IN _____ WE TRUST

I had the privilege of attending Richard Edelman’s Trust Barometer speech at the World Economic Forum.

Richard was one of the most eloquent speakers I encountered at WEF. He presented the annual Edelman “Trust Barometer” report, based from an online survey composed of 33,000+ respondents in 28 countries. The report paints a relatively dark picture of our world’s global affairs; the title of the document, An Implosion of Trust, says it all.

Some grim facts from the report:

  • Trust in “institutions” defined as governments, corporations, NGO’s and media have all declined in 2016 to trust “lows” that are similar to those during the 2008/2009 financial crisis (without a precipitous event this year, like we had in ‘08).
  • 85% of survey respondents indicated they believe that the aforementioned institutions do not have their best interests in mind, and that they don’t trust in “the system”.
  • Governments are distrusted in 75% of countries.

Richard’s presentation was followed by a panel where ideas were discussed for solutions to rebuild this trust.

At this point, I began to bifurcate “trust” into two broad categories: personal trust and (smart) contractual trust, as I believe there are 2 distinct aspects of the same word.

Personal Trust

Dear CEO, Prime Minister, President et al,

Have you screwed me lately? Will you screw me again? Do you even care? How are you going to fix it? How am I supposed to trust after you’ve already screwed me?

Sincerely,

the rest of us

I purposely pose these questions in crude layman’s terms as this is how the “rest” of the 99.9% of the population, who didn’t attend the World Economic Forum to strategize on improvements for Earth, while over-eating appetizers and drinking champagne are thinking.

Why is trust so low in governments, corporations, NGO’s, and media?

Primarily, most people do not feel like they have insight into the decision making processes of these institutions. Citizens suspect that governments are not deploying their resources appropriately or in order to serve their best interests. It seems like all their tax money vanishes, goes into a giant pool, and then is spent by nameless bureaucrats on projects whose results those taxpaying citizens believe they never see. Governments can be corrupt, with officials siphoning off resources for their own purposes or business interests. Corrupt officials benefit from traditional, nontransparent governance systems whereby they can conceal the flow of money and the provenance of decisions and actions.

Humanitarian aid encounters similar problems, despite, often, the best of intentions. While humanitarian aid organizations are crucial to a world that extends a hand to the poor and disadvantaged, potential donors see media reports about aid organizations misusing funds, or disaster-stricken countries claiming such organizations did not really help them in their time of crisis. In the current system, it is near-impossible for donors to get clear information about how every dollar (or other unit of currency) is being spent. Non-transparency in humanitarian aid gives rise to skepticism about the effectiveness of even the best aid organizations, compromising their ability to gain the trust of donors and beneficiaries.

With so many conversations going on about “fake news”, trust in media has never seemed lower. Distribution platforms for news can make it difficult to distinguish news from reputable sources from news purveyed in order to get “clicks” by content farms with little interest in factual accuracy. The bar has never been lower for new media sites to spring up and distribute content, while audiences seem not to care, or not to be able to distinguish, between reputable and non-reputable sources, undermining general confidence in the institution of media, which can be an important pillar of democracy. If each of us operates with an entirely different picture of what’s going on in the world, what basis do we have to come together and negotiate? To find solutions together for any kind of global problems?

Corporations are often thought in the context of profit-only or profit-first which breeds mistrust.

(Smart) Contractual Trust

Enter Ethereum: The world trust machine

By far, the most spoken about technology in Davos was blockchain and I believe it is due to the aforementioned global implosion of trust. As I posed in this year’s blockchain predictions, the key question asked in 2017, will be “How much should we pay to trust each other?”

Just as the “institutions” thought they had it rough, another layer of complexity is coming faster than a freight train: Ethereum, the global decentralized trust machine. Ethereum, in my opinion, is the next generation of the internet, or Earth’s veridical (defined: vəˈridək(ə)l /adjective: truthful) computer, which I spoke about in Davos, yesterday.

Ethereum is a blockchain-based, general purpose distributed computing platform, employing smart contract functionality. It employs the Ethereum Virtual Machine and Solidity to execute peer-to-peer agreements. This technology facilitates more efficient and secure transactions without centralized intermediation. Once terms are agreed upon, both assets are in place, they are tokenized, and exchanged by a process called an atomic swap where the trade is the settlement.

Rather than using Microsoft Word, pen, paper, attorneys, auditors, and notaries, our agreements will be codified. The banks are beginning understand this paradigm and are also building Ethereum based smart contract automation processes, as evidenced by J.P. Morgan’s creation and open-sourcing of Quorum.

