In Letsfair

In a rational definition, trust is a type of risk assessment of the likelihood that something will work out, for example a business. It is the act of relying on analysis based on past experiences. However, it cannot be defined as something rational and predictable. Trust empowers people to connect securely with the unknown. Human beings are exceptional in giving votes of confidence. An example of this is the fact that we share our credit card information on websites. We rely on trust for our lives to work.

According to Rachel Botsman, a world-renowned authority on the power of collaboration and trust, technology is profoundly altering the trust-building model between people. In her presentation at TED in 2016 [1], entitled “We’ve stopped trusting institutions and started trusting strangers”, she stated:

“Technology is creating new mechanisms that are enabling us to trust unknown people, companies and ideas. And yet at the same time, trust in institutions, banks, governments and even churches, is collapsing.”

Airbnb, Uber, BlaBlaCar and Tinder are just a few examples of mechanisms that allow its members to rely on strangers. A change is underway, the transition from “institutional trust” to “distributed trust.”

The Trust Stack

A research conducted by Rachel Botsman [1] demonstrates how technology is transforming social bonds and trust between people. By studying hundreds of networks and markets, she discovered a pattern that people follow, which she called “The Trust Stack”.

In the first layer of the Trust Stack, people have to trust that a new idea is safe and worth taking risks. The next layer is to rely on the platform, system or company that is making it easy to trade. The third and last layer refers to using little information to decide whether the other party in the business is trustworthy.

For example, to use BlaBlaCar, the consumer first needs to be convinced that sharing a car trip, reducing expenses, and getting into a car with a stranger is a possible idea. Of course, there are risks. Next it is necessary to trust that the service will not only remove the rotten apples, but also help solve problems, should they occur. And finally, trust that the driver and passengers present are honest. This is the process of someone going through the Trust Stack.

Over time, people will be open to changes in behavior. The more they experience this type of trust structure, the greater the disruption in existing systems, and eventually, even changes in the regulation of society and politics may occur. Laws that reduce risk, which add security and perhaps increase the penalty for fraudulent companies, are a few examples.

Trust is evolving

Through human history, trust has evolved in only three important chapters: local, institutional, and distributed. Society is now in the latter.

When people focus on being trustworthy, they demonstrate integrity in the way they behave. They do what they say they will, and with ethics. That is why trust was born locally. When you know a new person within a community, you already have some information about her beforehand, if she is who she says she is. In this way, there is consistently more social pressure for her to behave as expected.

Nowadays, the world has become accustomed to institutionalized trust. By not knowing other people in person, consumers end up putting trust in organizations with authority systems in the black box model, things like legal contracts, legislation and insurance, and less trust directly in individuals. Trust has become institutional and brokered.

On the other hand, it cannot be denied that, thanks to technology, society’s way of trusting is changing. Trust is no longer hierarchical, it is being disaggregated and inverted. A new revenue of trust is emerging and is distributed among people, more inclusive and responsible.

Today, many people are comfortable getting into cars driven by strangers. With just a finger slide on the screen, they make appointments with other people they find compatible. They share their homes with people they do not know. These are powerful examples of how technology is stimulating trust among people in ways and on a scale, that was previously not possible. This is a break in paradigm.

This change will be further accelerated due to the appearance of blockchain technology, which obviates the need for reliable intermediaries. The implications are immense and will be seen by the Letsfair platform.

The cost of lack of trust

An economic environment in which there is a lack of trust among its agents, relationships become more complex and, consequently, transaction costs increase, as well as risks and uncertainties. Sometimes such costs become so high that there is no incentive even for economic exchanges to take place. In other words, transactions are not completed.

In his main work, “The Society of Trust” [2], Alain Peyrefitte, sociologist, political scientist, diplomat, eleven times minister and member of the French Academy, explains:

“A society of distrust is a fearful, win-lose society: a society in which life in common is a game whose result is null, or even negative (if you win, I lose). […] A society of trust is a society in expansion, win-win (if you win, I win), society of solidarity, common project, openness, exchange, communication.”

For Alain Peyrefitte, the driving force behind development is trust, and in his book [2] he explains how the development of capitalism came from this theory. Mutual trust among people, trust of a society in its institutions, compliance with unwritten rules of mutual respect, and behavior that can minimize uncertainty lead individuals to know what to expect from others and institutions, and are vital and decisive elements to promote business, entrepreneurship, contracts, material progress and social development.

Distrust is something intangible and difficult to measure. Stephen Covey, in his book “The Speed of Trust” [3], exemplifies various effects of the low chain of trust. One is the cost of bureaucracy, presented as one of the seven low-trust taxes, estimated at $ 1.1 trillion in the US alone, accounting for more than 10% of its GDP.

The less confidence in the economic environment, the more it requires lawyers, judges, contracts and even non-monetary values. In addition to burdening businesses with a very high indirect cost, the climate of general mistrust causes the loss of countless opportunities and investments. The more trust there is, the more and better businesses prevail.

Blockchain: the machine of trust

In short, Blockchain is a decentralized, scalable, high potential peer-to-peer (P2P) network. Its integrity is based on a consensus mechanism. In practice, it solves a dilemma known among distributed-computing scientists called the “Byzantine Generals Problem.” Its solution uses the concept of work proof to enable people who do not trust each other to agree on a common goal even when there are people with opposing intentions.

Blockchain has the potential to transform the way people and businesses cooperate. By creating a system of distributed consensus, the true disruptive potential of the blockchain is in the chain of trust, bringing significant benefits to society’s day-to-day lives. It enabled the emergence of a new generation of highly scalable, robust and intelligent applications for the registration, exchange of information and ownership registry on: physical and virtual assets, tangible and intangible goods. Thanks to the key concepts of cryptographic security and decentralized consensus through a public ledger book, this technology can profoundly change the way a company’s economic activities are organized and have social, political, and scientific influence.

Blockchain allows a second generation of economic platforms in a truly decentralized ecosystem, making people the owners of their own identity and digital reputation. In addition to allowing the reliable registration of products, intellectual or artistic ownership, as well as all other transactions.

Just as the Internet has made the information age available to everyone, blockchain tends to revolutionize trust on a global scale. Bringing benefits to financial inclusion and economic acceleration, the democratization of opportunities, and the insertion of an element that the world lacks desperately: trust in each other.

References

[1] TED Talks — Rachel Botsman: We’ve stopped trusting institutions and started trusting strangers. Available at: (https://www.ted.com/talks/rachel_botsman_we_ve_stopped_trusting_institutions_and_started_trusting_strangers). Last access: May, 17, 2017

[2] Alain Peyrefitte (1995) La société de confiance. Essai sur les origines et la nature du développement Broché.

[3] Covey, Stephen R. and Merrill, Rebecca R. (2006) The Speed of Trust: The One Thing That Changes Everything.

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