The middleman is dead, long live the middleman: The role of trust in blockchain
The blockchain phenomena started within a cryptography mailing list known as Cypherpunks. A paper titled Bitcoin: A Peer-to-Peer Electronic Cash System written by an anonymous author named Satoshi Nakamoto surfaced on October 31, 2008. The premise of the paper was to have a system for electronic transactions without relying on third-party trust. Here is the abstract of the original paper:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.
Bitcoin, the first and one of simplest blockchain applications invented by Nakamoto, is technically a decentralized ledger (database), where all the nodes have a fully verifiable copy of the ledger. Nodes can use their processing power to verify recent transactions and append them as batches, called blocks, to the blockchain. They do so by solving complex mathematical equations and broadcast the network once found. All other nodes verify the solution, and the first verified answer adds its block to the blockchain and receives newly minted Bitcoins as a reward from the protocol.
Thus, blockchain is essentially a decentralized peer-to-peer network with no central authority figure, which adds information to the distributed database by collectively validating the accuracy of data. Since each node of the network participates in the review and confirmation of the new information before being accepted, the need for a trustworthy intermediary is virtually eliminated.
With the promise of decentralization and a universal open protocol, Blockchain is disrupting all aspects of digital presence and not just monetary systems. Here are some projects to give some examples of how wide the disruption is:
- Decentral file storage systems (e.g IPFS, StorJ), a.k.a decentral Dropbox
These projects are aiming to remove the trust in a central service provider for storing files online. All the files are encrypted before uploading to the network and are stored in multiple nodes of the network. Users are incentivised to share their unused portion of their hard drives and get compensated by the native token of these networks.
- Decentral marketplaces (e.g Openbazaar), a.k.a decentral eBay
By removing the control and trust of the central service provider, OpenBazaar allows a seller to sell any items for cryptocurrencies, without using any specific website. A network only consists of buyers and sellers, no middlemen, this might become a grey area to sell ethically questionable items, however opens up the market to anyone willing to sell their products. Information of purchases never leaks outside the transaction between the two parties involved in the transaction.
- Decentral social networks (e.g Akasha), a.k.a decentral Facebook
Social network operators are a sweet spot for advertisers and hackers, as seen with the recent Facebook failures to keep their user’s information safe, not mentioning the targeted ad campaigns running by Facebook itself. Akasha is trying to be the next generation of social networks, each user will need to run their software to be connected to the network, their information is never sent to any servers, thus fully private to them and their friends.
- Decentral virtual world (e.g Decentraland), a.k.a decentral Second life
Decentraland is a virtual reality platform powered by the Ethereum blockchain where you can build and explore 3D creations, play games and socialize. The idea of having a self governing virtual world seems to be futuristic: to be able to buy, sell, rent virtual land and running virtual businesses in that world using an open protocol without any middlemen seems to be become pragmatic using blockchain technology.
And many more examples yet to become reality...
Not surprisingly, today Blockchain is widely regarded as a breakthrough innovation that may have a profound impact on the economy and society, of a magnitude comparable to the effects of the introduction of the Internet itself. Because of its decentralized network structure that disintermediates trusted third parties, blockchain has allegedly been regarded as a “trust-free technology”. However, there is currently little consensus as to whether or not this claim is valid, since trust is an elusive and multifaceted concept.
Would users really accept a shift in trust from people and legal systems to technology? In a paper that we recently published in the journal Frontiers in Blockchain, we argue that in order to address this question, it is important to focus not only on the technical, but also on the psycho-social factors that shape a “distributed trust” system.
Technically the trustlessness is in regard to permissionless (public) blockchains, and permissioned (private) blockchains are generally considered as trusted systems, as the entities operating the verification nodes have control over the transactions. However, if a known trusted entity, such as a bank, is running their private blockchain, does that add more trust for the users or not? How can one trust in a trustless (trust-not-needed) technology?
In our paper, we argue that while blockchain has the potential to improve the level of security of applications, building users' trust is not only a technological challenge, but also (and perhaps most importantly) a psychological one. The disintermediating nature of this technology will not downscale the importance of trust. Rather this notion will remain a central concern in the evolution of blockchain, as a key feature of the socio-technical milieu that surrounds its applications. We hold that addressing this challenge requires a shift in focus from a purely technologically-driven view of “distributed trust,” to a more user-centered perspective that stresses the importance of the users' subjective perception of risks involved in this process. Thus, we suggest that besides technological research, psychological research is required to gain a greater understanding of people's trust in technology in the context of cryptography. In our view, this can be done by:
- exploring how trust changes when it is directed toward impersonal entities, e.g., an ethnographic analysis of the meaning and values people attach to trust in different settings (e.g., traditional, interpersonal trust vs. impersonal trust in technology) might help to understand new forms of trust in non-human agents and new forms of cooperation and construction of shared meanings among the involved actors;
- carrying out experimental studies to examine the different levels of trust people express in interpersonal relationships vs. relationships mediated by impersonal trust in the technology;
- informing the design of blockchain applications with design frameworks that stress the importance of human-centered values and needs: from this perspective, we argue that humanistic approaches to ICTs, such as Value Sensitive Design, Positive Technology/Computing, and Experience-Centered Design may provide potentially useful frameworks to address this challenge.
More to explore:
- Gaggioli, A, Eskandari, S., Cipresso, P., and Lozza, E. (2019). The Middleman is Dead, Long Live the Middleman: The “trust factor” and the psycho-social implications of blockchain. Frontiers in Blockchain - Human-Centric Constituents in Times of Decentralization. 15 November 2019 https://doi.org/10.3389/fbloc.2019.00020
- Werbach, K. (2018). The Blockchain and the New Architecture of Trust. Cambridge, MA: MIT Press.