Below is a lightly-edited transcript of my presentation of the same title to the 2019 Annual Meeting of the Property and Freedom Society on Sunday, Sept. 15, 2019. Youtube embedded below. For the podcast, related links, and associated powerpoint slides, see KOL274 | Nobody Owns Bitcoin (PFS 2019). I expect to publish a version of this as an article shortly; for now, cite as Stephan Kinsella, “Nobody Owns Bitcoin,” StephanKinsella.com (April 21, 2021).
Some related Q&A is in this session which was held later on the same day: Hülsmann, Kinsella, Dürr, Hoppe, Q&A (PFS 2019).
See also Marty Bent, “Is Bitcoin a New Type of Property?”, Bitcoin Magazine (Jul. 29, 2022).
Nobody Owns Bitcoin
by Stephan Kinsella
Transcript of a presentation delivered at the 2019 Annual Meeting of the Property and Freedom Society on Sept. 15, 2019. Cite as Stephan Kinsella, “Nobody Owns Bitcoin,” StephanKinsella.com (April 21, 2021)
STEPHAN KINSELLA: I feel a little bit like Madonna at a concert with this gear on, but that’s okay. So Godwin’s law says that in a political discussion, eventually Hitler or the Nazis will come up, and that happened really quickly today, didn’t it, just now? It seems to happen also with Bitcoin in any conversation Bitcoin comes up. We could maybe call this Satoshi’s Law.
So congratulations to Hans for having the first official PFS talk on a Bitcoin-related topic. This is my second talk on Bitcoin, and the first one was in 2013 in Atlanta at the Crytocurrency Conference on legal tender law. I’m not really an expert on Bitcoin. There’s lots of people in the room that are far more experts than I am on the technology and even the economics and the finance of Bitcoin, and so today I’m talking about property rights issues related to this idea.
So I was going to start this talk by saying raise your hand if you own Bitcoin, but I decided against that because I don’t want to expose anyone to any prying eyes. And it’s a trick question because I would say the talk is titled Nobody Owns Bitcoin, so you’re wrong. You don’t own Bitcoin. But I’m not that mean today, so I won’t do that.
So in a way I’ll go ahead and not hide the ball. The answer is nobody owns Bitcoin. It can’t be owned. The interesting question is why? One short answer is it’s very simple. People only own their own resources, and therefore, no one owns information. It’s very simple. That’s the answer, end of the talk. I mean if you understand the case against intellectual property this should be obvious, except even the case against intellectual property is not obvious to everyone. It takes awhile to grasp it. It’s very difficult for some people, although once you grasp it, it seems very simple.
Hans – Professor Hoppe made the same – a similar argument in his talk in 2016 here where he elaborated on his argumentation ethics, and he pointed out that once he figured it out, he wondered why no one had thought of it. But once you figure it out, it is deceptively simple, but it’s path-breaking nonetheless, and Hans pointed out something similar about Mises’ argument against the possibility of economic calculation under socialism. The argument seems very simple once you hear it, but it took Mises to discover it.
So what’s really the fuss about? Why would we even argue about this? And the reason is because in Bitcoin circles and outside Bitcoin people talk about it in certain ways. They say that I own certain Bitcoins. They talk about the possibility of Bitcoin being stolen or Bitcoin theft. And sometimes I say, well, I thought about it, and technically you don’t own your Bitcoin, and you can’t really steal Bitcoin. And this makes some Bitcoiners angry. It’s sort of like praising Hillary Clinton in front of a bunch of libertarians or something. They think I’m criticizing Bitcoin. You can’t criticize Bitcoin around Bitcoiners because nothing sets them back.
If you point out the government might confiscate it, it’s not a problem. I mean Bitcoiners are eternally optimistic. Anyway, it’s not a criticism. It’s just a legal analysis. It’s not ownable. Lots of things aren’t ownable in life—love, knowledge, relationships—and that’s not a criticism of those things existing or being valuable in life or playing a role in our life.
So why does it matter whether we own Bitcoin and how to describe this phenomena? Well, for one thing, the state thinks it matters. Various states around the world are noticing this phenomena, and they’re coming up with different tax rules sometimes classifying it as property, sometimes in other ways basically to steal it. So I sometimes caution Bitcoiners. Quit trying to argue that it’s like gold or a commodity or ownable because you might get what you wish for, and you might not like the results. Let’s maybe keep the waters a little muddy for the state.
