When Bitcoin was introduced in late 2008 by Satoshi Nakamoto, the person/persons/company/nation or whatever the pseudonym may symbolize, it was claimed that Bitcoin transactions would be based on cryptographic algorithms instead of trust. Zooming in, it can be observed that this is due to the underlying blockchain technology, which is fundamentally changing the way people trust. For the first time in human history, a permanent, public record of who owns what could be created, without mediation of a centralized third party. A single source of truth, doesn’t that sound idyllic? Well, not really. In the meantime, our friend Nakamoto mysteriously vanished from this planet. As did the cryptocurrency hype. Still, blockchain technology holds huge potential for business. But blockchain seems to be about more than clever code. In fact, there is a very human element that plays a vital role for blockchain’s mass adoption: good old human trust.
The relationship between trust and blockchain matters because blockchain is not as “trustless” or “trust-free” as was initially promised. The thing is, that trust is a very complex, multi-layered concept, difficult to describe and measure, yet incredibly important for the adoption of blockchain and its applications, such as cryptocurrency. In fact, the word “trust” is said to be the most frequently used word in any discussion about the sharing economy, the over-aching movement of blockchain. Although blockchain theoretically holds a promise of trust, this does not automatically make blockchain and cryptocurrency trustworthy. After all, blockchain was said to be unhackable, but recent hacking scandals, in which billions worth of cryptocurrencies have been stolen or vanished, have caused insecurities and trust issues among society, complemented by various claims relating cryptocurrency to money laundering. Clearly, such insecurities seem to stand in the way of cryptocurrencies’ mass adoption, acceptance and success. As such, the central question that arises is, why is it so difficult to establish and maintain trust in blockchain’s applications, in this digital era in which trust is so hard to build and so easy to destroy?
However complex trust may be, trust depends on a critical balance between vulnerability and expectation. Overall, trust increases when the social distance between the trustor and trustee becomes smaller, as people tend to put more trust in people they perceive as socially familiar. This psychological approach explains how trust impacts a wide array of environments, ranging from intimate relationships, to the workplace and (inter)national societies. Actually, trust seems to be so important now, that some people make a living of it.
Trust expert Rachel Botsman describes trust as “the remarkable forces that pulls one over the gap from the known to the unknown.” Her research about the evolution of trust reveals that trust is shifting from being institutional towards being distributed. This means that people are starting to trust central intermediaries less (e.g. banks, insurance companies, governments, the media), and their peers more, enabled by online tools. As such, she explains the success of many sharing economy platforms such as Blablacar, Airbnb or Uber. People are used to paying their trusted intermediaries in order to guarantee trust. As those intermediaries are being made redundant by blockchain, they will increasingly need to prove their value in their attempts not to be replaced by a general ledger.
So, on the one hand, blockchain transparency, traceability and unhackability provide a promise of trust, because people can reliably agree on what the general ledger states is correct. On the other hand, people are reluctant to trust blockchain because of its association with the black market, hacking scandals and because blockchain’s anonymity makes it impossible to judge the degree to which peers have similar social values, which is what people used to base their willingness to trust on.
At the end of the day, trust is an extremely complex matter, referred to by Botsman as “the glue that holds society together” but trust also seems to be the glue that holds blockchain together. It is so difficult to build and maintain because blockchain is a double-edged sword. Blockchain holds a promise of trust, but promises need to be lived up to in order to withstand.
What do you do to build and maintain trust? We are curious to find out!
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