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No Mercy No Malice

Trustless

June 17, 2022

It’s been a bummer summer for crypto. Flagship coins Bitcoin and Ether are at multiyear lows, while lesser coins barrel to zero. Luna went from a market capitalization of $34 billion (“market” and “capitalization” are becoming misnomers for crypto) to worthless in a matter of days.

Last week, crypto lending platform Celsius announced it was pausing all withdrawals and transfers between accounts. The company that told us to “unbank yourself” because “banking is broken” broke. (Pro tip: CEOs shitposting with their T-shirts are likely not great fiduciaries.)

This is the end of the beginning of web3, not the beginning of the end. A staggering amount of human and financial capital has been allocated to web3 businesses and technologies. If we invested this much in cheese we’d convince ourselves that Gouda can arrest a pandemic. But the sector’s struggles highlight crypto’s failure to deliver on a core promise: trustlessness. Trustless transactions are crypto’s raison d’etre. In the crypto Magna Carta, the white paper that introduced Bitcoin, Satoshi Nakomoto used the word “trust” thirteen times (in eight pages) and summed up cryptocurrency as “a system for electronic transactions without relying on trust.”

In God (and Each Other) We Trust

Why would crypto want to eliminate trust? Trust is at the heart of all human endeavors. Our species’ superpower is cooperation, and cooperation requires that we trust one another. Trust that we will divide the spoils of the hunt, keep our livestock from one another’s fields, or honor a warranty on a defective product. Modern life exists on a web of trust — from the dairy aisle to the interstate highway, we rely on millions of other people to do their jobs and demonstrate high regard for people they’ll likely never meet. But maintaining all that trust is expensive and cumbersome. I trust drivers to obey speed limits because I’ve paid tax dollars to support highway patrol officers. I trust milk because the FDA inspects dairy plants; and the brand name tells me who to sue if the milk makes me ill.

The financial system in particular is scaffolded by an elaborate set of safeguards — incentives, regulations, relationships, rule of law, fiat currencies — ensuring trust that we can move our capital without fearing it will disappear en route. In 1867 the cost to transfer assets, via stagecoach, from San Francisco to Omaha was roughly $10,000, adjusted for inflation. Today, Wells Fargo transfers money much, much faster and at near-zero cost. The value driver is not SWIFT, CHIPS, or the Fedwire system, but our trust that a transfer will actually happen.

It’s estimated that the cost of maintaining trust accounts for 35% of employment in the U.S. In financial and professional services, that number is 48%. I think that means (go with me here) the majority of my students will not be bankers, analysts, or product managers, but agents of trust in the Jedi order. I’m not sure the last sentence makes much sense, but it felt good writing it.

Trust Issue

What if we could have all the great taste of cooperation without the calories of trust? That’s the promise of crypto. Whatever you need validated, you put it on the immutable blockchain, and you have ground truth.

But beware of tech bros preaching decentralization. Technology has been promising to eliminate the middleman for decades, only to present new middlemen — in this case, new actors asking you to transfer trust and wealth from one institution to theirs. Crypto enthusiasts spent 14 years and tens of billions of venture capital dollars trying to create a trustless financial system with no middlemen. Status? See above: Celsius.

Crypto’s dirty little secret is that it’s no more eliminated the need for trust than it has replaced the U.S. dollar. (Sorry, Jack.) Its core rhetoric is in the Reaganite antigovernment creed … “Don’t trust the Fed.” Don’t trust anyone, they told us. But this is bullshit. I mean bullshit3. When crypto went mainstream in 2020, it appended a new line: “trust us.”

Just. Like. A. Bank.

Celsius — now in the grip of an old-economy bank run — operates on the same model as Citi … or Lehman Brothers. You give them your “money,” they engage in complex machinations with it, and you trust that they can/will give it back to you when you need it.

