A New Type of Trust, Enabled by Technology

A New Type of Trust, Enabled by Technology

Moran Cerf is Assistant Professor of Marketing at Kellogg School of Management. He describes a “third way” of generating trust—one that does not rely on a single third party and which is not vulnerable to a single point of failure.

Trust is a hard to define, but quoting the famous ruling by Supreme Court Justice Potter Stewart when asked about obscenity: “you might not be able to define it, but you know it when you see it”. We know when trust is there. When it is built and established, and we know when it breaks.

While trust is often established between two parties (e.g. a couple in a relationship, companies doing business together, or countries establishing diplomatic rules of engagement), the mechanisms for trust building, in many ways, have remained the same for millennia. Essentially comprising of two types:

  1. two parties establish a trust among themselves, and engage in future interaction based on this trust. Examples such as “a handshake”, one’s “word” or “honor” were satisfactory modes of trust for years.
  2. A second mechanism for trust building that is often employed is one where the individuals do not inherently trust one another (for a variety of reasons, but first and foremost the lack of information about one another) is the choice to trust a 3rd party that will vouch for the honor of both sides. This mechanism is governing much of our trust in the world to-date.

Here is an example for the latter type of trust: imagine going through security on your way to a flight. At some point you are faced with a TSA agent. Her job is to decide whether you are authorized to enter a secured terminal and essentially allowed on a flight. She never met you before. She does not know anything about you. Nor does she have the time or infrastructure to now evaluate your trustworthiness. Yet she has to make a decision: should I let this person go through or not. In order to help her decide whether to trust you or not, society is using a 3rd party trust. In the particular example – the government acts as the 3rd party. You show a valid ID and the TSA agent checks the validity of this ID. Embedded in this experience is her belief that the ID is hard to forge and that owning one necessitates that the government went through the process of making sure you are trustworthy. She does not really trust you, per se. But she does trust the government. and this 3-way process helps her decide to let you cross the gate. The process and the difficulty to compromise the ID are the ways trust is generated.

The same mechanism is true for money (you go to a store. The owner does not know you, but they trust that the $10 bill that you hand them was made by a 3rd party they trust. Accordingly, they let you leave with the cereal box in exchange for the bill), in online purchases (you type a number of a credit card, and I trust Visa/American Express/PayPal/etc. to pay me and take care of charging you), healthcare (I trust that if you have a certain credential by an academic institute you are authorized doctor, and I let you tell me what to do with my own body to fix things that bother me; later, the pharmacist trust that if I have a letter from you that says they should give me a certain drug then they should indeed hand it to me trusting that I will not abuse it), and many other fields.

Now, through the power of technology we have a 3rd way of generating trust. One that does not rely on a single 3rd party, and a potential single point of failure: a vote of a large population of unbiased individuals who all act as each others’ checks and balances.

Here is how it works. Take the TSA in the previous example. Beforehand the TSA agent needed to check the validity of your ID and trust that IDs are hard to forge. In the new trust mechanism what she will do is upload your credentials (say, your name, picture and the question: “should I let this person pass through O’Hare’s security?”) to the Internet, and wait for people to answer the question. Yes, a vote of random strangers all looking at your picture and profile information will determine whether she lets you in or not.

The idea being: if enough people are willing to play along, they will spend the time looking you up in various social media sites, checking your bio online, or even going through additional steps to check your identity (calling your presumed office to see if you are who you claim you are, or going through records to see if there is reason to believe that you should not be allowed to pass through the gate). If enough of them did it, and a majority of them came back with the answer: the person should pass, the TSA agent will let you go through. No ID. No proof from your end. No government. No single authority. No effort on her part. Just the help of a large amount of individuals.

This solution raised a few questions: 1. why in the world would people care to do the work needed to vet an individual? 2. Can a number of people, maliciously, decide to toy with the system and intentionally say that you, for example, should not be allowed to pass even though you, objectively, are lawful? 3. what protocol will enable this process to work smoothly and also not take too long (presumably, you would not want to spend hours at the gate waiting for hundreds of thousands of people to slowly send their report).

The answer to all those queries lies in a tool that slowly becomes the new protocol for trust, relying on two key technical elements: cryptography, and Internet connectivity. The tool is known as the ‘Blockchain’.

