Do You Trust the ‘Trustless’ Blockchain?
Where trust is hiding and why adoption depends on maximizing trust, not eliminating it.
The word ‘trustless’ is thrown around a lot in the blockchain community, yet it is one of the most misunderstood concepts in the blockchain vocabulary.
The benefit it describes is a fundamental part of what makes blockchain technology so revolutionary — instead of needing to trust another human or centralized party, all you need to trust is open, auditable code.
Boom, trust eliminated. Or is it?
Anyone who has done something as simple as send coins from one wallet to another has felt the reality. It’s the heart-pounding nervousness that you got one character wrong and lost your coins forever.
What’s that feeling?
That’s trust. Or lack thereof.
Trust didn’t disappear — it moved. And early blockchain adopters feel it firsthand.
For trust to be a true selling point for blockchain, we must figure out where trust went and how to maximize trust in its new home.
The Trust Paradox
Trust is not binary. There is not a trust switch within humans that can be flipped on and off. Trust is a spectrum and we will never reach one end or the other.
Even if the goal of blockchain technology from an academic perspective is to “eliminate trust”, the real goal from a human perspective is to maximize trust. A “trustless” system requires human trust.
There’s a clear gap between the aim of trustlessness and the amount of trust you can actually put into a blockchain platform as a user. The mechanisms required to remove the need for trusted third parties has come at the expense of usability. The user experience of most blockchain apps lags behind modern expectations.
Why would most people, even those familiar with blockchain, rather store the bulk of their wealth in a centralized bank? Why is there still such a gut-lurching fear of being responsible for your own private key? Why is commercial adoption lagging so far behind?
With this, the trust paradox is born: The benefits of a trustless system are clear, but a trustless system actually requires a lot of trust.
Where did trust go?
Trust in the code
If the code is law, then it is very important that you trust the code. The unfortunate truth is that even those who know how to write smart contracts are unlikely to read every contract they ever use. Imagine needing to read the code of a website before you use it. Therefore, ‘trust in the code’ more accurately translates ‘trust in the system’.
Do you trust the core developers? Do you trust the organization or company? Do you trust the network surrounding the application?
For most people, their trust in the code will stem from the number of people who use the code. The more people who use something, the more likely it is to be correct, right?
Unfortunately, that’s not always the case. Think of a user by the name of “devops199” who accidentally locked $280 million in the digital wallet service Parity while attempting to fix a few bugs. Despite the Parity wallet being a widely used wallet with audited code, this bug was missed until it was too late.
Trust in the governance
The immutability of blockchain and attempts at decentralized governance are often at odds with the need of software to adapt. This leads to challenges when it comes to updating blockchain platforms and contracts.
So who should control when something should be changed? Who has the power?
If you’re familiar with blockchain technology, you’ve probably heard of hard forks, soft forks, or even the recently introduced hard spoon. These are mechanisms to change aspects of the blockchain. These changes are often more contentious than you may expect, especially when they aim to provide performance improvements. Similar to debates involving national politics, there are always individuals who want things to remain the way they are, which often leads to slower progress. Depending on which side of the fence you are on, this may be good or bad.
At the contract level, developers are beginning to explore patterns that make it possible to update core components of a system without needing a new contract. This can be done through updating variables within a contract or separating contracts into connecting pieces. This provides an opportunity to bring iteration to contract development, but also opens the door to potential misuse.
Not only do you have to trust the code, but you have to trust that it is not going to change in an adverse way. And conversely, that it will still be able to adapt to unforeseen challenges in the future.
Trust in yourself
The blockchain moves a lot of control back to the user. That sounds like a good thing until you remember how many times you forget your password to a website.
You don’t need to look far for examples of why trusting yourself may come as a challenge for many people.
Think of James Howells, an IT worker in the UK who accidentally threw away his laptop with 7,500 bitcoins (worth about $50 million) in 2013. He is now trying to get access to dig it up at a local landfill.
It’s tough to have trust in a system that’s so difficult to use, yet easy to misuse.
“Did I initiate that transfer correctly? How can I keep my private key(s) safe? What happens if I lose my private key?”
