Moving Trust To The Blockchain
Trust isn’t just the belief that someone or something is reliable, good, honest, or effective. It can also refer to an arrangement in which someone's money or property is legally held and managed by a person or organization, for a set period of time. Trust can also be a term used with computer systems. Ethereum, known as “the world computer” and “the trust machine,” is a revolutionary platform that is potentially providing a solution to the global problem of trust.
A Crisis of Trust
On January 19, 2017, Andrew Keys, head of global business development for ConsenSys, published a Medium article on the “trust problem,” in which he proposed several Ethereum solutions. Keys referenced Richard Edelman’s report, An Implosion of Trust, and Trust Barometer speech, which was presented at this year’s World Economic Forum (WEF), in Davos, Switzerland. Keys notes that the report, “paints a relatively dark picture of our world’s global affairs.”
Some grim facts from the report:
- Trust in “institutions” defined as governments, corporations, NGO’s and media have all declined in 2016 to trust “lows” that are similar to those during the 2008/2009 financial crisis (without a precipitous event this year, like we had in ‘08).
- 85% of survey respondents indicated they believe that the aforementioned institutions do not have their best interests in mind and that they don’t trust in “the system.”
- Governments are distrusted in 75% of countries.
Edelman’s findings are based on an online survey of 33,000+ responders in 28 countries. The results show that two-thirds of the countries surveyed are now considered “distrusters” (they have below 50 percent trust in mainstream institutions), with many still reeling still reeling from the shock of the Great Recession of 2008.
“Like the second and third waves of a tsunami, ongoing globalization and technological change are now further weakening people’s trust in global institutions, which they believe have failed to protect them from the negative effects of these forces. The celebrated benefits of free trade — affordable products for mass consumption and the raising of a billion people out of poverty — have suddenly been supplanted by concerns about the outsourcing of jobs to lower-cost markets. The impact of automation is being felt, especially in lower-skilled jobs, as driverless trucks and retail stores without cashiers become reality.”
The report concludes that 15 percent of the general population believes that the current system is working, while 53 percent state that it’s not, and the remaining 32 percent are uncertain. Specific reasons for the decline are cited in the report, but what’s crucial to ascertain from the findings is that the lack of trust has widened the divide between the global populace and the institutions of businesses and governments they once held confidence in. It also showed that the credibility of world leaders is also declining, and many governments today are seen as incompetent or corrupt.
Based on these numbers, the intermediaries put in place to protect and ensure global trust are not doing their jobs. We’ve also seen a spike in unethical activities such as false media, counterfeiting, thieving NGOs, and a myriad of voting scandals. This causes much cynicism to permeate online, compounding the negativity with news headlines that include tales of unscrupulous practices, often executed by banks and the powerful global elite. Even in the cases where the architects of deception are unrelated to the top one percent, it still creates disharmony in societies and has drastic effects on the global economy. According to new media theorist and author Don Tapscott:
“It is estimated counterfeit goods cost the global economy more than $600 billion (USD) annually.”
For globalization to be successful, trust must be strengthened and solidified through new means.
The Ethereum Trust Machine
Discussing the World Economic Forum, Andrew Keys states:
“By far, the most spoken about technology in Davos was blockchain and I believe it is due to the aforementioned global implosion of trust.”
Keys believes that Ethereum is the next generation of the internet and has the potential to implement truth into the web. Because peer-to-peer agreements can be executed through smart contracts written on the Ethereum Virtual Machine (EVM) with Solidity, secure transactions can occur without centralized intermediation.
“Once terms are agreed upon, both assets are in place, they are tokenized, and exchanged by a process called an atomic swap where the trade is the settlement.”