Why has crypto abandoned trustlessness? Well … trustless doesn’t work. Last year $2.2 million worth of NFTs were stolen on NFT marketplace OpenSea. A truly trustless model would render those NFTs unrecoverable — but that’s unfair, so OpenSea took the trust route and froze the transactions. Coinbase used to boast that trustlessness made crypto “immune to country-specific sanctions.” Then when Russian soldiers poured over the border into Ukraine and the U.S. enacted sanctions, the company complied with the mandate and blocked 25,000 Russian-linked accounts. Crypto transactions require high technical competence, even advanced programming knowledge. And they are far from free — the proof-of-work system that underlies Bitcoin and Ethereum incurs massive energy costs. (Crypto boosters promise that will change, and we should … trust them.)

Middlemen are inevitable. We depend on them to provide more than just trust: security, convenience, customer assistance, and so on. They make user interfaces intuitive and navigable. They help you recover your belongings when you forget your password or your keys. These services provide value, and that comes at a price. Competition and innovation can reduce the cost of trust (stagecoach vs. SWIFT), but they do not eliminate it.

18.63% APY

The web3 ayahuasca Big Gulp led us to believe we could innovate away the tiresome and expensive infrastructure of trust. But as we wake from that trip, it’s worth asking history’s central question: Who to trust?

Most transactions present ample data for a rational answer. And were we rational actors, we would weigh that data and proceed accordingly. But desire clouds the equation. If we want something enough, our tolerance for risk goes up fast. When it’s midnight at the airport, you’ve been on the road for a week, and the line for licensed taxis home is 40 minutes long, the driver hanging around baggage claim looks increasingly trustworthy. Desire offers rationalizations instead of rationality: You don’t know anyone who’s been robbed by an unlicensed driver, you’ve heard taxi medallions are controlled by organized crime, you’ve got a good eye for people … you’ll be fine. Desire is essential to human experience, but it does lead to bad choices in trust. Many residents of New York have a doorman and multiple locks on their door. Most of them, usually after drinking, have let a stranger into their apartment.

What happened with Celsius is an example of desire working overtime. Splashed next to a stock photo of a sailbro, Celsius’s website promises: Earn up to 18.63% APY. That promise triggers our greed glands, so we don’t read the fine print and let that stranger in. The fine print, likely read sober, illuminates that this advertised rate is only for “Platinum Loyalty users” depositing “Synthetix” tokens. And the payouts come in the form of CEL, a digital currency from Celsius. CEL is down more than 90% year over year.

Blockchain technology has been heralded for being secure, but there’s a difference between technical security and financial risk. When a platform such as Celsius tells you “security is at its core,” that means it’ll secure your Cumrocket coins on the blockchain ledger. But this has nothing to do with securing the price of your Cumrocket (down 85.2% year to date). The company has purposefully conflated the two. Another pro tip: Don’t trust a trading platform that displays exploding confetti on its website.

Who Do You Trust?

Trust is expensive, which is another way to say it’s valuable. But it’s also free — among the most valuable assets you can build are not lying and demonstrating competence. We’re in an era of overpromising, and it often feels there are few consequences for exaggerating, or just outright lying. The richest man in the world has been overpromising what his (very good) cars can do for years. Our last president promised anything and everything, and he’s the unchallenged leader of one of our two political parties. But the truth is like air trapped underwater. Eventually, the plates shift and the truth bubbles up to the sunlight.

The benefits of trust apply to nations as well as individuals. For every standard deviation increase in a nation’s trust, bilateral trade increases 90% to 150%. In countries with low levels of trust, investment skews disproportionately toward projects with short time horizons. Lower trust is also correlated with lower GDP per capita. Put it this way: Over the long term, fomenting trust can make you rich.


Dad3

People work for, invest in, and meet with me because they believe they can (mostly) trust me. I have never sued or been sued by anybody. In contrast, at home I am simultaneously the least/most trusted person on the planet. My kids don’t trust me on anything about culture, technology, media, haircuts, sports, TV, what they should wear, say, or even eat. But they completely trust I would do anything for them. To be willing to do anything for someone is to love them, and them knowing it is to be loved back.

Life is so rich,

P.S. Got a question you want to ask me? I’m doing a virtual AMA in less than two weeks. Submit a question here and become a Section4 member to reserve your seat.

37 comments

  1. Jonnie says:

    It’s unfortunate that people so often conflate companies offering crypto products to retail/institutions, with the actual underlying protocols themselves.