But why would people disagree about this issue? Why would there be confusion? One reason is because the state over the centuries, especially in recent times, has gradually intruded into law with democratic law-making as Professor Hoppe calls it, which is legislation, the state. And the other is just conceptual confusion because law is developing over the centuries, and not everyone is an expert, and experts sometimes disagree. And this derives in large part from imprecision in language and their overuse or the misuse of analogies and metaphors.
Now, many Austrian thinkers have – and other thinks have cautioned against the misuse or overuse of metaphors. Metaphors are really impossible to avoid. The imprecision of language is impossible to avoid. But we have to be cautious of it. Böhm-Bawerk in 1881 himself said it’s basically impossible to avoid the use of metaphors if we can – it would be an absurd undertaking to banish from the language of economic theory every manner of speaking that is not literally correct. We couldn’t say the one-hundredth part of what we have to say if we refused to take recourse to a metaphor. But one requirement is essential—that economic theory avoid the error of confusing a practical habit, which we indulge in, for the sake of expediency, with scientific truth. So he’s saying we do – we have to use metaphors, but we have to be careful.
Many other thinkers have – and ironically Roderick Long, a libertarian philosopher, pointed out that, ironically, in his memoirs, Mises accused Böhm-Bawerk himself in this dispute over Cantillon effects of being led astray by the idea of friction and other metaphors borrowed from the physical sciences. So even Böhm-Bawerk fell prey to this. And Professor Rothbard and Guido Hülsmannn – they’ve also pointed out the dangers of overuse of metaphors in economic and political reasoning.
A famous American judge, later a justice on the Supreme Court, Cardozo, in 1926, said, “[M]etaphors in law are to be narrowly watched, for they start out as devices to liberate thought, but they often end up enslaving it.” And there’s other imprecisions in language we have to be wary of like – as Robert LeFevre, a famous classical libertarian, pointed out when we use possessives in language like my wife, it doesn’t mean I own my wife. It’s just a possessive, but people – well, in a libertarian society anyway – so people use this idea. My labor – it’s my labor. I own my labor, therefore, intellectual property. So you see how these ideas lead to confusion.
Another example would be—speaking of labor—David Hume himself criticized John Locke’s overly metaphorical, or as Hume called it, figurative idea that labor is joined to or mixed with objects, which is part of the argument for homesteading. And even Israel Kirzner, the Austrian economist, approvingly cites scholar, J.P. Day, who says that laboring is an activity, and although activity can be engaged in or performed or done, they can’t be owned. So we often say it’s my labor. I own it, but technically speaking you can’t own labor.
So with this in mind, what would it mean to own a Bitcoin? Why do people say that? So there’s just two parts to this proposition I own Bitcoin: ownership and Bitcoin. Very quickly, as I said, I’m not a technical expert, and Hans cautioned me not to overwhelm anyone with too much technical knowledge about Bitcoin. I’m not an expert, but I do have a t-shirt, which I do own. It’s a real thing.
So Bitcoin is basically a distributed ledger that tracks private-public key cryptographic pairs with entries in this ledger, which correspond to one of up to 21 million Bitcoins. And there will only be 21 million ever created in the Bitcoin system in about 120 years I think. We’re at about 18 now, so it’s a very slow grow. It’s – this slide we’re looking at now is being displayed from a file, which is on this computer. It’s on one memory device. Bitcoin is distributed, meaning there are about 10,000 or more copies of this ledger on different people’s computers, called nodes, around the world, and it’s updated every 10 minutes as new Bitcoins are created and transferred. So basically it’s a ledger, which is just information, so that’s what’s important to know that Bitcoin is just an entry – a Bitcoin is an entry on this big ledger, which is stored on many people’s computers around the world, so that’s all the technical detail.
Now, as to ownership, I was a little surprised in the last few years to realize that Mises himself had some extremely perceptive comments about this topic. Even better in his 1922 book Socialism, he basically distinguished between two types of ownership. In 1922, in Socialism, he called it sociological ownership. In Human Action, he called it catallactic. Basically, he means practical ownership, so he means the ability to use a resource, which is what humans do, and he called that catallactic ownership.
I’ve got a long quote here, but I won’t redo the whole thing, as compared to juristic or legal ownership, which is what most people mean by the word ownership or property rights, and he links this. Ownership and property rights are what the laws protect. So one is the right of ownership or property rights, and the other is the ability to use a resource, which he calls catallactic ownership.
