Opinion: You don’t have to trust blockchain for it to be useful
Blockchain can create trust. The trust it creates doesn't have to be perfect to be useful.
Blockchains have been succinctly described as trust factories. Bitcoin is basically a machine that consumes a lot of energy in order to produce valuable trust. This trust can then be exported to different situations where needed.
The question is whether that trust is high quality or low quality. The highest-quality most pure trust is often regarded as "trustlessness", held up as the main goal of blockchain. Trustlessness is a state of 100% perfect trust, so complete that you don't have to do anything as crude as put faith in something.
Have some faith, or don't
For example, when your payment doesn't arrive you don't have to ask the sender whether they initiated the transfer and then decide whether to believe their answer. You can get the transaction ID and check for it on the blockchain, and then be 100% certain where it's at.
There are other applications too. As Kai Stinchcombe described, you can use a blockchain voting system to independently verify that your vote has been counted, simply by downloading the blockchain from a broadcast node and decrypting the Merkle root from your Linux command line. If everyone does that, democracy will be saved.
Or you can ensure that you trustlessly retain access to your wealth in a censorship-resistant digital form. You just need to design and build your own hardware wallet from scratch (to avoid trusting other manufacturers) and import your private keys. Then all you have to do is find some way of retaining your seed phrase in a way that it's near-guaranteed not to be damaged or lost, while preventing anyone else from ever seeing it but ensuring it's accessible in case you need it. And don't even think of entrusting it to a bank safe deposit box.
Okay, so trustlessness is easier said than done.
Being your own bank is a raging pain, the vast majority of cryptocurrency enthusiasts prefer the convenience of trusted central exchanges over the hassles of decentralised exchanges, and even the tools being used to build this trustless future are centralised points of failure.
Some, such as cryptographer Bruce Schneier, argue that these hard realities render blockchain pointless, and say that since we can't use blockchain to exorcise trust anyway, the entire thing really is pointless.
"A system where you can lose your life savings if you forget your key or download a piece of malware is not particularly trustworthy. No amount of explaining how SHA-256 works to prevent double-spending will fix that," he emphasises.
Others, such as Wharton professor Kevin Werbach, argue that these realities call for a more nuanced approach of instilling trust in blockchains rather than dismissing the entire thing.
But in the end, you don't need to absolutely trust blockchain for it to be useful. The amount of trust people have in many institutions today is staggeringly low, but it still works in a fashion. Something just needs to be adequately predictable to be adequately trusted, which is well within the capabilities of blockchain technology even if does call for various trusted third parties.
But in that case, what's the point of blockchain? What makes it any better than a slow database?
Blockchain. What is it good for?
It's not possible to discuss the lack of trust in blockchain, and how that impacts its applications, without seeing how these stack up next to current systems. This is because even if it can't bring that completely trustless paradigm, it can offer a new framework for moving the trust within systems.
For example, self-sovereign identity, a system where everyone takes personal control of their own personal information, can be envisioned as a way of moving the points of trust within a system rather than moving towards complete trustlessness.
By moving the handling and ownership of data away from a mass of shadowy companies and back into your hands, the points of trust shift back to yourself and to whatever system is used to allow access to this data. It doesn't have to be completely trustless to be a huge improvement, and companies like Microsoft and many more have already agreed that blockchain is a perfect match for these systems.
Room for improvement
For example, consider the state of credit scores today.
In a nutshell, the current system is one where banks pass all your information onto one of the few consumer credit rating agencies, and these agencies use their own unscientific formula to give you a number that determines which financial services you're allowed to access at what rates. Your number and its implications will vary depending on which credit rating agency the bank uses.
The credit rating agency will then hoard your data as well as sell it to other companies for a tidy extra profit. At some point the credit rating agency itself or one of its less security-conscious partners will almost inevitably mess up or get hacked or otherwise lose all your data, including your full name and address, social security number, credit card number and so on, to the wilds of the Internet. A few hundred million people here, a few hundred million there – it adds up.
