The term ‘trustless’ is often applied to explain the power of blockchain, but it’s also a bit of a misnomer. ‘Trustless’ doesn’t mean that blockchains exist without trust; instead, it means that two people who don’t have established trust between them can rely on a system they do trust, in order to do business or otherwise interact. The ‘trustless’ system still relies on trust: it’s just not in each other. It’s in the system itself.
Take, if you will, a simple financial transaction. You have a thing I want, and I have money. I don’t know you, and thus I haven’t established any trust with you. I won’t hand my money over without having the thing in hand, but you won’t hand the thing over without having the money in hand. You could solve this by meeting face to face; you show me the thing exists, I give you the money, you give me the thing. But that necessitates being in the same place, at the same time, in order to establish trust. Instead, you give that trust to the blockchain, and it acts as the guarantor in your relationship.
Trusting the blockchain
Given that its main role is to act as the source of trust in relationships, it’s incredibly important for blockchain providers to establish trust with their users. Unfortunately, bad players and famous hacks and scams have created an environment where that trust isn’t intrinsic, and where intelligent users are incredibly suspicious.
ICOs are a big part of the tainting of the public’s view on blockchain technology. A lot of people realized they could make a lot of money really quickly, and that created a dangerous environment where profit was more important than product. Frauds perpetrate the notion that this is all about getting rich quick, and investors are left scrambling to figure out who’s worthy of their money.
Don’t be the bad apple
Those of us who believe in the blockchain hope that bad apples won’t destroy the system, but real scams aren’t the biggest problem. Instead, it’s people who believe in blockchain, and want to be part of the groundswell of enthusiasm (okay, yes, and also cash), but don’t realize just how bad their bad practices really are. We see them making the same mistakes over and over.
The first problem eager creators run into is stacking the deck with advisors. Advisors are often trotted out as proof that an ICO is reliable, especially when there’s a clear lack of product. Whitepapers are time-consuming and difficult to write; but claiming that Vitalik is giving you advice is free! Sometimes fully-stocked advisor pages are the sign of an actual scams, such as when an ICOs claim a famous blockchain name who has no idea they exist; we’ve even seen an ICO with photographs of the same man wearing different hats, listed as every member of their core team! But even good players become bad apples when they prioritize getting advisors over other, more important, metrics.
The most important of those metrics is the actual product. If the product isn’t done when you ICO, you’ll inevitably run into problems — this is a completely new area. Look at how often CryptoKitties runs into technical problems. That’s with a product that’s been thoroughly vetted and tested! Imagine how high the hurdle is to jump when all you’re starting with is an idea. Good players need to remember that product is everything. Create it first, put out a whitepaper, and then look for investors.
You made a prototype, and it worked really well! So you ICOed and suddenly had thousands of users and everything crash into a flaming pile of… whoops. Scalability is an important metric for new companies, because scaling on the blockchain is hard. Remember when we crashed Ethereum? Yeah, so does everyone else, and we’re working hard to make sure it never happens again. You have to be ready to serve the market, and that means anticipating wild success, but also being prepared for moderate success instead.
ICOs are guaranteed to bring in a sudden rush of cash, but bad players have left a users war of the technology they were supposed to empower. Before any kind of monetization, companies need to ask themselves: what are you providing? Who are you serving? And, is the product really worth it?
So how do you establish trust?
In blockchain, and especially in startups, people tend to rally around the well-known individual. That’s the exact opposite of our philosophy at CryptoKitties. We don’t believe in the cult of the lone genius. There are numerous CryptoKitties co-founders who helped make this project the success it is, and everyone at Axiom Zen also contributed to that success.
For the team at CryptoKitties, the first step to establishing trust was creating a core product before we launched. No one had to guess whether or not we could do what we claimed based on the strength of our advisors; we could show them!
Once we did that, we set out to meet our community. How better to prove that you aren’t one guy wearing ten hats, or ten eels wearing a suit? We hosted events, met users, did interviews, and established beta users to help stick the landing of our launch. We established community in the most literal sense, and those people could then speak to our trustfulness.
Perhaps most importantly: we monetized transparently, and we didn’t ICO. The CryptoKitties team takes 3.75% of every transaction, and we have a handful of Gen 0s we can auction — this has been public knowledge since we launched. That, plus the sale of the Kitty Clock Gen 0s, is how we make our money — this is so transparent, you can read about it in our FAQ!
Trust by any other name would smell as sweet
Trust on the blockchain is actually still hugely important. It’s just very, very different than the kind of trust we needed for traditional, off-the-chain transactions. If you’re planning on starting a company on the blockchain, you need to do everything you can to earn the trust of your users. And if you’re a user? You should stop investing in people who don’t have yours.
Are you a CryptoKitties user? If not, head over to the website and learn what it’s all about.