Trust is key for cryptocurrencies

(4 minutes reading time)

The acceptance of Bitcoin protocol currencies and Ripple like networks is dependent on trust even if trust is said not to be necessary for the value to be transferred between two actors. Neglecting this will hamper adoption of the Bitcoin protocol by the masses.

[clear-line] Bitcoin as the most prominent member of a new class of cryptocurrencies has taken a few direct hits lately, and some will undoubtedly – and maybe even anxiously – be waiting for the knock-out uppercut punch to have it crashing to the floor. “It is just Black Tulips all over again.”

To me Bitcoin has two parts to consider: the infant currency and the invention of a new cryptographically based protocol to execute transactions. My interest is mainly in the second part while I follow the developments of the currency with a close eye as to understand more about the impact and prerequisites of such a new transaction protocol to our ability to collaborate.

Yesterday I suggested reading Sander Duivestein and Patrick Savalle’s article: Bitcoin: It’s the platform, not the currency, stupid! (The Next Web)

It is a pretty lengthily article – almost 7000 words – but covers a lot of ground on Bitcoin, the protocol and the potential consequences this could have for our society. The article touches on dozens of subjects covered here at RPD.

The article basically does not leave much if any room for doubt and is stating guesses as projections into the future as if they are facts: “will have” instead of “could have”. Lets consider this a direct rhetorical style and get to the content presented.

The coming period I will address various aspects of the article, commenting on it, while referring to content at RPD addressing these issues. I have no clue were this will end but maybe I can finally put together the sequel article to “The bitcoin legacy and the crypto-currency promise (part 1: Foundation)” at some point in time.

As indicated already in April 2013 part 2 will be addressing: bitcoin specifics, the future of payments and the social/political implications of crypto-currencies. Promise is a promise… as a Dutch saying goes: “a promise creates a debt”. (i.e. “belofte maakt schuld”)

The artikel of Duivestein and Savelle devotes a full paragraph on “trust”:

A network where trust is not needed

As recent events have shown bitcoin is pretty much about trust (or lack of it). It is only not the type of trust we were used to, namely human based trust but technology based trust instead.

Duivestein and Savalle implicitly state that the bitcoin protocol is flawless in all of its aspects and therefore there is no chance (equals 100% certainty) of it going wrong. As a consequence you do not need trust.

One of my better posts I have written here at RPD, if I may say so myself, was about the metamorphosis of human trust into technology based Trust in an Inter-connected World.

Trust comes in different forms: trusting a fiat currency – and the coins, bills and electronic manifestations it is represented by – is different from trusting a bank, which is different from trusting your car to function well if you decide to go for a ride, which is different from trusting your fellow road warriors to act reasonably and according to expectations. Trusting bitcoin is much like trusting your car. And if we zoom into that trust even then we will find many aspects that in the end turn out to be types of human based trust (e.g. “I trust the garage has fixed my breaks properly”).

Even though I am relatively well informed on bitcoin and its background still I only hold the notion that this cryptographic part really is well constructed because others (as being other humans) have told me so. Not because I have been able to establish that for my self as a fact. Even though it is said cryptographically bitcoin can not be broken I have to trust others this is really the case.

How am I to know that that the protocol is flawless? I have to trust others to believe it…

This phenomenon of the illusion of understanding we encounter with many if not all of the concepts we use in our daily lives. We will be convinced that the world is the centre of the universe and that the world is flat until some bright guys tell us it is different. We take the new view for granted, we observe our surroundings that seem to be in line with the assumptions and therefore we declare it “the truth”. Until somebody else comes around and tells us differently. (Like a child who believes in Santa, or Sinterklaas) Well actually Einstein did tell us: time and space is not linear. But this is lost on most of us mortals.

Bitcoin and the protocol is too complex for the vast majority of people who will have to revert to human trust to relate to bitcoin and its possible uses. Recent events with bitcoin will only proof to these people, who in the end will have to be using it, that bitcoin can not be trusted…

By not making the distinction between the various types of trust involved, neglecting the humans who in the end have no other way of trusting in a human way and by stating that trust is not needed at all I think the authors are making a gaffe.

(Update 25 Feb 2014)
But “trust” is central to the argument made by the article:

In a system with intermediaries, it is always possible that one of the parties is consciously or unconsciously filtering or changing information. The solution to this problem must, by definition, be a system where trust is not needed. This requirement can only be met by decentralized systems.

Does this imply the article as a whole is rubbish? With the absence of humans in the system indeed “trust” is not needed. Trust comes into play when humans are going to use the system, as postulated above. Maybe human trust is not relevant for determining the metamathematical validity of the “value” received by a wallet but it is for the adoption and embedding of this (type of) system by humans in their daily lives and in the role governments will seek to manage the effects of the changes ahead.

Conclusion: The acceptance of Bitcoin protocol currencies and Ripple like networks is dependent on trust even if trust is said not to be necessary for the value to be transferred between two actors. Neglecting this will hamper adoption of the Bitcoin protocol by the masses.

Part 2: Different Scalability in Different Circumstances

Part 3: Will the „middle man” disappear?

Part 4: Bitcoin futurology: incongruous prophesies

For more on Bitcoin at Red Planet Dust:
The RPD Bitcoin files