The Evolution of Trust

A primitive example of this trade-off can be found in the earliest forms of banking where, centuries ago, assets were deposited in exchange for promissory notes, allowing merchants to more conveniently exchange value with one another and scale their businesses through credit. As our systems and businesses have increased in complexity, we have had to scale trust to match. It is this interconnected web of trust between us that allows organisations to create value. The relationship between trust and macroeconomic growth is well documented: more trusting environments foster prosperity, trade, employment and economic growth. If trust has gotten us to where we are today, why not carry on as we have done for centuries?

The problem is that trust is eroding at a time when it is arguably more important than ever. Trust today is multi-dimensional insofar as we place it in competent, reputable and regulated entities. These entities have become increasingly centralised and time has shown that these pillars have failed to protect us. Centralised trust points are in fact single points of failure that can be opportunistically exploited, resulting in a world where funds are misappropriated, data misused and speech arbitrarily censored. The reasons behind the erosion of trust are many, but can likely be attributed at least in part, to repeated instances of corporations and institutions abusing this trust such as the Facebook–Cambridge Analytica data scandal. The long term effects that this erosion of trust can have, cannot be understated.

What if there was a better way for us to significantly scale trust along a new dimension without the associated downsides? Whilst this may sound too good to be true, that’s exactly what public blockchains are promising to deliver. How? By decentralising control and thereby dis-intermediating trust; where handshakes and gentleman’s agreements are replaced with deterministic open source software that provides strong guarantees. Rather than relying on human trust - through a combination of cryptographic primitives, distributed computing and game-theoretic incentives - public blockchains harness our human tendency to act in our own self-interest to build networks that require no oversight yet produce positive outcomes for the greater good. This does not mean that we need to do away with all other forms of trust or human relationships (e.g. reputation, competence, regulation) but rather this enables more ‘bounded’ forms of it, where people can more deliberately choose whom they place their trust in.

Parallels with The Internet

Understanding these abstract concepts and the value they will unlock can be challenging, so it can help to first look back in time at the internet to understand its core value proposition. After all there are striking similarities in the trajectories both technologies have followed. Both the internet and cryptography were developed by the military, were initially misunderstood and had their potential impact on the world underestimated. This isn’t to say that blockchains are a ‘new internet’ - far from it. Blockchains should be thought of as an additional layer of technology that sits atop the internet, adding new functionalities and enabling new use cases that weren’t previously possible.

Before the internet, the ability for information to propagate throughout the world was very limited. The value that the free flow of information has brought to our lives can be seen in almost everything we do – even in something as seemingly trivial as sending an email to a friend. Instead of needing to send a letter, telegram or telex message, where charges and delivery times varied depending on the destination, we can now send an email instantly and at practically zero cost. The frictionless exchange of information enabled the world to scale, facilitating international trade and innovation on an unprecedented scale.

Returning to the example of sending an email to a friend - regardless of when you send it and where they are in the world, they’ll receive your message and be able to respond to it almost instantaneously. Yet when sending that same friend anything of value e.g. money, when exactly they receive it and how much it will cost you is largely dependent on where they are in the world. In other words, information is borderless, so why isn’t value?

This particular example shines a spotlight on the limitations of our current systems and brings us back to the issue of scaling trust. Sending money, particularly across borders can take several days because unlike information, sending anything of value requires trust. This trust is built up over time and is incredibly valuable but also costly to maintain. In spite of this financial institutions are constantly having to monitor transactions for fraud prevention - a time consuming and costly endeavour. Blockchains allow this trust to be ‘outsourced’ to the network, where data records are verified and secured cryptographically.

Value Proposition

What then is the value proposition of this technology? In a nutshell, it is the decentralisation of control - however this is the means to an end. In doing so, we significantly increase our ability to scale trust globally, facilitating open-source development, transparency and composability between pieces of software, where value is treated as a first-class object and novel forms of ownership and coordination are made possible.

So what does a world enabled by blockchains look like? Much like in the early days of the internet, it is difficult to imagine all of the possible use cases and innovations that are yet to come. What we can do is look at what is being built today to give us an idea of what the future holds:

• Value will flow freely. Send anything of value - be it money, a deed to a house or shares in a company - as easily as sending a text message is today. Individuals and businesses will transact globally in a frictionless and efficient manner. True microtransactions will enable new forms of monetisation.
• Data will be portable, empowering users to switch platforms effortlessly. In the absence of user lock-in, services would need to compete on features and providing the best experiences for their users rather than relying on their monopoly over data. No longer will we have to trust whether our data is being misused or sold without our permission.
• New forms of ownership mean that access to wealth-building assets is democratised. Creators will have ownership in the platforms they provide content for, better aligning incentives. New ways of licensing and distributing intellectual property and proprietary ML models will be made possible. Software will be owned by its users.
• Novel forms of privacy enabled by zero-knowledge proofs with a multitude of applications e.g. cryptographically proving your eligibility for a loan without having to disclose any information to the lender or verifying identity and credentials with a universal single-sign-on.
• Secure peer-to-peer communications enable once disparate systems to talk to one another in real time. Intelligent devices such as autonomous vehicles will be able to seamlessly communicate with their local surroundings.
• Programmable value will expand the universe of assets. Derivatives, tokenised assets, escrow, credit and insurance are expressed as composable pieces of code.

Conclusion

As with any nascent technology there are teething problems, challenging hurdles to overcome and new questions to be answered e.g. which trade-offs should we make in the pursuit of scalability? How can privacy enhancing protocols exist within current regulatory frameworks? What is the best way to solve key management for the everyday user? How do we merge existing and frontier systems?

The user experience can be awkward and the learning curve is steep. However, amidst all of this there are working applications and transformative products being built today with glimmers of what is still to come. Assets can be traded on decentralised exchanges such as Uniswap or borrowed against on decentralised lending markets like Aave, at anytime and from anywhere. Identity is portable and data is composable with data networks such as Ceramic, messaging is peer-to-peer with decentralised communications networks such as XMTP and training of AI models is distributed with ASM. Everything from exchanges and publishing houses to games and marketplaces is owned by their users and contributors.

For younger generations today, it can be difficult to imagine a world before the internet. Future generations will find it difficult to imagine the world we currently live in - where we were forced to trust blindly, rather than being allowed to choose. Blockchain’s potential to have a positive impact on our world is significant and we believe it is a vision worth working towards.