    Celsius is an entity that holds users’ funds, and deploys them into various DeFi protocols to generate yield. While we can argue over the level of decentralization of DeFi protocols, it’s entirely inaccurate to say that Celsius is representative of trustlessness or that it should be. It’s a tremendously important distinction for anyone that wants to understand or critically analyze Web3.

    To name a few trustless protocols: Aave, Curve, Compound Finance. They are trustless in the sense users are in control of their funds at all times, secured not by an entity like Celsius, but by trustless smart contracts. TL;DR, the collapse of Celsius casts no shade on DeFi; in fact it’s a vindication of the fact that no entity, no matter how large or influential, can subvert the leading DeFi protocols in time of need or crisis. They will be liquidated like everyone else.

  2. watticus says:

    So much misinformation here its difficult to know where to begin, but here goes…

    • “Why would crypto want to eliminate trust?”

    The entire purpose of money itself is to eliminate or at least reduce the need for trust in an economy. Without it, coordination over long spans of time and space between distributed market actors would be impossible. You say it yourself: “I trust drivers to obey speed limits because I’ve paid tax dollars to support highway patrol officers. I trust milk because the FDA inspects dairy plants; and the brand name tells me who to sue if the milk makes me ill.” Both of these examples would be impossible to coordinate without money. Bitcoin is just the next evolution of money.

    Another point – your privileged Western viewpoint is galling. Perhaps you should ask one of the roughly 5.4 billion people (~70% of the world population) who live under authoritarian regimes why eliminating the need for trust in an economy is desirable.

    • “In 1867 the cost to transfer assets, via stagecoach, from San Francisco to Omaha was roughly $10,000, adjusted for inflation. Today, Wells Fargo transfers money much, much faster and at near-zero cost. The value driver is not SWIFT, CHIPS, or the Fedwire system, but our trust that a transfer will actually happen.”

    Its amusing that you think comparing the incumbent financial system with that of the mid-nineteenth century is a compelling way of demonstrating its superiority. The reason it is easier and cheaper to transfer money across distances now is purely a function of the advent of information technologies such as the telegraph, the phone, and most recently the internet, which were exogenous to but benefited the financial system. There had been no truly revolutionary “zero to one” innovations with money itself since the Renaissance, perhaps even longer ago – until Bitcoin. And I believe it will unlock so much human creative energy and ingenuity that it will trigger another Renaissance.

    Also, the last sentence; “The value driver is not SWIFT, CHIPS, or the Fedwire system, but our trust that a transfer will actually happen” is meaningless guff with a comforting ring to it.

    • “It’s estimated that the cost of maintaining trust accounts for 35% of employment in the U.S. In financial and professional services, that number is 48%.”

    Imagine if we could free up that human capital to focus on other things…

    • “Crypto enthusiasts spent 14 years and tens of billions of venture capital dollars trying to create a trustless financial system with no middlemen. Status? See above: Celsius.”

    Satoshi Nakamoto’s innovation was to combine a number of existing technologies (the internet, cryptography, Merkle roots and trees, timestamps, the proof of work consensus mechanism) in a way no one had done before, and augment it with the addition of a new innovation: the difficulty adjustment. Through doing so he solved the “double spend problem”, eliminating the need for a trusted third party in digital transactions and creating the first and only decentralised, secure, permissionless, immutable peer-to-peer electronic cash network. Because Bitcoin’s code is open source, there is nothing to stop someone from copying this code wholesale or editing it. This has spawned a host of copycats (also known as altcoins) that make up the broader “Crypto” ecosystem; the vast majority of which have turned out to provide nothing of value.

    Throughout the article, you have either unwittingly or deliberately conflated Bitcoin with “Crypto”. This venture capital money you mentioned has primarily been poured into marketing altcoins and developing privately run businesses such as exchanges – none of which have anything to do with the revolutionary innovation of Bitcoin. Conmen will come and go, Bitcoin is here to stay.

    • “Why has Crypto abandoned trustlessness? Well … trustless doesn’t work.”

    Again, your examples have nothing to do with Bitcoin – which actually did enable many Ukrainian refugees to escape the country with their wealth intact.