For those who haven’t read a technical or non-technical introduction to Ethereum, here is an example of an what would typically cost a corporation millions of dollars in fees to intermediaries, transcribed into less than 100 lines of smart contract (pseudo) code for the equivalent issuance of a public offering or crowdfunding of shares in a corporation.

contract Crowdsale {

struct Owner

uint sharesOwned

uint sellPrice

uint forSale

mapping (address => Owner) ownersRegistry

function CrowdSale (uint shares, uint price, unit retain)

ownersRegistry[msg.sender].sharesOwned = shares

ownersRegistry[msg.sender].sellPrice = price

ownersRegistry[msg.sender].forSales = shares — retain

function purchase (address owner, uint quantity)

owner.send (msg.value)

ownersRegistry[owner].sharedOwned —

ownersRegistry[owner].forSale —

ownersRegistry[msg.sender]sharesOwned++.

function sell (uint price, uint quantity)

ownersRegistry[msg.sender].sellPrice = price

ownersRegistry [msg.sender].forSale += quantity

}

It is early days, and there will surely be the need of attorneys, auditors, and regulators to learn, educate and facilitate smart contracts, but the process will become much more automated, intermediaries will be removed and the cost of trust will plummet.

If you think this radically far away, Overstock.com has already used Ethereum based smart contract technology to facilitate a public offering.

Who are you? Trusting Digital Identity

The foundation of blockchain based trust, is through digital identity systems, such as uPort.

Individuals, institutions, and other groups, in order to access Ethereum, need a public-private cryptographic key pairing, which becomes their blockchain identity. As, say, an individual interacts with various financial institutions, businesses, government agencies, etc., he or she accrues reputational attributes as attestations that are permanently, immutably, and transparently connected to that person’s blockchain-based identity.

A government agency can have a blockchain-based identity, and so can all the individuals working in that agency who are authorized to make certain kinds of decisions or verify certain types of documents or deals. With a blockchain-based governance system, it is far easier to track how errors came about, perform an audit on a system as a whole, and provide transparency to citizens on decision-making.

Blockchain-based identity, that collects reputational attributes, could be applied to media outlets and individual journalists in a way that allows end users to rate the veracity of statements and reporting, and to flag malicious reporting and factual inaccuracies back to the community. Individuals can build reputation for themselves within such a system such that an experienced journalist at a top-tier, fact-driven outlet with an excellent blockchain-based reputation can vote on the quality of another news article and have her vote more highly weighted than other votes that don’t have strong reputations.

In terms of humanitarian aid, blockchain-based tools are on the way that will allow donors and funders to track how every bit of ether (or fiat currency) is spent on their platforms. Benefactory and WeiFund are two such projects that enable transparent tracking of fund use by funders and donors. Restoring confidence in humanitarian aid and other models of development funding through tracking and transparency is essential to building a world where people who want to help are enabled to do so.

Blockchain-based reputation means that we can dislocate our trust from centralized bodies of individual people — bodies that are subject to human errors, accidents, hacking, indecision, and even corruption — and replace it with trust in shared source of truth resources that are logical and code based, that no human being can manipulate in order to serve their interests. Moving trust to blockchains allows societies to unlock almost boundless meta-efficiencies, to communicate, and work together more seamlessly.

Currently 2.5 billion people worldwide are “unbanked”, which means they are essentially locked out of the global financial system, without access to the resources they would need to secure a loan, have a credit score that shows their financial history, and create a binding contract necessary to doing work or starting a business. With blockchain-based identity and reputation, no centralized services are necessary in order to perform these functions; just a blockchain-based history of good financial behavior, and other positive signals from reputational attributes connected to an individual’s identity. Even beyond the unbanked, smart contracts will allow business and financial activities between actors who never before were able to create value, unlocking enormous potential economic growth.

There is no reason why, using Ethereum, a potential donor in the United States could not give a small business loan in ether to a person in a developing country that they have never met before. Using transparent and secure blockchain-based funding and governance tools, combined with blockchain-based identity that accrues reputational attributes through attestations, this scenario is entirely possible. It could move forward without needing processing by any kind of centralized body.

Touché. But can we trust the blockchain?

After the Edelman Trust Barometer was published, Phil Gomes of Edelman subsequently produced a work titled Hacking Trust: 2017 Edelman Trust Barometer and Blockchain in which over 1/3rd (10 of the 28) of the countries survey respondents trusted “blockchain technology” more than “cloud technology” even though I believe core blockchain technologies are in their 1st inning and cloud is in its 5th inning.

This is where blockchain technologists have a responsibility to educate, collaborate, and elucidate the proper use cases for this technology, for the good of everyone in “the system” including citizens, regulators and institutions of Earth.

We may have lost trust in each other, and in many of our human institutions. This loss is unfortunate, and it is felt here at Davos, and across the globe. But blockchain presents us with a unique opportunity to replace that trust and restore it, providing citizens, media, organizations, and agencies with a basis to come to the table again, make decisions together, and heal from the crises in trust that we face today.

Onwards and upwards,

Andrew is Managing Director - Head of Global Business Development at ConsenSys, where he drives strategic partnerships, enterprise strategy and communications for ConsenSys. Andrew co-founded ConsenSys Enterprise to create Fortune 500 Ethereum blockchain solutions. Much thanks to Amanda Gutterman for her contributions to this piece

Disclaimer: Futurism has a personal affiliation with ConsenSys. This is a piece of editorial content. ConsenSys does not have any review privileges on editorial decisions.


Share This Article