A lot of people will then become the victims of identity theft.
Here's the kicker
Identity theft victims will often have their credit scores wrecked, and now those same institutions that sold and carelessly handled your data in the first place – all under a system you never chose to opt into and cannot opt out of – will often charge people who want to access their credit scores, and routinely refuse to update people's scores they wrecked by identity theft.
The tendency to blame victims just adds insult to injury. If you could use a good rueful laugh, have a look at the security tips offered by credit rating agencies while remembering that these companies have been profiting from selling your data.
"If someone you don't know asks for personal information (your name, birthdate, social security number, or bank account number) by phone, mail, or online, just say no!" Experian advises. "Don't overshare on social networks... Never post any personal information, location data, and even what items are included in a picture (like a credit card on a table) that you do share."
In 2017, 123 million US households had their street address, demographics, financial information and more leaked by Experian partner Alteryx, when it forgot to put a password on the database that was holding this information. Judging by the nature of the data leaked, it was probably a peek of Alteryx's $33,800 "demographic and firmographic data" product.
"Don't give out personal information, especially if you didn't initiate the contact or don't know who you are dealing with" Equifax advises. "When someone asks you to share your Social Security number, or your child's number, ask how it will be used, how it will be safeguarded, why it is needed, and if there are options if you choose not to share it."
In 2017, Equifax leaked over 145 million customers' names, social security numbers and dates of birth.
Do you trust them? If not, too bad. You don't really have a choice.
It might be premature to start thinking of complete trustlessness as a realistic goal, given how public blockchains are still wrangling with scalable decentralisation. But it's not too soon to start thinking of blockchain-inspired systems, and how they can move the points of trust within existing systems to more favourable positions.
On the whole, thinking of the technology as a way of moving trust rather than replacing it entirely can highlight some of the more useful applications.
In questions of personal identity, those points of trust could start moving back to individuals.
And in supply chains, the World Trade Organisation envisions blockchain as a way of adding flexibility and improving efficiency by letting two parties immediately create trust out of nowhere to get goods around the world. Here, trust is being strategically applied to business relationships like glue. The trust itself is trust in whoever's providing the blockchain being used. It might be IBM, or it might be Suku, or maybe it will be something else entirely.
The point is that as long as these individual parties maintain an adequate level of trust in that blockchain solution, all parties who trust that solution can immediately start trusting each other within certain parameters on a case by case basis. Blockchains don't have to be 100% trustworthy to be useful.
Elsewhere, the China Trade and Finance Interbank Trade Finance Blockchain is helping with a lack of trust between SMEs and banks, by replacing the need for building trust between businesses and banks with the need to simply trust the Central Banking Association. By reducing the cost of building trust (ie conducting credit checks and examining the finances of prospective borrowers), it can improve efficiency significantly.
And then there's trust in the value and backing of money. Central clearinghouses currently act as the points of trust in interbank dealings because they guarantee that all system participants will be able to settle up at the end of the day. Moving hard money can't be done instantly, so the banks maintain trust via the central clearinghouse by offering up collateral. Now, blockchain paradigms coupled with digital currency are letting the points of trust get re-arranged directly between banks to remove the inefficiencies of going through an intermediary every time.
Whether these kinds of systems can be accurately called a blockchain is still up for debate. It might be more accurate to describe them as "blockchain-inspired".
Either way, it's clear that the potential of blockchain offered by blockchain goes well beyond the technical bare bones its biggest opponents reduce it to, even if practical considerations see it stop short of the dystopian/utopian visions of its keenest supporters.
Disclosure: At the time of writing the author holds ETH.
- Ethereum drops 13% but experts are convinced good news around the corner
- Bitcoin price on a knife-edge, as the Death Cross looms
- Bitcoin price drops 10% over the past week: Is another drop coming?
- Ethereum price dips 5% overnight: Here’s what the experts are saying
- Will Ethereum’s price rally ahead of DeFi Summer 2.0?