200,000 left Hungary after the Revolution of 1956 was defeated. Among them was a young man who took part in the fight and was forced to flee from the retaliation. He later settled in the United States and started a family. He told his child a lot about the adventures in his youth, his fight against oppression and the particulars and mechanics of tyranny.
The child was so impressed by these stories that, as an adult in America, he continued his father’s fight against totalitarianism with his own tools. He concluded that one should have a healthy amount of distrust toward people in power, as power can be widely abused. Therefore, we should create structures where arbitrary decision-making is possible only when absolutely necessary. As many issues as possible should be governed by pre-set agreements that leading policy makers cannot change to serve their own interests. But how likely are they to respect the mutually agreed-upon rules once they gain the right to modify them? How can we guarantee that they will not abuse power through smart changes to the playbook?
The answer is by creating systems that even the mightiest cannot manipulate. It is not a coincidence that a Hungarian freedom fighter and refugee’s son, the computer scientist Nick Szabo created and defined the notion of smart contracts in 1997. These are agreements that execute a predefined rule set independently of anyone else, in a tamper-proof and automatic manner. Almost 20 years later, his concept was realized with the birth of Ethereum.
It is not by chance either that Nick Szabo also laid the theoretical foundations of tamper-proof monetary systems. In 1998, he described a seemingly feasible decentralized currency he called bit gold. Such a currency operates by initial rules that no monetary committee can override afterward (as they would, for example, when it is their concealed interest to debase a currency.) Not even its own creator can tweak them.
Bit gold was never realized in practice because no one implemented it. However, the anonymous creator of Bitcoin, Satoshi Nakamoto, transferred many ideas from it into his own invention. Some think it is because Satoshi and Szabo are the same person. Be that true or false, let us not forget that these tools were created so that leading policy makers cannot abuse their power as easily as they could so many times over the course of history, such as in communist Hungary. These are recent inventions that still need plenty of development and we have yet to gain a deeper understanding of. But once we apply them cleverly in organizing our economy and society, we could radically decrease the odds of national tragedieslike the Revolution of 1956. Doing so is their very purpose.