When blockchain technology is claimed, because it establishes trust, to “transform everything” and “change the world”, what kind of trust exactly are we talking about?
After humanity realised barter was inefficient – to buy what you wanted, you had to have on hand what the seller sought – money came into existence. But commodity money too was inefficient: all that gold and silver sitting idle in people’s pockets when those metals could be used in producing industrial value. Paper money solved that problem as physical paper itself has little value in alternative use but high value as currency or similar value-bearing certificates. But you had to trust that the paper being given you was genuinely issued by some credible authority – otherwise, the same value could be double-used; it’s called counterfeiting – and you run the risk of not actually receiving anything when you held that paper.
If, however, that assigned central authority turns out, after all, not to be credible – perhaps citizens worry it might over-issue money, thus debasing the currency through inflation – an alternative currency, also trusted but without centralised control, attracts popular appeal.
Blockchain technology promises credibility for digital currencies alternative to the ones we already have. But the technology’s enthusiasts also want to provide the same kind of worthiness for all other transactions involving trust. That’s why those enthusiasts say blockchain will “transform everything” and “change the world”.
(There are good reasons to view digital currencies with skepticism: as is the case for every possible asset, they are volatile in value — for every success story of rising hundreds of percent in value, there are corresponding disaster stories of equally sharp plunges. Producing digital currencies eats up significant electricity, so we’ve simply restored the original problem of inefficient commodity money wastefully edging out alternative much-needed industrial application.)
Digital currencies are of course just one small example of the application of blockchain technology. All payment and settlement schemes, all banking, a great deal of insurance, all see further related application. But, at the end of it all, the technology simply provides a massively distributed, online collection of records, i.e., a fancy ledger of promises and statements that, for all practical purposes, cannot be altered and so constitutes an accurate and faithful account. It’s just book-keeping.
So, yes, we trust what that blockchain-moulded ledger tells us. “It solves the trust problem.”
However, that kind of trust is different from my trusting my neighbors not to hop onto my WiFi thereby slowing down my Internet surfing; my trusting my nephews and nieces not to do drugs; nations trusting the Great Powers not to break international commitments. If a neighbouring nation state invades my country, it does not at all help my people that we can point to the accurate, uncrackable blockchain ledger that shows that evil nation state had promised not to do this.
The word “trust” is overloaded in meaning, and therefore over-hyped in intent.
How much outside of ledgers does “book-keeping trust” sees application in the real world? Where is the boundary between where blockchain technology applies and where it doesn’t? And in how many languages other than English is the word “trust” similarly overloaded?
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