The way the Blockchain would enable the TSA trust protocol is the following: the agent indeed sends the query through the Blockchain protocol to thousands of online peers. These peers use their computers to work through validating that you are indeed allowed to pass through the gate (ideally, by automatically mining police records, historical information or any way of assessing your trustworthiness without manual labour), the computers each send their answer to the TSA agent rapidly. Here comes the answer to the first question above. What is the incentive? merely for doing this work, every 10 minutes a single individual of the ones helping the trust mechanism will receive a reward (say, a payment of $600, for their time). The payment will be assigned randomly to one of the many workers whose computers tirelessly worked to check your credentials. The fact that no one knows who will get the reward, but someone will, makes everyone work on the assignment (especially since it mostly involves idle computers doing the work) and hoping that at some point they will be the fortunate ones to receive the reward. This is also the reason many people engage in the task. The more people get involved, the greater the trust for everyone, and the faster things get processed. If only 10 of us are doing the work, then validating your credentials might take hours. But if millions of us are doing it – then seconds could be just enough to help the TSA agents get the needed yes. The balance between the number of people helping, the time it takes to approve each query and the pay randomly assigned to an individual for doing the work are at the heart of the protocol. More people – faster response time – higher reward to one of the many who did the work.

Additionally, answering the second question, more people joining makes it harder for selected set of individuals to skew the results. Even if 10 people really do not like a person and will send a ‘no’ to the TSA call right away, they will be unable to override the large majority of millions of people who have no reason to be biased against the individual. They will be overwhelmed by the majority. Thus, a more reasonable answer will be given in nearly any case.

The Blockchain may seem to some as a version of the infamous ‘wisdom of the crowd’ trend that became popular in the last decade (one where the suggestion that a vote by many people converges to an answer better than that of a few). Wisdom of crowds, too, benefit from large number of individuals contributing. But unlike this crowd sourcing, Blockchain merits expertise and effort rather than merely an uninformed opinion. It also favors crowds that have no inherent connection thus favoring unbiased groups and yielding notably more accurate outcomes.

The examples and the potential are infinite: imagine instead of seeing one doctor for an opinion sending your anonymous medical record to the Internet and having a large number of doctors each send their assessment. One will get a high reward for doing the work, but you will get not a ‘second opinion’ but a ‘1000th opinion’ from experts. Obviously, the financial world identified the benefits of the technology early. Instead of one central bank owning our records and our money. Everyone will be able to validate every transaction and be able to check that no fraud occurs or that no single-point of failure could emerge. A mechanism such as this offers the ability to verify and disables any individual from operating in their best interest at the expense of the larger group. Failures such as the 2008 banking crisis are nearly impossible in such a system. This is why usage of the Blockchain for financial systems such as the Bitcoin, Silvercoin, Ethereum and other cryptocurrencies became more mainstream recently.

Another curious example came to light in the last weeks, with the new company known as the The DAO that benefits from Blockchain to form a decentralized corporate entity. A company with no management, no employees, no offices and essentially nothing but a a ‘protocol’ that allows people to put money in an entity and decide, together, using voting rights proportional to the money invested, on what the company can and will do. Will they hire employees? sell stationary paper in Portland, become a Venture Capital, or drill oil in the coast of Louisiana? The tribe will speak.

The key is this: the Internet has been with us for over two decades now. It enables peer-to-peer interactions and anonymous interactions. It enables fast exchanges and distributed organization of people. Accordingly, because of this technology and the advance in cryptography in the last 3 decades it gives rise to a new mechanism for trust. Some already call the Blockchain the technology that will revolutionize the Internet, making it the “Internet of Trust”.

It did not skip our attention that this tool allows for a much more democratic way of decision making altogether. Instead of situations where a 12-people jury of non-experts has to decide on the faith of complex cases (take for example the famous Hanh vs. Duveen case, where lingerie store owner and telephone company operator were the deciding votes on the authenticity of one of Da Vinci’s famous works, not having any background in art or counterfeiting…), or where a biased TSA agent might be unreasonably difficult on individuals from certain minority groups. Now a large population of individuals will offer a much more reasonable and unbiased way to set trust.