Blockchain fuels the Trust Economy & Internet of Value
The emergence of the trust economy has been an interesting by-product of the increased reliance on digital social experiences and the power of social networks. Trust for the first time can be commoditized, manufactured, codified, and quantified. This is a powerful statement that requires a bit of further explanation no doubt in its relation to Bitcoin. Bitcoin forms an interesting use case derived from the manufacture of trust, and blockchain is a foundational technology that powers the economy of trust.
The concept of trust is an incredibly important one in any economy or marketplace – or indeed any interaction or exchange of value between parties or institutions. Whether it be proceeding with a financial transaction, investing in an emerging technology company, taking an Uber across town, or renting out a house half-way across the world via AirBnB – all of these actions inevitably will require the prerequisite manufacture of trust to proceed. Trust, according to the Oxford English Dictionary, is defined as: “Firm belief in the reliability, truth, or ability of someone or something”. So how does one go about manufacturing trust? Is there a concrete recipe that yields a higher degree of trustworthiness?
The first thing to note is that there is a significant difference in how trust is relayed and characterized in the real-world versus the abstractions that appear in the digital-world. While in the real-world trust or higher levels of trustworthiness have been associated with subjective characteristics, in the digital-world, trust has become an increasingly quantified and measured via some interesting social proxies.
In the digital-world, trust now can be defined in terms of social proxies or reputational capital analogies. The implicit message being that the greater in quantity (or numerics) social proxies of trust are, the more inherent trust that can be extracted. Or better stated, the greater in quantity (or numerics) social proxies of trust are, the better the likelihood of a trustful experience – true to the original intentions of the interaction between social participants.
Examples of quantifiable social proxies of trust include the following:
- 5-Star Ratings
- Social Connections
Trust, or the lack of trust, translates into impacts of real dollars and cents. Social proxies of trust form an incredible influencing factor – influencing the consumption of product, content, subscriptions, and acting as a differentiator between similar offerings. A product or service with higher quantified reputational capital will concretely perform better than its comparable peer – the differentiator being the degree of trust that can be manufactured. In other words, trust sells. For example, between two nearly identical light fixtures that can be purchased on Amazon (as an example), the one that will have the greater likelihood of purchase will be the one with the higher level of quantified social proxies of trust in the form of positive reviews and commentary.
Trust has moved away from a subjective enterprise to a highly calculable enterprise. Most individuals put an extremely high premium on trust which translates into real decisions, with real financial consequences. This commoditization, manufacturability, codification, and quantification of trust is needed in all digital transactions. Now there are means and methods that are employed every day to quantify trust and to empower various digital economies. Digital trust fuels the gig economy, fuels the sharing economy, and fuels new and untapped sources of future value creation.
Blockchain technology that Bitcoin relies upon is an enabler of the digital trust economy. Unlike social proxies of trust which influence the likelihood of trustful interactions – blockchain technology goes one step further in the definitive enforcement of trust. With blockchain there is no choice in being truthful or not. In the blockchain world, trust is not manufactured via reputational capital; it is manufactured via the carefully orchestrated interactions between ecosystem participants. Blockchain technology underpins the furtherance of the trust economy – establishing trust between parties and institutions to exchange value. The blockchain data structure and associated verification protocols are what TCP/IP was to the proliferation of the internet in terms of facilitating the act of communication. While the internet ultimately fueled the social economy, blockchain will further fuel the trust economy.
Bitcoin and other cryptocurrencies are one of the most uniquely complex use cases of blockchain. The Bitcoin blockchain is the first instance of trust-enforced financial interactions powered by a public ledger and verifiable transparency. In the Bitcoin world, P2P interactions proceed without the need for trustful intermediaries and trust-proxies like in the form of credit ratings, as an example. Beyond Bitcoin being seen as just a digital currency (and that is remarkable statement in and of itself and in no way intended to minimize Bitcoin’s technological accomplishments), Bitcoin is also seen as a proponent of the trust economy.
While the internet has powered global communications ultimately creating the power behind social networks and social value chains – at the root of all social interactions remains the element of trust. Via blockchain, this element of trust can now be codified, extracted, and singled-out on its own. In simple formulaic fashion, digital social interactions are now a function of both: connection and communication, as well as trust. While the quantification of social connectedness embodies levels of trust, blockchain technology enables definitive trustful connectedness. Blockchain technology removes trust ambiguity in interactions and collapses the trust spectrum to a binary enterprise – either trust exists or it does not.
Internet of Value
Not only does the blockchain foundationally fuel the trust economy, but blockchain technology will also inherently fuel the Internet of Value (IoV). The Internet of Value brings together seamless and simplified transactions in everyday people-to-people interactions. The Internet of Value allows transaction processing as easily as an email, message, SMS, or tweet. Whether it is processing large-scale transactions such as the sale of properties or vehicles, or very small-scale transactions fueled via micro-payments, the Internet of Value would introduce new and direct ways to interact – bringing a new dimension to social interactions through disintermediation.
Globally, the world grows more and more interconnected by the day: half the world owns a smartphone, there are more cell phones than people, and sadly there are more people will access to the internet than those that have access to running water. However in today’s landscape, financial transactions which are the root of any economy, still are processed in very traditional means via conventional invoices, payments, bank accounts, credit cards, credit rating institutions, lenders, financial institutions, and through many self-interested intermediaries. All of this ultimately translates to slow financial transaction processing capabilities. In the financial world today, things do not often happen in real-time. However, with the blockchain fueling the Internet of Value – the financial transaction will soon see tremendous change. The Internet of Value will form many new and imaginative value creation possibilities.
Take for instance the world of logistics and supply chains. Many companies have very complex logistic operations and supply chains. Companies will often rely on a host of third-party companies, carriers, vendors, suppliers, manufacturers, so on and so forth. Cornucopias of participants exist in any supply chain ecosystem. An ecosystem-wide blockchain would be able to reliably facilitate communications, actions, and transactions between participants. No longer will paper trails or emails or invoices be needed to track communications, actions, or transactions. A self-managing ecosystem would grow as a result. Not only does this proposed ecosystem create new ways of value capture, but positive benefits to a company’s bottom-line would also result.
These are really exciting times. Anyone who claims to know the true trajectory of the trust economy or the Internet of Value is probably wrong. However, one thing is certain, the rate and pace of change will continue to accelerate now more than ever before.