ether. My public address can only be controlled by the corresponding private keys, which I store securely. A helpful way to think about public addresses and private keys is like email. Anyone can send to my email address (public address), but only I can send from my email address with my password (private keys).
I now ‘own’ 5 ether and this ‘ownership’ affords me the right to control those 5 ether. They have been assigned to whoever has the corresponding private keys, which in this case is me. The 5 ether will always reside on the Ethereum blockchain. I cannot take my 5 ether off the Ethereum blockchain, store them on my hard drive and at a later date bring them back onto the Ethereum blockchain to sell or transfer them. They are digital assets that live on the Ethereum blockchain. The 5 ether I own are assigned to me, or transferred to me, such that I now have control of 5 ether that I did not have before. I, and only I, have the ability to control these 5 ether through my private keys.
Ownership of crypto assets doesn’t feel like ownership in the same sense that I own a house or I own a gold bar. Ownership of other assets comes with more than just control, usually physical possession and/or legal protection.
Let’s consider other assets:
Gold – owning a gold bar likely means I have physical possession of that gold bar, which I can store in a vault or bury in my backyard. I continue to own the gold bar until I sell it or forget where I buried it
Property – owning land gives me control of the land, physical possession and legal rights
Shares – after buying shares in a company, my name goes on the company’s register. Nowadays, this is largely a digital experience. I have control of these shares until I sell them, usually on an exchange. Sometimes I do not have control of these shares, where for instance I am a minority shareholder and a critical mass of shareholders decide to sell all the shares in a company to an acquirer, in which case I am also forced to sell my shares
Cash (paper money) – I control and have physical possession of the $20 note in my wallet, but ownership of cash in circulation resides with governments and central banks. I control the cash until I exchange it for goods or services
Ownership of crypto assets is limited to control. There is no physical possession or legal protection. This might feel like a weaker form of ownership, but it is arguably the strongest form of ownership. Crypto assets are the only assets in human history which are unseizable. Cash, gold, shares and property can all be seized by the centralised actors behind these assets. Unfortunately, this is not an uncommon experience where governments cannot always be trusted to act in the best interests of their citizens.
Crypto assets are digital assets that reside on a digital ledger where ownership is the assigned right to control future entries on that ledger. If I buy or receive more crypto assets, I have the ability to control more future entries on that ledger in the future. This may seem incredibly simple but it is, in fact, incredibly powerful.