Blockchain - Does trust really matter?

Trust has gained increased focus when discussing distributed ledger technology ever since Blockchain first emerged, and at the same time, trust has always been evaluated and researched in correspondence to the evolution of society and, more specifically, technology. Furthermore, the relationship between trust and technology has transformed simultaneously as changes to personal- and organizational relationships have matured.

Blockchain has now existed for about nine years and we are yet to discover the full potential of the technology; even so, major papers and consultancies have coined Blockchain ‘the trust protocol’, ‘the trust machine’, ‘the new trust economy’ and the like. Some of which might be credited to Blockchain’s birth in 2008 as a response to distrust in centralized institutions following the financial crisis.

This piece seeks to underline the importance between the difference in one’s trust towards a specific technology, and having the technology facilitate trust itself - the latter being Blockchain.

Currently, the global reach made possible by contemporary technology means companies and individuals have the opportunity to conduct business with a much wider array of partners and stakeholders, the vast majority of which an interested party will not have a previous relationship with.  Trust is a key component to any relationship, transaction or distribution of information, and should be highlighted in this new age of technology where stakeholders are no longer restricted by geography or limited to already established partnerships. This is highlighted by new aspects of business such as the sharing economy, and peer-to-peer networks, and Blockchain as a means to find a trust-free solution to transacting business.

Private or public Blockchain

Private Blockchains is also known as permissioned based Blockchains enable the members to have credentials allowing them to modify the ruleset. In a private Blockchain there is no need for anonymous miners to validate transactions because this is controlled by predetermined members.

On the other hand, you have the public Blockchain which stems from the original Bitcoin idea of a fully open and permissionless network; both types share similar levels of security and verification. In regard to the public Blockchain, transparency is a key component of the technology in the sense that every transaction of the block is visible to every party involved in the transaction.

Transparency also means immutability throughout the chain; the possibility of editing or deleting existing transactions does not exist. The viewability of the Blockchain is the same for all the parties, and that gives the Blockchain a so called ‘single-view’ for all participants. This is not necessarily the case with private implementations.

The immutable nature of the Blockchain, also provides a level of certainty to participants that transactions added to the ledger have actually occurred, and that responsible parties reporting deliverables have met all pre-established conditions necessary for the completion of the said transaction. It would appear from this that, as time progresses, there would be a collection of evidence to support a stakeholder’s ability to deliver on their promises as the ledger becomes updated with successful transactions. Therefore, increasing trust between possible stakeholders.

The problem with this interpretation is the fact that only successful transactions are being added to the ledger, and there is no reporting being done for transactions where one or both parties fail to fulfil the pre-established conditions outlined for the transaction to occur. Thus, a stakeholder might have an apparent long history of successfully fulfilling agreements, while in reality they have an even longer list of transactions to be completed. This has especially serious implications for stakeholders undertaking numerous smart contracts at one time. In this vein, it is relevant to look at transparency of Blockchain and how Blockchain could be setup or implemented.

In a B2B perspective transferring years of tacit industry expert knowledge onto a complex technology can be an extensive challenge. Since Blockchain has not matured yet, it requires immense resources to transfer years of tacit expert knowledge from a given industry onto a working Blockchain application within the same industry. This creates a barrier to further understanding and developing the business perspective of the technology, therefore, hindering trust. This may seem contradictory since the business players or companies which have the highest outcome potential of Blockchain are the ones working in an industry where trust is highly valued, such as in banking and other financial institutions.

In other words, Blockchain is more than a technology innovation; it is also a business model innovation. What is meant by this, is that Blockchain, as a technology, reshapes much more than the technical infrastructure of a certain company. Blockchain changes the way of transacting business, the role of intermediaries, required resources and enables many more innovations to be based on the Blockchain use. One might state that Blockchain therefore is a business model catalyst as well as being a technical innovation. This has further implications towards the specific user trusting the technology. The environment in which the user acts is radically changing, and in turn affects the user. If these initial feelings are negative, the probability that Blockchain will be able to facilitate trusting relationships between the participants becomes hampered from the get go.

Why should we care?

Our era of the digital age is delivering unlimited possibilities and formidable challenges. Technology, especially the distributed kind like Blockchain, creates opportunities for everyone, but in the end, it is us, as users, who determine the outcome. This is why trust is the bullseye in regard to Blockchain, and evaluating whether Blockchain actually supports our trust bases is critical. One aspect of that is Blockchain facilitating trust and therefore removing our worries (level 3 in Trust level model - seen above), but the other aspect is trusting the technology and how it works (level 2 in Trust level model). This is why knowledge, time and an increased focus on the technology is crucial. The potential is immense, but so is the complexity, which is constantly changing based on the different use-cases. At the same time, the technology is yet to truly mature, with the majority of people either not knowing it exists or not acknowledging its importance. Furthermore, it is important to understand that trust is dynamic, it is constantly remade, strengthened or undermined in every encounter with the technology, and that the future use of Blockchain might be hidden through multiple applications that build on the technology’s infrastructure, thereby keeping the end-user from knowing that they are actually using Blockchain technology.

While it may initially seem like a logical conclusion to draw that Blockchain is a “trust engine”, in the end it heavily depends on society’s perception, governance, implementation and application.

To sum up, even with Blockchain removing the need for trust previously supported by a mediator, there is still a barrier to overcome with actually trusting the technology. The fundamental argument would be, that one does not need to trust the technology based on the nature of its build, but this all depends on the application of use and implementation, which in a B2B private Blockchain scenario is regarded much less of an issue.

/Marc Pascal Landgreen

Special thanks to Henrik Enerbäck, Matthew David Williams and Emil Maintz