If the blockchain manipulates balances according to the whims of a court, then manipulating the court becomes a potential source of revenue for anyone able to game the system.
But if the blockchain doesn’t manipulate balances according to the court, and the court decides half of your crypto equities in $WALLET now belong to someone else, then at that moment in time the blockchain’s account balances become inaccurate. These types of events happen not infrequently, which creates a problem.
Perhaps blockchain property titles will make my point easier for you to understand. Say you own the house at 187 Blue Kodiak Drive, and the title is an “NFT” recorded on the blockchain. The NFT must be respected (!). Then a court steps in and assigns ownership of 187 Blue Kodiak to a bank, because it turns out you haven’t been paying your mortgage. But wait, the blockchain still says you own the home at 187 Blue Kodiak Drive (!). However, you don’t own it anymore — not legally, not physically.
Now pretend the blockchain on which the 187 Blue Kodiak Drive house title is recorded dutifully obeys the commands of the court which in our previous example allowed the bank to repossess it. In our previous example, that’d be just fine — after all, you haven’t been paying your mortgage. But now the issue changes: The Pink Panther slides his way into the court one day, and one way or another convinces an decision-making authority there that you’ve sold him the home at 187. The Pink Panther is now in possession of the title, and you’re out of luck.
Ultimately, this criticism of smart property has been around for many years now. It wasn’t my intent to “surprise” you with it. However, people invested in tangentially related crypto systems tend to really struggle with this. That’s because public blockchains were never designed to track non-bearer assets which exist in in the real world. Unlike companies built by humans or real estate, the (public) blockchain exists only in cyberspace, and therefore any ownership data of company shares or real estate recorded on the blockchain can only ever be an approximation of the truth. Permissioned blockchains — or simple databases for that matter — tend to be a better fit for situations such as this. The issue with them is they don’t take investors.