Now, in Socialism, he even said this. I will read this part. The sociological or economic and juristic concepts of ownership are different, and this is natural. And he says one can only be surprised that the fact is still sometimes overlooked. Ownership from the economic point of view is the having of goods, which is part of human action. This can be called natural or original ownership, and it’s a purely physical relationship of man to goods. But the legal concept is that, it says, this is what rights people should have, so there’s a distinction between description and prescription, between the way things are and the way things should be.
So Mises clearly recognizes this, and this, of course, follows from his view of human action, which was praxeology, the logic of human action, which can be summarized as saying the human action is guided by knowledge. This point is often not emphasized in Austrian writing. The – it’s implicitly recognized. Some scholars mention it from time to time. But usually the focus is on the use of means, but of course, all human action is guided by knowledge. So human actors guided by knowledge about the way the world works – they employ scarce means to make changes in the world to achieve their ends. It’s what human action is. So the two ingredients of human action are the possession and ability to consult knowledge that guides your actions and the ability to control resources to change the way things happen in the world. These are scarce means, and that is what Mises would call catallactic ownership.
Now, in my view and in the view of probably mainstream scholars, it’s better to use the word just possession or power or control instead of saying catallactic ownership and having to distinguish it every time because this leads to confusion, and this is exactly part of the reason why Bitcoiners would say I own Bitcoin. What they really mean is I can control it, and it’s virtually impossible for someone else to steal it from me because of the cryptographic system that’s set up. It’s almost impossible for a Bitcoin to be taken without your consent, and they – by that they mean ownership. They’re thinking practically, but we should just say possession or control.
Now, notice that Mises links ownership and property rights, and that’s because property rights apply only in society when we have laws. But possession or use of resources would apply to any human actor even outside of society. Even Crusoe alone on his island has to employ scarce resources, but he can’t own these resources in the legal sense because there’s no legal system, and there’s no other people to threaten his use of property. Now, what happens is just as ownership is used to mean practical control or possession when it should be restricted to legal ownership, the word property has come to be used widely in society to refer to the resource that is owned, and this also leads to confusion. So someone would say that bicycle is my property, or this phone is my property.
But even mainstream legal scholars, when they’re thinking precisely and carefully, they recognize that technically speaking the word property ought to be restricted to the right, so you have a property right and a resource. You have an ownership right in the resource. The owner of the resource has the property right in the resource. To call the resource itself property can lead to confusion because then the question starts arising – well, we’ll get to this in a second.
But the question is, is this property? Are ideas property? Are Bitcoins property? Which is never the question. So if we clean up our terminology and our concepts, it helps us think more clearly about all this and avoid some equivocation, unintentional or intentional, and mistakes. So that – you would say – to be clear, you would say humans need to possess, not catallactically own – they need to possess and use scarce resources. In society, we have laws, the juristic laws, that protect the property rights in these resources. That means they’re owners of these resources. So you possess a resource that you need to employ as part of human action, but in society you might have an ownership or a property right, and you’re the owner. So it’s better to do this than to call an object property itself.
Now, how are these property rights determined substantively? In a free society, in a private law society, and roughly in the private law systems of the Roman law and the common law except for state intrusions, the rules were very simple. And this is how you can state the essence of libertarian rules of how property rights would be developed. Number one: self-ownership in the case of your body, which is also a misleading metaphor. It’s better to say body ownership because the self is a nebulous term. But basically if there’s a dispute over who owns someone’s body, the libertarian default answer is the person himself owns it, very simple. I can’t justify these rules right now. Professor Hoppe has already done this, but that’s the rule.
And then in the case of every other resource in the world, these are the scarce means of action that these are things that were previously unowned, and this is what distinguishes all other resources from people’s bodies. People’s bodies were not previously unowned and therefore are not technically homesteaded in my view. That’s why the rule is separate. It’s just there’s direct ownership of your body because of your special connection to it. But in the case of external resources, there are three rules. One is original appropriation, sometimes called homesteading, which means the first user has a better claim than other people.
And then there’s contractual transfer, which means the owner of that resource consensually transfers it to someone else by a sale or a gift or a bequest in an inheritance. And then you can think of a third rule—rectification or restitution. If you commit a tort against someone, you might own them some recompense by giving them some of your money or your property to make them whole. But other than these three or four simple rules, there are no other rules that you need to consult to determine the owner of any resource when there’s a dispute.