For something so commonly referred to as “trustless”, a surprising amount of people don’t trust it; better yet, don’t trust themselves to use it.
In fact, the biggest bitcoin exchange in the US, Coinbase, manages private keys for its users. Individuals are opting for centralization (trusted 3rd parties), even when interacting with the decentralized blockchain because of the ease of use.
If blockchain moved trust to the individual, how do we empower individuals to trust themselves?
Trust in adoption
Many of the platforms being built using blockchain technology today require scale to provide the majority of their value. For example, a blockchain app aiming to provide a marketplace for ridesharing needs a large number of drivers and riders to use their platform for it to provide value. This means that early adopters must trust that scale will be reached.
For those building on top of blockchain platforms like ethereum, the level of trust must be even higher due to the challenges of moving systems from one platform to another. You have to trust that the specific blockchain that you choose to use or build your app on will be used in the future.
Is Ethereum the platform of the future, or is it EOS, or is it an unknown project that is yet to release its whitepaper?
In terms of the Innovation Adoption Lifecycle, blockchain is still somewhere in the ‘Innovators’ or ‘Early Adopters’ stage. That’s very early. History has many example of technologies that showed a lot of promise during this stage only to later fail.
Why does it matter?
It matters because there is a lot of value in shifting trust. Blockchain has the potential to revolutionize many industries if trust in the systems surrounding the technology can be improved.
Look at one of the most popular trust systems today: banking. When you use a bank, you’re putting your trust into the people running it.
You trust that they’ll let you access your money.
You trust that they’ll successfully transfer your money when you need to transfer it.
And, you trust that they will not lie about your account balance.
That’s a lot of trust to put in a company that may or may not have your best interest at heart.
Although this may not seem like a problem in a country like the United States, this level of trusted power has bred corruption around the world.
Take Venezuela for example:
The economic crisis in the South American country has gotten to the point where the Venezuelan banking authority now has control over how much money citizens can withdraw from banks each month. Moreover, the bolivar has lost 98% of its value in just one year, causing people to lose their life savings and making their future highly uncertain.
Or how about Cyprus:
During the 2012 financial crisis people were only able to withdraw €300 in cash per day. Some banks, in order to not run out of cash, dropped the limit to €100 per day. It was even worse for people people who had saving accounts that exceeded €100,000. At the Bank of Cyprus, the largest local bank, people whose deposits exceeded €100,000 lost around 48% of total deposits - leading to a total loss of roughly 4 billion euros.
Because the bank is in control of your funds, there’s not much you can do about those restrictions and losses.
Enter the “trustless” blockchain. With blockchain, there’s no need to rely on a centralized third-party. You don’t need to trust a bank or a government to protect your money. You know that your balance on the blockchain is exactly what you own, and you can access or transfer it at any time.
For some economies, the current state of blockchain may provide enough benefits to justify adoption.
But for systems that aren’t broken, simply inefficient, it’s going to take more work until the benefits outweigh the risks.
Adoption is risk vs reward
Adoption will not happen until the reward outweighs the risk — an equation that is different for every potential participant. But for many, the risk (perceived or real) is still too high.
On the reward side, there are many teams working on improvements like increasing throughput, reducing transactions costs, and providing privacy solutions. But for many, the uncertain feasibility and timeline for these solutions actually increases the risk of adoption.
Meanwhile, the risk side of the equation only seems to be getting worse. With hacks, regulatory uncertainty, and dramatic price swings, trust in blockchain technologies continues to be tested.
Let’s work to maximize trust
Blockchain technology creates the opportunity to distribute trust, but that comes with a new set of challenges. By acknowledging that trust hasn’t disappeared, it has merely shifted, we can focus on how to maximize trust in its new locations.
We will need ‘trusted parties’ to review code, read white papers, and oversee governance. Whether this is mandated by a government or not, oversight is in the best interest of the blockchain ecosystem.
Improving trust for individuals may mean some centralization. It is not a secret that many apps built on blockchain still utilize centralized services. Especially at the onset, it does not need to be all or nothing. User experience still matters.
Even with improvements to blockchain performance, mainstream adoption will only happen when we can solve these trust issues — not removing trust, but maximizing it.
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