    “The benefits of trust apply to nations as well as individuals. For every standard deviation increase in a nation’s trust, bilateral trade increases 90% to 150%. In countries with low levels of trust, investment skews disproportionately toward projects with short time horizons. Lower trust is also correlated with lower GDP per capita. Put it this way: Over the long term, fomenting trust can make you rich.”

    Confusing correlation with causation. Have you not considered that perhaps the reason trust is so low in less developed economies is because their money and financial systems are either dysfunctional, repressive, or both?

    You’re either deliberately spreading misinformation or else you haven’t spent any time seriously studying and considering the issue from first principles.

    I.e: What is money? What’s the history of money? Why do we use it? What does it enable us to do? Is it money or trust that makes humans unique? What is bitcoin? Why was it invented? etc.

    The reason why many Bitcoiners are hostile to the rest of “Crypto” is because so many uninitiated confuse the two, which leads to them dismissing the technology entirely.

  3. Daniel G Parker says:

    Damn, this guy just keeps saying stuff that both educate and humor me, and there is a little bit of snickering give it to the man feel here. I love it.

  4. Marcoh says:

    You have to differenciate bitcoin (not owned by anyone) and the Rest of the crypto coins(owned by someone). How can you still trust the government, while it prints money since Nixon left the Gold Standard. The Problem is that cryptos are more and more used to gamble, than as safe place.

  5. B says:

    Prof. You’re like the smart uncle I never had… although you both loved a drink in your primate state I believe 😉

    Anyway… I come from The Netherlands (the 2nd highest on the trust level)… on the other side, I escaped the war in Ukraine with my family after living there for the past 3 years. I’ve seen both sides of the coin… And the one who’s now the runner up, is deteriorating fast, where trust is being lost in governments, and the more sunlight we put on the dark corners of government, the more dirt comes out, how little they can be trusted, and the people responsible can move on without consequences. Although some consequences, they just move from minister of finance to minister of housing for example. Why not right, they can be trusted…

    On the other side, in Ukraine for example, trust is formed through very small cohorts of community. Often not even your family to be honest, the war has shown big cracks in that as well when families have ties to both the Ukranian as well as the Russian motherlands. There trust, whether you take a small loan, or need someone to watch your dogs, or trust nobody breaks into your house, is all tightly nit with the cohorts you form personally. In a way it’s actually similar in the Netherlands, where you most rely on friends and neighbours, although we do start from the ethos: “The most people are good people”… where in Ukraine it’s more the other way around.

    ANYWAY…. let’s get to the point… Why am I sharing this? It’s true that The Netherlands had institutions and rules (lots of rules) on which we could trust. But the more we see that crossing those rules, has fewer and fewer consequences for the people in power (aka politicians), trust is eroding and people are becoming less trustworthy towards each other. You can also see it back in the public discourse, fueled by the cancerous Meta products (and Twatter). All of which, can corrode our society’s trust, without any real consequences.

    In Ukraine, most of the corruption is being fought through technology funnily enough. Tiny example, it was pretty normal you would be stopped by the police for some nonsense, in order to blackmail you into paying cash fines to them. Now, it’s an entirely automatic system that catches you for speeding, and within 15-30min after the incident, you have a picture of yourself smiling and speeding in your inbox, and you can pay it with a one-click link. BAM one simple piece of corruption gone.

    Of course this is a tiny example, but let’s go into government spending and their way to “solve problems” in society.

    Another example of the trust darling, The Netherlands… Where indeed our Gouda is f-cking awesome, but this buttery smooth mouth orgasmic substance, is clouding our judgement…

    Point in case — the Government believes we should invest ahead to ensure we’re economically and technologically relevant in the coming 20 years. For that mission, they created a $6B fund, where an old finance prime minister (who also fucked up many things in previous cabinets), is now in charge of a very vague group/unidentifiable committee, to pick the bets for the future. One of their biggest bets is…. (drumroll)…. a $400M bet on making jetfuel more efficient. Not a fucking joke. So first of all, the lack of transparency how they made this decision, and to then also hold them accountable is utterly unidentifable. But the worst is, this goes directly into the pockets of some of the richest companies on the planet (in terms of cash reserves)… Why on earth do we call it an investment if it’s just subsidies that will actually lead to no extra job employment, nor will it contribute something directly to our GDP or taxes?