Now, knowledge itself can’t be owned because knowledge is not a scarce resource that’s part of human action. This is why I went through – I emphasized knowledge is what guides human action. And knowledge or information does – is not an independently existing thing. It’s always a patterning of a thing. So this piece of paper, you can say it has information on it, but the information couldn’t exist without being on the paper. It can’t just be free-floating. It’s always the impatterning of a thing, and that thing is always a scarce resource that someone can own. So information is always just a characteristic or a feature of a thing that is already owned by someone.
Okay, so basically media, things that information can be stored on are themselves physical scarce resources, which already have an owner according to the private law rules that we’ve already discussed. So you have to realize then, according to this scheme, a person owns a resource, but you don’t own its characteristics or features, so there’s a tendency for people to double count. If I write a book, people think I own the book. But it’s not just the pieces of paper that I printed it on or the notebook that I wrote it in the first time or the computer hard drive that I stored it on when I typed it. It’s also the pattern of it, but the pattern can’t be separated from the underlying medium because it has to be stored on something. So if you say I own this pattern of information and I own the paper, it’s double counting, and what that leads to is the idea that you own a universal. You own a feature of your property, which means you own everyone else’s resource that has a similar feature.
So, for example, if I own a red bicycle, and you say because I own a red bicycle I own its color or its age or its weight, then you would own every other object in the world or every other bicycle that’s red or that has the same age. Obviously that’s absurd. That would turn property on its head and would give people ownership of other people’s resources. So the characteristics of an object define what it is, but the ownership rights are in the object itself.
I’ve got enough time for an hour and a half of talk, so I have some extra slides here. I’m going to put this on my website by the way. And by the way, I did this Power Point because I’m always reluctant to do Power Points because it’s a little bit like an Amway salesman, dorky. But Renata, lovely Renata told me that half of our audience here is not native English speakers, and sometimes even us southerners speak a little bit fast. She said it would help to have a handout so I can see the word you’re saying and maybe follow a little bit more, so I did the Power Point for Renata and this will be on my website when I post this. So there’s some extra slides here, which I’m going to skip because of time.
So as I mentioned earlier, what’s the real question when there’s a dispute or a debate about what the law should be? The real question is not is this property? Is X property? Which is the way a lot of people put it. They’ll say are ideas property? Like if you argue about intellectual property, they’ll say, well, the dispute is whether ideas are property, and you’re saying ideas aren’t property. But I think they are property because it took innovation and labor to create them, and I created it, and I – so they think the dispute is, are ideas property. And then the question is who’s the owner? Once you can see that it’s property, then the question is who’s the owner?
Some libertarians like Tibor Machan and others say, well, if I wrote a poem, the poem is a thing that exists, and I created it and it’s ownable. Then the only person that could own it would be me, the creator. That’s the natural answer. So they skipped the first question about whether it’s an ownable type of thing in the first place, and they do that because they ask, are ideas property? Is this bicycle property? That’s not the question. The question would be whose bicycle is it? Are Bitcoins property is not the right question.
So the question is always, in a context when there’s two or more people that have a dispute or a contest over a thing, that’s the type of thing that you could have a dispute over, which is always a scarce means of action, a scarce resource, a physical material thing that can causally interfere with the world that you use to achieve your ends. When there’s a dispute about that, then the question is, okay, there’s a dispute. Who’s the owner? You answer the question by consulting the private property rules. There’s only four. They’re very simple.
Now, I coined a term. My view is when anyone coins a term they’re in danger of being a crank. If you’re really a genius, you might can coin two or three. Mises had catallactic, some praxeology. Hayek had a bunch that are a little bit too many. Eric Voegelin had – I mean some of these guys go crazy. But then real cranks have a bunch of terms. You can’t even understand their stuff. So I’m going to just have one, which is conflictable because the word scarcity, another slide I probably won’t get to, but scarcity is another word with dual meanings.
And it confuses people because by scarcity, in essence, what we mean is what Mises meant when he referred to scarce means of action, the things that we have to use in the world because we don’t live in a world of superabundance. So scarcity for us means the opposite of superabundance. Superabundance is this unimaginable state of the Garden of Eden where we have no wants, no dissatisfaction. We would not even act, so it’s almost an unrealistic hypothetical. But superabundance – scarcity to us basically means – it means what economists call rivalry, or I would say things over which there can be conflict, so conflictability. Most people confuse that with more ordinary meaning of scarcity, which means lack of abundance, which just means not enough supply, which the laws of supply and demand regulate.
