What Crypto Gets Wrong About Trust

Crypto is crashing.

As I write this, Bitcoin is down 65% from its November peak. Ethereum has dipped below its peak from January 2018. The stock market rally following the Federal Reserve’s interest rate hike had no effect on cryptocurrencies, and nobody knows where the bottom might be.

I’m one of those know-nothing nobodies with no idea what comes next. I own a bit of crypto, but more out of curiosity than ideology. So, given that I have no useful commentary to offer on the prognostication front, it’s the ideology that I want to focus on here: namely, the “trustless” mantra.

It’s a mantra that Alyssa Blackburn, a data scientist at Rice University and Baylor College of Medicine in Houston, has been working to unpack for some time, as the New York Times recently reported.

Despite all the egalitarian, decentralized, trust-the-code-not-the-person idealism, Blackburn found just 64 key players were responsible for the majority of Bitcoin mining activity in the first two years -- some of whom could have, during that time, hacked the system to spend the same Bitcoins twice.



Is it wise to “trust the code” when the code allows for that kind of behavior? Probably not. But what was interesting was what actually happened:“[W]hile some miners had the power to execute 51 percent attacks, they repeatedly chose not to. Rather, they acted altruistically -- preserving the cryptocurrency’s integrity, even though the decentralization-based fraud-prevention mechanism had been compromised.”

In other words, when the code failed, we had to trust… people.

And even though it’s been a while since so few people could control the entire Bitcoin blockchain, it’s not uncommon at all for major issues in crypto to require human intervention -- to require human trust.

Last year, for example, a hacker stole $610 million in crypto via a code vulnerability -- and then returned it all.

See, here’s the thing: “trustless” isn’t “trustless” at all. It’s extremely trustful: trustful in the code, in the people who wrote the code, in the people seeking to exploit the code, in the fallible systems and protocols designed into the code.

Can people betray your trust? Absolutely. But so can systems and protocols. And when those systems and protocols don’t produce a fair result, there can be very little recourse.

Take, for example, Circle DAO, a decentralized autonomous organization that recently voted, according to its established systems and protocols, to default on an investor agreement and “refund” the investor’s money instead of paying them out the return they were owed. In making the case for the (presumably highly illegal) proposal, its author stated, “Decentralization is about freedom. The freedom to do as one desires, unbound by anything and everything.”

This view is not only childish but dystopian. It’s a view that paints as its ideal a world in which nobody needs to be accountable to anyone. It is also a view that is at odds with any form of functioning society, no matter the protocols or political system.

This is what crypto generally, and folks like that proposal author specifically, get wrong about trust. We NEED it. There is no such thing as a functioning society without trust.

Trust is hard. It requires us to behave with integrity. And sometimes it costs us. But it is impossible to remove trust from society -- only to transfer it, from organizations made up of people, to code and protocols written by people. We delude ourselves if we believe that an effective system based on code requires any less of an investment in trust.

The solution is not to abandon trust. The solution is to do the necessary work to build it up.

Are we willing?

1 comment about "What Crypto Gets Wrong About Trust".
Check to receive email when comments are posted.
  1. Charles Pierce from Private, June 18, 2022 at 12:02 p.m.

    Good comments, a few observations for you.

    1) Blockchain governance allows changes approved by 51% of the stakeholders (as stakeholders increase, fraud or changes are harder to do without consensus).

    2) Jack Dorsey, who nows runs "Block" which is Square, the payment app, has a whitepaper they put out which talks about Trust. The conclusion I got out of it is:

       a) Blockchain allows transactions between two anonymous entities.

       b) The whitepaper discusses "trust" as being something the entities need to determine what level of turst they want to establish between themselves.

       c) This leads to the "rise" of "trust mechanisms" which are ways for entities to assess information they want to know about each other to establish trust. In other words, to your point, 3rd party organizations that rate the entities may arise (EXAMPLE: Banks in the US have strict protocols to allow a person to have an account, which is why ACH transactions are relatively safe, as an example).

    So, "trust" is needed and. ironically, that implies the idea of decentralization STILL requires centralized trust mechanisms to establish trust and remove risk.

Next story loading loading..