Code versus Values: The Cryptographic Twist on “Trust”

We hear a lot about the term “trustless” in crypto, and many are confused by its implications. It is a vague term with several potential meanings, depending on the context. ‘Without direction’ means ‘without direction’, so ‘without confidence’ must mean ‘without confidence’, right? Surely a lack of trust is bad?

It turns out that “trustless” is yet another term that the crypto ecosystem has appropriated and imbued with a modified definition, to refer to the lack of need for trust. In traditional finance, we trust our banks to make our payments and protect our deposits and we trust our brokers to execute our buy/sell requests.

Noelle Acheson is the former Head of Research at CoinDesk and Genesis Trading. This article is excerpted from her Crypto is a macro now newsletter, which focuses on the overlap between the changing crypto and macro landscapes. These opinions are her own and nothing she writes should be considered investment advice.

In crypto, in theory, we don’t need to trust third parties. We can directly perform peer-to-peer transactions, letting the code handle balance adjustments and verify on-chain that everything is in order.

It’s not a lack of trust – it’s an environment in which trust isn’t necessary.

In theory, anyway. By stripping away the layers, we still have to trust the blockchain as well as the interface we’re using; we even have to trust the miners and/or validators that maintain the network. And by purchasing our crypto-assets from a centralized exchange or storing them with a centralized custodian, we trust intermediaries to manage our funds fairly (unfortunately not always the case, as we have seen). If we are using a decentralized application, we hope that the code does not have bugs (this is not always the case either).

How do we assess “trust”?

Like the air we breathe, our lives are fueled by trust, even in “trustless” systems. Our society doesn’t work without it, and it won’t work no matter how decentralized we are. Trust is why contracts work, empires fall, and people seek community.

It’s also why the “Edelman Trust Barometer”, published every January, is such a compelling read. Since 2000, he has been documenting the decline of trust in our society by surveying 32,000 people in 28 countries, to assess attitudes towards the institutions that shape the framework of our lives.

This year, the main theme is growing polarization, with respondents in the US, Argentina, Spain and others overwhelmingly ticking the “extremely divided and no solution in sight” box. A major driver of this change is declining trust in government (seen as “unethical and incompetent”) and the media (seen as “biased and misleading”).

The “business” appears to be the only pillar of trust in our society. This year’s report highlights the growing public expectations of CEOs. 89% of respondents expect them to take a stronger stance on the treatment of employees, 82% on climate change, 80% on discrimination.

Rather than offering relief that at least one key group of institutions continue to be trusted, it raises many concerns. What is the purpose of the company – to make profits for investors or to defend certain values? How political should companies get and how much might this hurt their growth potential?

This shift in expectations resurfaces something I touched on earlier. We cannot remove the need for trust in our lives, and when it is damaged in one area, we seek compensation in another. But expecting corporations to take on the role of societal governance and spreading the “truth” could end up distorting markets.

A different trust model for crypto investing

Which brings us to crypto: a simple assumption is that crypto runs on cold code rather than warm people and therefore offers a “purer” market experience. It may be (no business decisions affecting revenue potential, leaving investors to focus on design choices), but code – especially in crypto – embodies values.

Satoshi did not create Bitcoin to fill a void in the map of global trust. He (or she or they; I’ll use “he” for convenience) created Bitcoin to fill a void in his trust card, expecting other like-minded people to find it interesting. Bitcoin doesn’t have leaders to shape it according to what its market wants, nor a marketing department to help identify what it is. Bitcoin didn’t go looking for users – its ecosystem spontaneously emerged among people who appreciate what its code can do, and grew as more people challenge established market orthodoxies and money.

An often misunderstood premise of Bitcoin and similar cryptonets is that they are written in code to perform a function that makes them a tool, and tools have many uses, both good and bad. Bitcoin, for example, may have been created with certain values ​​in mind, but that doesn’t stop it from being used by those who don’t share those values.

This matters for investor expectations. Investing in crypto is akin to investing in tools, which makes crypto much more of a commodity market governed by supply and demand than a securities market governed by business strategy and soft goals. Yet unlike commodities, crypto assets also embody certain characteristics that put them in the path of the “stock investor” crowd, which Edelman’s study found is even more important than most. between us thought. No one has ever accused copper of having values.

This also matters in terms of regulatory assessment, bringing up a heated debate that many cryptocurrencies know all too well: should you regulate a tool or only its uses? Knives can make food easier to eat and they can kill, but no politician advocates regulating knife sales. However, Bitcoin (to pick an obvious example) was born with built-in anti-regulation sentiment. This justifies some concern on the part of those who see their influence diminishing.

All of this highlights just how new concepts in crypto still are and how we have barely scratched the surface in terms of their impact on how we view concepts such as markets, regulation, and trust. It’s about more than understanding algorithms, data structures, securities law, or economic incentives.

But it’s worth questioning our confidence in a trust report, especially when a PR firm that caters to business tells us that business is more trustworthy than other areas of our societal framework. Whether or not the report’s conclusion is biased, probing carefully presented narratives is a healthy exercise.

This is perhaps the ultimate utility of the crypto ecosystem. As it continues to test use cases and expand into new market segments, it has given us more than a way around selective barriers and a window into a new economic hierarchy. It also gave us a lens through which to challenge established conventions.

As the Edelman Report suggests, ‘values’ and ‘trust’ are important – however, we may not understand them as well as we thought and the new tools in the philosophical box cause us to think about this. what they mean to us as individuals and communities. This could, in turn, lead to a deeper awareness of how these fundamental concepts can shape the next generation of markets and transactions, and what this means for our relationships with each other.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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