Now, again, this conflict arises over the use of a resource. That’s a scarce resource, a physical material thing, but never over its characteristics, never over its color or over its weight or its age. And this is analogous to one of Professor Hoppe’s insights where he’s pointed out that property rights are always in the physical integrity of a resource, not in their value. You can’t have a property right in a value. And for similar reasons, characteristics of owned resources are not independently owned, which is why information can’t be owned. So here’s my superabundant stuff, which I’ll skip.
All right, so to sum up now. So by now, the Bitcoin case in my view should be clear. Bitcoins are just entries in a ledger. The ledger is just information stored on 10,000 private computers around the world, a bunch of different hard drives, and they’re all owned by different people or companies. So if I owned a Bitcoin, that would mean I own the pattern of information that’s stored on other people’s computers. That would mean I have a property right in their computers, but I don’t have a property right in their computers. They own their computers, and this is analogous to Rothbard’s own proto-anti-IP argument where he argued against defamation law or reputation rights because he pointed out you can’t have a right to your reputation because the reputation is just what other people think about you. And that’s just information in their brains, and if you own your reputation, you own their brains, which is what we would normally call slavery, so we tend to be against that.
Now, there’s one ancillary point, and maybe I can answer it in the Q&A or after. It’s important to note also that the Bitcoin system is, because it’s pseudonymous in the way it’s designed, there are no terms of service. So you can’t make the argument that if I steal your Bitcoin, and by the way, the only way to steal a Bitcoin would be either to trespass into someone’s computer or their home and literally violate their property rights to get their private key, which is already a crime. So you don’t need to make a double crime, or to guess it, and it’s impossible to guess it. But if you did happen to guess it – this is the argument that if you guess someone’s private key and you transfer their Bitcoins to your account using the private key that you luckily guessed that that would be theft because they own the Bitcoins. And this is basically the argument, my argument, that no, that wouldn’t be theft because that’s actually permitted by the rules of the Bitcoin system.
Okay, so in conclusion, while Bitcoin may not be legally ownable in a free society, it can still be useful. Just like knowledge can’t be owned, it’s still useful. Nobody owns Bitcoins, but you can still use them. Thank you.
Related links/relevant material:
- Konrad Graf, Are Bitcoins Ownable?: Property Rights, IP Wrongs, and Legal-Theory Implications [PDF]
- Preston Byrne, What do you legally “own” with Bitcoin? A short introduction to krypto-property
- On the Danger of Metaphors in Scientific Discourse
- LeFevre on Intellectual Property and the “Ownership of Intangibles”
- The “If you own something, that implies that you can sell it; if you sell something, that implies you must own it first” Fallacies,
- “The Non-Aggression Principle as a Limit on Action, Not on Property Rights,” StephanKinsella.com Blog (Jan. 22, 2010)
- “IP and Aggression as Limits on Property Rights: How They Differ,” StephanKinsella.com Blog (Jan. 22, 2010)
- KOL085 | The History, Meaning, and Future of Legal Tender
- The Limits of Libertarianism?: A Dissenting View
- KOL249 | WCN’s Max Hillebrand: Intellectual Property and Who Owns Bitcoin
- Cordato and Kirzner on Intellectual Property
- Mises on property
- KOL246 | CryptoVoices: Bitcoin as Property, Digital Goods, Personal Liberty, and Intellectual Property
- See other links at KOL191 | The Economy with Albert Lu: Can You Own Bitcoin? (1/3)
- My facebook post discussing ownership of Bitcoin
- Tom Bell: Copyright Erodes Property?
- Bitcoin Is Officially a Commodity, According to U.S. Regulator
- Tax Plan May Hurt Bitcoin, WSJ
- Swiss Tax Authorities Confirm that Bitcoin is VAT-free in Switzerland
- Tokyo court says bitcoins are not ownable
- FinCEN Rules Commodity-Backed Token Services are Money Transmitters
- Bitcoin Is Officially a Commodity, According to U.S. Regulator;
- Miami Judge Rules Bitcoin Is Not Money; Dismisses Money Laundering, Transmitting Charges
- How to handle bitcoin gains on your taxes
- SEC: US Securities Laws ‘May Apply’ to Token Sales
- Federal Judge Rules Bitcoin Is Real Money
If someone STEALS my bitcoins (by guessing my reasonable attempt at a secure brainwallet passphrase), I will hunt them down and, with threats of ever-escalating violent force, demand it, or a financially equivalent compensation, back. (Or ask my DRO to do something effectively similar.)
This situation is basically an “implied norm” or “implicit contract”, like when people eat in restaurants before paying.
(This brainwallet-passphrase cracking happens disturbingly often. Creating strong passphrases is hard.)