    This is where I believe strongly in that we need better, more open, and transparent systems where technology can play a great part in, that we won’t become the b*tch of some centralized company, that can monetize all that data for their sole benefit.

    W3 has a future for sure, but it will require, like in W1+2 (almost sound like we’re using acronyms close to WWI+WWII… anyhow)… to wash out the bad actors, the get-rich-quick schemes, and the influencers who cause mayhem.

    We need to focus on being able to prioritize the world’s most pressing problems, and see where technologies, such as blockchains and tokenization of incentive structures, make a lot of sense, where users should become owners, and not purely consumers of whom we suck out all of their life.

    Don’t go silent into the night, G!

    B

  6. Navin says:

    Scott, your posts have been trending better recently. Kudos.

  7. baba says:

    Right, trust doesn’t come cheap. I’d like you to let U.S. businesses & libertarian value holding compadres of yours to know that they could go setup shop in many places like China, Somalia, Sudan etc where there few or no rules/laws/regulations and no taxes either. Yet none of those countries have a framework that the world trusts and respects (or used to a large degree). I’d like you to talk about the trust we have placed in agencies like the FAA or the CDC or FDA etc for a long time, only to see that trust being eroded consistently by the free market enthusiasts who claim that the markets can determine and value trust better than any agency. It will be interesting to see if Boeing is able to sell planes without FAA certifications etc. Talk more about how hard it is to establish trust & how easy it is to loose it.

  8. Pete says:

    Thanks, Scott. You nailed it again. Trust is a key lubricant in any successful society. Watching the erosion of trust in the U.S. these past 5 to 10 years is nothing short of heartbreaking.

  9. Andrew says:

    Something like $10B has been lost to crypto hacks, rug pulls and other scams in the last year. There is nothing about crypto that suggests it is likely to replace fiat currency or become a widely adopted asset class any time soon. For most people, normal currency works just fine for day to day transactions, and the stock and bond markets will feel less risky and more comprehensible than putting their retirement savings in ether. I have no doubt a few crypto bros will get rich again one day when BTC claws back some of its losses. But this does not make crypto anything more than a complicated and incredibly risky bet that appeals to a relatively small group of speculators, as it’s always been.

  10. HAJ says:

    What is the significance of this statement: “I have never sued or been sued by anybody.”?

    • RRRR says:

      Because if people unfailingly kept their word to each other, there would be no such things as lawyers or lawsuits.

  11. Ivan says:

    Trustless is a basic and key proposition of Web3. Celsius is Web2. In Web3 nobody could freeze withdrawals. If you need trust, it’s legacy. As simple as that. Simple litmus test.

    I would love for the basic Web3 concepts to be sinking in Scott’s unfortunately repeatedly biased posts. To be clear: truslessness and decentralization are not the all solving bullets some maxis might preach. But to be able to discuss what could come next, the basics must be understood correctly. I tried a few times to message Scott and Kara about these flaws in their crypto Anschauung but to no avail. Well, I am nobody, but I’d hope somebody with some influence could break through.

    • Emil says:

      The guy is explaining to you why trust is needed and good, and why trustlesness is a chimera, and you’re pointing out he doesn’t understand Web3 brings trustlesness.

  12. J Van Fleet says:

    great piece, but the interpersonal trust part of the World Value Survey is complete nonsense – it has Japan somewhat below the USA, which is humorous, and well below China, which is astonishingly stupid (i’ve lived for a decade plus in each of the three countries) – like most surveys, WVS’s methodology is ridiculous – they had to choose between a meaningful dataset and a self-serving marketing advantage – they chose the latter – for another case of the same deplorable behavior, see the college rankings (though those do an enormous amount of damage, while WVS is mostly just entertaining, unintentionally)

    • Bob Pinkus says:

      That “Interpersonal vs GDP per Capita by Country” chart is from 2014. That’s ancient history.

