(This is part 3 of an article on crypto-currencies at Red Planet Dust. See for Part 1, Part 2)
Human collaboration is based on trust. We do not have a choice other then to rely on an incredible amount of others if we are to accomplish almost anything at all. We have to rely on people we have contact with very regularly and intimately, but also we are reliant on countless others who are to do their little part in having the gears of society move for you to have what you need or want. We are just blatantly dependent on others. (i.e. This may come as a bit of shock for readers truly believing that we are living an individualised live, only pursuing our individual interests.)
We cannot control all aspects we encounter in life, nor can we predict the future. As individuals we try to predict the behaviors and actions of others – individuals, groups and institutions – based on former behavior, or by reputation, or by impression. We mostly unconsciously calculate how much we are willing to be dependent on them. Trust is about predictability and others acting in your, or your groups’ interest. Trust are unwritten agreements that otherwise would cost so much time and friction to establish that the effort to collaborate would be bigger then the “revenues” coming from that collaboration. Like using standards for instance, trust is helping us to effectively collaborate without the need to discuss the terms and conditions and all other technicalities involved again and again, it makes the future (linearly) predictable to a comforting degree. It makes that people can collaborate almost ad-randomly.
How we sociologically behave, how we psychologically function has a direct link of how we use trust. Trust is embedded in our DNA for it is crucial to collaborate and collaboration is at the core of our human abilities. Trust has evolutionary proven to be a very effective mechanism for collaboration, and collaboration being at the core of our success as mankind. Trust is a key sociological and psychological mechanism to have us collaborate while dealing with essential uncertainty about the future.
Although we highly value trust – as it is at the core of human experiences as love, friendship, religion as the superlative degree of trust, and patriotism – it is not sufficient to have our society blossom on its own. We do not all have the same interests, and many of us are pursuing only individual gains. We need laws and we need to police and enforce them. We create contracts; we put locks on our doors and bicycles, we want privacy, we create governments and political structures to handle these tensions. For we know, deep down, that in the end we have to be very cautious about the others around us. Mankind has found incredibly complicated mechanisms, and trust in all its facets being a very important one, to deal with the frictions that could arise and hinder collaboration.
Enter Inter-connectivity
The more complex our society has become the more complex the fabric of trusts works out in our society and in our individual lives. With the advent of the interconnected world another layer is added that has profound impact on how we relate to each other and how we collaborate on almost anything. How are we going to transplant our conceptions of trust as we have been internalising it and using it in almost anything we do as it has formed our society for 200.000 years since the emergence of the Homo Sapiens (which I would like to re-dub in “Homo Collaborans”) into this new environment? An environment that lets many more people, and also an abundance of increasingly intelligent devices be combined and be connected at an unprecedented scale. Is trust, as we know it today the right reference in an interconnected world?
Enter trust in technology
Trusting technology is not the same as trusting humans or groups of humans. These are two totally different types of trust. You trust your mother quite differently then a 64 digit Bitcoin based on heavy cryptography, don’t you? Teasing question: Which one do you trust more?
Human Trust is about not knowing future behavior of others for certain, but what if we could know for certain, or at least more certain then our human trust concepts (and control mechanisms) cater for? Would we be willing to keep using this type of trust just for nostalgic reasons? To continue the traffic metaphor: there will be a moment that the self-driving car is decidedly saver then a human driver, will we keep on trusting the human driver or will we hand over the wheel (aka trust) to technology? Are we going to keep on trusting financial institutions when alternatives are created that do not rely on human trust while catering the same functionality?
Trust in an interconnected world
Many, like Felix Salmon in the article ”The Bitcoin Bubble and the Future of Currency” — Money & Banking — Medium, think that not involving aspects of human trust equals mistrusting humans or its institutions. In an indirect and relative way it is, when a certain technology can be better trusted then a human factor. But in an absolute sense trusting technology with the absence of human based trust can give a higher degree of certainty then before. The outcome of future behavior or action is more predictable then before in an increasing amount of situations. NB This is were e.g. Big data comes in. Regardless of the impact on our society, which can and will be substantial this will improve our ability to collaborate.
The other way around: how are we to create trust concepts in an interconnected world? A world that basically is “governed” by technology. I think market places are a good place to start to see how the network construction, the services and the link up of both supply and demand (based on sufficient liquidity) create a new technology driven trust amended with human aspects like reviews, likes etc. (NB which is not the same as trust persé, but could lead to reassurance of humans as to start accepting trust of the technology provided).
Enter payments.
With the advent of electronic payments a few decades ago we have moved from relying on trust in individuals and institutions (both human based) into a combination of trust in humans and trust in technology as a foundation for payments.
What we now see happening with crypto-currencies as an example is that we move on to only need to trust technology.
All our payment infrastructures today are based on the combination of human and technological trust. This relates not only to the technology used, but also in how financial institutions are dealing with payments, how they are regulated, how you and I can use payments. But with the digitization of currency a lot of the provisions that were necessary in the electronic era seem unnecessary.
With crypto-currency the trust is the money itself. Trust is at the hart of the payments value chain. So if we change the type of trust at the level of the currency itself this will invoke a new payments value chain.
Bitcoin is showing us that new constructions are feasible that will make money less dependent on human trust as to become an even better facilitator of the human ability to collaborate (and to keep the social compact together in the wordings of Felix). Money does not need the inclusion of human based trust perse.
The design of a currency system based on a technical design that does not need human based trust in its core does not imply mistrust of humans or its institutions (even though it can mitigate for the uncertainty that human based trust involves). There is just less need for intangible human trust.
Bitcoin is giving us a glimpse of a payments mechanism that as a currency does not have a need for “human” trust anymore. NB Not all aspects of Bitcoin as a payment mechanism are without human trust, but the currency it self does. The potential consequences are huge.
For more on Bitcoin at Red Planet Dust:
