Princeton’s Arvind Narayanan: Blockchains and Governments are Two Different Solutions to the Same Problem

During the final lecture of Princeton’s Bitcoin and Cryptocurrency Technologies online course, Assistant Professor of Computer Science Arvind Narayanan made a thought-provoking comparison between governments and cryptographic technologies such as the blockchain. Although Narayanan does not seem to agree with the cypherpunk philosophy of cryptoanarchy, he did note that blockchains and the state are essentially two different solutions to the same problem. Here’s Narayanan in his own words:

“The state is one way to scale society past small groups where everyone trusts each other. The curious thing about that is that it’s very similar to the benefits that are touted for the cryptographic way of doing things in that these transactions are over the Internet where you don’t necessarily trust the other person.”

This concept brings up a provocative view of the disruptive potential of bitcoin, as it alludes to the fact that blockchains may be more efficient than governments in certain situations.

Two different systems for consensus

Governments and blockchains are, at their core, systems of consensus. With bitcoin, the network comes to consensus on the current state of the ledger. With the state, the idea is that voting for representatives leads to consensus on law (at least in a democracy). As Narayanan put it, “The state and crypto really are delivering a very similar benefit at the end of the day — even though through very different mechanisms.” Some in the bitcoin community have suggested that the blockchain could be used to replace elected representatives, but it’s of the utmost importance to remember that blockchains are not the perfect solution to every consensus problem. 

Dismantling the state is not an option

Indeed, Professor Narayanan is not of the opinion that the state can be replaced by a blockchain. In fact, he believes that decentralization through cryptographic protocols can only work if developers find a way for their solutions to fit into the current system. In his lecture, he notes, “Unless you have some way of interoperating with the state, you’ve not made any progress.”

Narayanan used the example of smart property to bring home his point about cryptographic technologies having to work within the confines of the state. If someone transfers ownership of a car via a blockchain and still holds onto the certificate of title, then, in the eyes of the state, that transfer never happened. A seller could simply say their car was stolen as long as they still hold the car title. Of course, this scenario assumes the governmental entity has not decided to adopt the blockchain as a vehicle for property registration.

Cryptoanarchists would disagree

Of course, cryptoanarchists would disagree with Narayanan’s assessment. The whole idea of “going dark” is to create a new structure of society outside of the state. Cryptographic cash was one of the main topics of interest on the cypherpunk mailing list for many years, so it would not be too surprising to find out that Satoshi Nakamoto also disagrees with Professor Narayanan.
Although it may not be wise to buy a car without receiving the title, it’s clear that the blockchain has already been used to subvert the state in some ways; one only has to look at the many darknet marketplaces in existence to see evidence of that. As time goes by, cypherpunks will only continue to build more state-ignoring applications on top of the blockchain. For them, dismantling the state is the only option.