  13. James Marrs says:

    Another Brilliant No Mercy / No Malice writing. It is difficult to know what to read related to the Crypto collapse. This writing provides a beautiful overview of just exactly how we arrived at this crypto mess. Remove trust and just about everything else vanishes. That holds true in every aspect of life and without trust crypto cannot be embraced with faith. I like Voyager. I feel it is doing everything possible to be trustworthy in a time when most of the crypto world is crumbling. This situation makes you appreciate our large banks and financial institutions. Thanks once again Prof-G. May I live my life more like you do.

  14. Kyle Steed says:

    Thank you Scott. A goof word here. Trust is a huge part of my success as a (fine) artist as well. First, trust in myself, and secondly the trust my clients/collectors have in me. But what really hit home for me was that last bit about home life. I feel that. Thanks again. Cheers!

  15. Dan Nash says:

    Brilliant topical piece. Strongly suggest post on LinkedIn if not already. So many heated discussions there this week.

  16. mcs says:

    Sent this to my three daughters…
    “My kids don’t trust me on anything about culture, technology, media, haircuts, sports, TV, what they should wear, say, or even eat. But they completely trust I would do anything for them. To be willing to do anything for someone is to love them, and them knowing it is to be loved back.“
    PERFECT!!

  17. Memphis Vivian says:

    I love it! … “it” being Celsius “pausing all withdrawals.” … Celsius is phrasing that as if that’s some kind of tedious-but-acceptable thing, like being put on hold on for a long time on a customer service call to Land’s End about why your refund for returned merchandise is taking so long. There has never been any meaningful guarantee about crypto’s ready convertibility to any known earthbound acceptable medium of exchange (let alone at a transparent rate of exchange or within a set time frame), and anyone who doesn’t know that hasn’t been paying attention. And the lack of ANY flavor of consumer protections — FINRA? SEC? SIPIC? FDIC? Consumer Protection Bureau? — is not news either. Rank speculation in a Wild West market is fine with me, but people don’t get to act shocked and betrayed and demanding of justice when it doesn’t work out.

  18. Kunle says:

    Intriguing. I suspect that the required trust infrastructure scales significantly faster than the relative number economic relationships. While the number of economic relationships per individual since 1867 may have grown by only an order of magnitude (I am guessing) the required trust maintenance system has grown many more times in size and sheer complexity. Even though crypto is still floundering in its young age, I believe the blockchain technology is the only way we can keep more people creating than are keeping the books.

  19. Steve Kreis says:

    It has been a “bummer summer” for more than crypto. The Nasdaq and S&P, the Fed, Treasury securities and political institutions have all taken a hit in value, either financial value or perceived (trust) value. I believe you are early to declare Crypto and Web3 dead based on a few failed projects (there will be more of those for sure). The final crypto story is yet to be written.

    Your trust analysis is good but maybe incomplete. Only 3 countries on your chart are above 50% in “interpersonal trust”, and all of them lean or are socialist/communist. Makes me wonder what that means.

    And just how much do we, the people, trust the institutions that brought us the financial collapse and bailouts of 2008? And the dairy lobby induced labeling adopted by the FDA. Or the pandemic guidance fed us by the CDC. And on and on and on. Crony capitalism (in my view) has eroded trust enough to bring us to the trust crisis we currently face.

    Crypto has been proposed as an answer to some of these trust issues. I do not see any other answers out there and until I do, I will keep watching that so called trustless Web3/Crypto space. And I will reserve judgement on the effectiveness of these new vehicles to solve some problems.

    As always, thanks, Scott for the well written and though provoking piece.

    • Andrew says:

      Did you not read his post? He didn’t say crypto is “dead”. He literally said it’s the end of the beginning for crypto, not the beginning of the end.

  20. David Crow says:

    I think that the strength of the US dollar is not primarily based upon Trust but on the fact that the dollar is supported by the US Government’s full faith and credit. Importantly in addition, the value of the dollar is supported by the economy of the United States which produces the goods and services you can procure with your dollars.

