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Trust is Not a Product

In May, I sat on a panel with the CEO of a company trying to modernize trade finance. When asked to talk about the benefits of blockchain technology, he asserted that “blockchain” has solved trust.

Blockchain technology hasn’t solved trust. It can’t. Nothing can “solve” trust. Trust is an attitude towards a proposition or entity which reflects confidence in the truth of a claim. Most people talk about trust the same way they would about probabilities, with degrees of belief qualified by certain conditions and evidence. In the backdrop of this sentiment runs a wide spectrum of priors that are ingrained in different societal conventions. On a recent trip abroad, I was surprised to observe that there were no prices listed in a marketplace. My friend explained to me that prices were not fixed and that the sellers quote prices at their discretion. This seemed completely normal to her but it left me with the impression that the vendors were cheating me. Motivations for trusting another party come from a variety of evidence, from faith in the enforcement power of a legal system to the look in someone else’s eyes. 
 
Practically, trust is a spectrum. I rely on my credit card to finance many of my daily expenses but I also verify that no false transactions were registered when I receive my monthly credit card statement. I have a high degree of confidence in my credit card, but I also know that the system is prone to flaws.
 
Distributed ledgers (and specifically blockchains) facilitate a framework where all parties privy to the ledger can evaluate the provenance of the information in it to determine if there has been tampering. In theory, a distributed ledger prevents the more obvious types of data tampering by validating information submitted to the ledger with a unified protocol and replicating all valid data across nodes. This feature makes them more appealing to trading partners than having data managed by a third party.
 
Bitcoin provides very robust methods for ensuring the integrity of its ledger which satisfy most reasonable people. Bitcoin maintains a network which is difficult to tamper or cheat through a proof-of-work consensus mechanism and public asset registry. Yet, Bitcoin is not a panacea. Upon critical examination of the ledger’s design scheme, the network struggles to align the incentives of miners and stakeholders.
 
With that said, distributed ledgers are only as good as the entity incenting consensus around them. Recently, Ethereum’s governing authority tacitly incented miners to soft fork. This soft forking altered some entries in the Ethereum ledger and prevented a specific wallet from spending tokens. Setting aside the value of this technical decision, these types of activities –decisions occurring off-chain which influence the entries to the ledger - compromise the value of the ledger if they are not clearly communicated to the ecosystem. Perhaps we can trust that all Ethereum transactions are valid by their shared protocol, but it’s harder to verify that this protocol is future-proof against the preferences of a certain group which may harbor economic clout. The potential of off-ledger manipulation calls into question the ability to blindly trust a blockchain structure.
 
So, while distributed ledgers are an excellent tool in enhancing the integrity of trade agreements, we should not fool ourselves into thinking that trust is something that can ever be deemed as “solved.” This assertion betrays an eagerness to simplify a complex issue which extends far beyond the limitations of today’s software.