Recently there has been a lot of discussion on how blockchain technology will revolutionise our approach to trust. Most of these pieces glide over the design of blockchain, the distributed ledger at the heart of bitcoin. Blockchain is designed to be trustless. Human behaviour in high trust scenarios is very different to behaviour in trustless ones.
Enthusiasm for blockchain as a technology solution is growing. Bitcoin has a thriving payments ecosystem and many clones. Global financial services and professional services firms are exploring the potential of blockchain as a transparent distributed ledger system. There are potential applications for blockchain to further reduce the friction in payments systems, to support smart contracting systems and to provide registers of asset ownership. At the same time there are issues that need to be addressed, particularly how the computing power demands of a distributed blockchain ledger will be managed without a currency like bitcoin to be mined in payment for processing.
Transparent distributed ledgers may revolutionise our approaches to recording and exchanging assets. Because the intermediaries who help us exchange assets today often rely on trust to sustain their intermediary role it is common for people to see blockchain as revolutionising trust. Banks, brokers, registrars, accounting firms, and trustees all depend on the market’s trust to provide a viable service. Changing to a trustless distributed ledger will have a significant impact on these industries.
Putting aside technological considerations, trustless exchange is not necessarily an improvement in human relationships. Bitcoin is trustless because it was designed to be anonymous. That has encouraged its use in capital flight from controlled markets like China and also a currency of choice in black market transactions as well. Because the system does not rely on the identity of the owner of bitcoin, once it is stolen or defrauded the currency is irrecoverable.
Perhaps the new applications of blockchain will factor in new less anonymous usages. However, trustless behaviour in human society is generally poor. The institutions blockchain distrusts were social innovations to address the flaws of the trustless exchange before that point. Stock markets were easily manipulated when shareholdings were a mystery. Property ownership disputes dominate the history of legal affairs because of the mystery in ancient ownership systems.
Many organisations creating new global frictionless markets have found they need to implement new systems to reduce anonymity and create trust proxies to balance exploitative human behaviour in an anonymous trustless world. Auction and ecommerce sites’ seller ratings are an example to cut down on fraudulent behaviour. The trolling problem on social media sites is another consequence of trustlessness. Look at any failing state and you will see the banditry, violence and corruption that comes with breakdowns in social trust. Solving the technology challenges of blockchain is only one part of the challenge. We will need to address the social innovations to support a trust based economic exchange as well.
We need to remember that trust is a human decision. The trust algorithm stays in the human brain and works on human relationships. Technology can support but will not replace that decision. The future of trust is likely to remain independent of blockchain, but it will provide useful insights into how far we need new social behaviours to manage in a trustless commercial world.