Can the Blockchain and Token Economics Fix Privatizations?

If privatizations may effectively improve the efficiency in which some assets or services are managed - whenever such assets or services are subject to free market forces and competition - there are privatizations which rather replace a state monopoly with a privileged rent-extracting private monopoly, which is shielded from free market competition.

In practice, the state transfers its privilege of extracting rents - with a public asset or a service - into the hands of a wealthy private investor.

Creating a blockchain/DLT-based system to manage strategic public assets.

The template below can be applied to public assets or services that are strategic to the society as a whole and would be better not left solely in private hands but, ideally, the state shall always retain at least the control of such assets/services in order to shield the society from the consequences of abuses by private operators.

The term "Tokenization" is mainly associated with securities, equities and real assets, and it indicates the creation of a digital token that represents different types of rights - such as ownership, right to some economical payment, voting, etc.

In the proposed model, the tokenization is necessary to "Translate" economical rights connected with the public asset in a digital format that can be easily distributed to stakeholders and to which smart contract provisions can be attached in order to guarantee the automatic enforcement of certain provisions key to the incentives.

The strategic public asset will be transferred into a special-purpose vehicle.

The Asset Committee decides how to spend the revenues of the SPV, based on a set of priorities and reports received from third-party controllers, auditors and technical experts on the conditions of the asset.

The General Assembly is composed by all stakeholders, and it will vote the composition of the Asset Committee and perform an ex-post supervision of the allocation of the funds done by the Asset Committee.

While the limitations and dysfunctions of past privatizations are now apparent and ever more publicly questioned, the need for a new approach and a new model for managing key public strategic assets becomes ever more pressing.