Blockchain and disruption of trust models
You will rarely hear a blockchain argument that does not talk about trust. People use it in different contexts which confuses others who are still trying to understand what blockchain is. I have also been asked to exactly define what I mean by trust. I will try to explain that in this article through the trust models that we live in.
Two trust models
One of the ways I describe blockchain is that it has the potential to disrupt the trust models that we live in. We live in two different trust systems. The first one is where we inherently trust everything. A prime example of this is the government issued currency. We inherently trust the money that is in our wallets. We trust that its value within the local market will more or less stay the same and it would remain a usable currency for our lifetime.
The second trust model that we live in is the one where we inherently distrust everything. Almost everything we do with our money fits into this trust model. Over the years we have set up laws, regulations and legal systems that protect us from unexpected outcomes when we transact using the money. The very reason the laws, regulations and the legal system exists is that we do not inherently trust the party that we are transacting with. o
Two waves of blockchain revolution
I like to divide the blockchain revolution into two waves. The first wave, started by bitcoin and resulted in the creation of hundreds of other cryptocurrencies aims to disrupt the first trust system. It promises to remove the need for the government, central and commercial banks that we tend to inherently trust when it comes to money. And it does that by offering an alternative currency that works without a need for the guarantee from a government.
The second wave of blockchain revolution started with the creation of Ethereum. Ethereum, for the first time, made it possible to write smart contracts on the blockchain. While Ethereum’s cryptocurrency, Ether, promises to disrupt the first trust system like bitcoin, Ethereum (and another blockchain with support for smart contracts) itself promises to disrupt the second trust system that we live in. Smart contracts are computer programmes that run on the blockchain. Once a smart contract is added to blockchain it cannot be changed by anyone. anyone. Parties having access to the smart contract can view it but they cannot change it. Two parties transacting with each other can agree to a process that going to complete the transaction between them. This agreed process can then be encoded into a smart contract and added to the blockchain. This mechanism provides a guarantee that the transaction gets executed as agreed and no other party with malicious intent can amend it. As the founder of Ethereum once said - code becomes the law. The trust shifts from the legal system to the blockchain.
This sounds very exciting, but remember that it is too early to predict what direction the technology will take. Blockchain seems to have a promising future but only time will tell how much of it will come to fruition.