Blockchain and crypto still require trust

Blockchain is supposed to do for financial dealings what automated driving promises to do for busy roads. Both technologies are designed to increase efficiency, safety, and ultimately provide a superior user experience.

And, in both instances, despite the meta-narrative that the technologies are moving us away from the flaws of humanity (like being a bad driver or a scammy financial service provider), they both rest on a sense of trust.

With robot cars, maybe it’s a little bit more obvious: When you get in a vehicle controlled by an algorithm and then let it zip you down a highway you are trusting that the computer code making decisions and guiding the vehicle has been properly trained and is capable of dealing with the unplanned situations motorists face.

Applying that logic, it’s likely that widespread automated car adoption won’t hinge on advances in computer vision or machine learning, but how good robot car companies are at getting the public to trust them and their product.

Trust and blockchain

But the connection between trust and how cryptocurrencies work is a little bit less obvious, and in some cases overshadowed completely when talking about how permissionless networks are governed by the consensus of the users, as is the case with bitcoin.

I can’t do a better job of unpacking the fundamental trust component of blockchain and cryptocurrency, and why these systems are often viewed as “trustless” by proponents, than this piece by EJ Spode in Aeon magazine does.

Here’s one example, from the story, talking about the controversy after Ethereum’s hard fork following The DAO hack, which created two variants of the blockchain:

“In their view, the hard fork undermined the core principle of Ethereum, which was, after all, to bypass all the meddling humans – the corrupt bureaucrats and politicians and board directors and CEOs and lawyers. The code was supposed to be the law. If you didn’t see the weakness in the software, that was your problem, since the software was publicly available.”

And here’s another good passage explaining how there is a need to look beyond the code powering cryptocurrencies and really understand the motivation and intent of how and why the system was created:

“Blockchains don’t offer us a trustless system, but rather a reassignment of trust. Instead of trusting our laws and institutions, we are being asked to trust stakeholders and miners, and programmers, and those who know enough coding to be able to verify the code. We aren’t actually trusting the blockchain technology; we are trusting the people that support the blockchain. The blockchain community is certainly new and different, and it talks a good game of algorithms and hashing power, which at least sounds better than tired slogans such as Prudential is rock solid and You are in good hands with Allstate. But miners aren’t necessarily any more reliable than the corporations they replace.”

So where does this leave us?

I think it’s important to remember that blockchain and cryptocurrencies are a new and maturing technology. It’s also important to remember that while they are aiming to improve current financial and transactional systems, there is still work to be done in perfecting them.

Following that, I actually don’t think it’s a bad thing that there is still human involvement, and emotion and intellect guiding new technologies.

All of this is simply to say, that at the end, even if blockchains and cryptocurrencies are driven by high-powered algorithms, someone, or a group of people, still have to be around to update the software. And that fact can either be an opportunity or a liability, depending on how you look at it.