  21. Ryan says:

    pm
    Thought that was well written but think one thing was a bit inaccurate/misleading. The whole ‘trust increases GDP’ isn’t totally accurate. More likely things that build trust also lead to GDP growth, like education, food security, gender equality, civil rights, etc. In nearly any model, be it global financial services or hunter-gather communities, trust seems to be built on the underlying of ideas of mutual benefit and repercussions for injustice. Blockchain tech appears to satisfy those conditions on the surface but where the stories have been broken is when a look under the hood reveals the fine print slants negative outcomes to favour to the company.

  22. Nouras Haddad says:

    Prof, you are lumping together conflating web3 protocols like Bitcoin, Ethereum (which are being built to be trustless and decentralized) and companies like Census, Coinbase which are just that- companies. They have CEOs, shareholders, and agendas and if you are giving them your money you need to trust them. And yes, many of them are scams disguised as businesses.

  23. Dave says:

    Beautiful.

    I love how a post supposedly about crypto can be about so much more, and end in a touching tone.

    Life is indeed so rich.

  24. Pedro Andrade says:

    Saying that Celsius is a web3 product is misleading, there is no decentralization in that, and neither is a native crypto product with smart contracts and all of this. It’s literally a centralized ecosystem just like any other.

  25. JC Wandemberg says:

    Hi Scott, first of, a bit of grammar, it’s ‘Whom do you trust’.
    Trust is paramount, we all know that. The financial system is indeed scaffolded by an elaborate set of safeguards — incentives and disincentives— ensuring the Status Quo of a perverse blood-sucking system. Yes, in 1867 the cost to transfer asset was huge. Today, Wells Fargo transfers money at the expense of poor workers who pay hundreds of millions with they hard-earned dollars per year. When some of us behind behind crypto in general, and Blockchain in particular, talk about TRUST we are not only talking about trust that a transfer will actually happen, we are talking about trust in an entirely new system based on the power of mathematics and a NON-Dominant Hierarchy. The real beauty of Blockchain is that it epitomizes a truly Participative Democracy, so different from our pathetic and pervasive pseudo-democracies around the world.
    Best regards,
    JC Wandemberg Ph.D.

    • Ryan says:

      Thought that was well written but think one thing was a bit inaccurate/misleading. The whole ‘trust increases GDP’ isn’t totally accurate. More likely things that build trust also lead to GDP growth, like education, food security, gender equality, civil rights, etc. In nearly any model, be it global financial services or hunter-gather communities, trust seems to be built on the underlying of ideas of mutual benefit and repercussions for injustice. Blockchain tech appears to satisfy those conditions on the surface but where the stories have been broken is when a look under the hood reveals the fine print slants negative outcomes to favour to the company.

    • JC Wandemberg says:

      BTW, our pathetic and pervasive pseudo-democracies are based on DOMINANT and RESTRICTIVE hierarchies that, besides all their pathological implications, cannot handle the increasing relevant uncertainties and system discontinuities of our times.

  26. Mark Miller says:

    An exceptionally well-done article this week Scott, thank you. I know you give commencement addresses as well – and I think those “trust” factors that are free are also excellent career advice. Not lying, and demonstrating competence – are huge.

    Government, at it’s best, helps build that trust and creates it through fair practices.

    All the best – Mark

  27. Jim Weber says:

    Thank you Scott for this eloquent essay on the blinding “White Space” for trust in our society seemingly across every institution. There is real opportunity for leaders and brands to fill this vacuum with trust…

  28. Greg says:

    I’d venture to say that we really don’t rely on trust, but only on the illusion of trust. The article references a companies that have been shown, time and again to be untrustworthy (Lehman, Wells-Fargo) largely without meaningful consequences. In another section, the statement is made: ‘ You give them your “money,” they engage in complex machinations with it, and you trust that they can/will give it back to you when you need it.“ Again history shows that when the complex machinations go pear shaped, the trustees simply shrug and say ‘bail us out’ and we the tax payers end up covering the losses of our money with money we gave the government for other purposes. In essence screwed twice by two different trustees. I’m not a crypto fanboi by any stretch, and have owned exactly zero crypto. But the current system is still based on a version of capitalism that insists on returns that can really only be achieved through the abuse of trust. Yes, the system is broke/rigged.

  29. jim says:

    I don’t understand Crypto other than it sounds like imaginary money and you are dealing with imaginary people and their imaginary friends.