Ethereum can solve the global trust problem through the creation of blockchain-based identities that can be authenticated by decentralized platforms, such as the ConsenSys project, uPort. Through these new systems of governance, companies and other large organizations can track errors and perform autonomous audits much faster and easier than conventional methods, providing clarity to the people involved in the decision-making processes of how to correct these inefficiencies. A blockchain-based identity system also allows individuals to possess a virtual reputation that is both immutable and quantifiable, creating an incentivized system of trust that can even be rewarded. According to Keys, media outlets and journalists could amass reputational attributes that allow consumers “to rate the veracity of statements and reporting, and to flag malicious reporting and factual inaccuracies back to the community.” This is one way to combat the issue of fake news, as creating a grading system would allow end users to scale the truthfulness of the media stories, and individuals, based on the journalist’s blockchain reputation. Decentralized social media platforms that allow content creators to be paid and promoted for their contributions, such as the AKASHA Project, reward journalists for skill and works of value.
Trust as Value
Humanitarian aid is another area where the blockchain can revolutionize trust. Charitable organizations that collect millions in fiat currency have inadequate systems to accurately track funds from the multitude of contributors. More importantly, contributors have no assured way to track their funds and the organization’s spending model. This has led to numerous scandals from top-tier charities such as Kids Wish Network, who hoarded 97 percent of the total charitable funds raised. This gross misappropriation of funds that were originally pledged to help those in need is a big reason why many decentralized platforms have stepped up to the task of bringing integrity back to humanitarian aid. Two such companies answering the call are Ethereum-based Alice and Slock.it’s Charity DAO. They both provide transparency through governance from the donors as opposed to the organizations themselves. Once in operations, these decentralized platforms will allow users to track their donations, whether in fiat or cryptocurrency.
This new “internet of value,” can also incentivize consumers to purchase original items instead of counterfeits. In an article Tapscott wrote for The Huffington Post, Blockchain Transformation at Davos, he describes his participation in the first digital signing of a physical book on the blockchain. The book, Blockchain Revolution by Tapscott, contained a chip from Wisekey that works in tandem with mobile devices to measure authenticity.
“Now imagine books becoming nodes on that same network by giving each book a digital signature. If the author chooses, they can allow the reader to give them feedback or ask questions. Similarly, the author can allow readers to speak to one another. Suddenly a book is turned from an inanimate object into a community of people.
Now the author can restrict the interaction to readers that have actually purchased a genuine copy of the book, and not a knockoff or photocopy. The author can offer the reader additional services. They can alert the readers to special events in their area. They can send the readers other articles by the author, subsequent to the book’s publication. The author can do this for free or for a fee.
Rather than a one-shot proposition, the author can convert the book from a single purchase into an ongoing relationship with the reader. It is more like an interactive magazine subscription.”
While some authors have attempted to create communities full of their readers through Facebook pages, this relationship is owned and controlled by Facebook which “dictates what can and cannot be done with that connection,” said Tapscott. To add insult to injury, third party intermediaries like Facebook generate profits from selling advertisements to the readers with data they procure from the community.
While the use cases of blockchain tracking are abundant – everything from fish to diamonds – the blockchain can also remove intermediaries that connect content creators with the consumers. Currently, consumers are used to third parties facilitating the services and things we want (Amazon, Facebook, and Uber), however, a re-education period may be necessary for users to adjust to the new decentralized alternatives.
Although the digital signing of items of provenance can take a bite out of the $600 billion (USD) counterfeit industry, the real value is in the new ways consumers and content creators can interact. Tapscott’s book on the blockchain is just one example - other media forms, such as the entertainment industry, may follow suit.
The decline of global trust had its origins long before the invention of the blockchain. However, it is this specific technology that has the ability to authenticate commerce, business practices, and personal reputation, to spur new trust. This makes the blockchain not just a fad, but rather a critical component to building a better and more trusting world.
Andrew Keys summarizes this point:
“We may have lost trust in each other, and in many of our human institutions. This loss is unfortunate, and it is felt here at Davos, and across the globe. But blockchain presents us with a unique opportunity to replace that trust and restore it, providing citizens, media, organizations, and agencies with a basis to come to the table again, make decisions together, and heal from the crises in trust that we face today.”