The concept of trust is as ancient as history. Initially, people needed little more than the word of a trusted colleague to transfer ownership of assets from one to the other — no intermediaries, no rules and no ‘added’ costs, speaking loosely. But with the emergence of Capitalism, the notion of objective vs. perceived value rooted itself into society and it became increasingly necessary to institute risk arbitrage to level the differences, oversee asset transfers and validate value exchanges in a safe and trustworthy manner, ensuring the interests of the parties involved.
What followed was the age of moderated trust — supported by banks, fund managers, and legal aid offices — all expending and ensuring trust, albeit at a cost. Fast forward to 2008, and trust has evolved yet again, with the introduction of the blockchain.
A Brief History of Trust
Dating as far back as the times of the hunter and gatherer, navigating the challenges of lack of trust has never been easy. The Roman Empire developed perhaps the first formal system of Trusts in its establishment of fideicommissum. This system, however, only addressed testamentary trusts, never a mechanism to establish it between a living trustor and his beneficiaries. Skip to 12th and 13th century Feudal England, and you will see the genesis of the modern personal ‘trust law’. Alandowner could bestow ownership of his lands upon a trustee while he went off to fight in the crusades. He would rely on this trustee to confer ownership back upon him if and when he returned from war, thus, completing the circle of trust.
It was the 14th century European merchants, however, who radically formalized trust and established the first ever trust symbols. They came up with the practice of what is popularly known as double entry bookkeeping to log and validate business transactions — a practice soon remodeled into the overwhelmingly universal practice of pegging debits against credit, assets against liabilities. Balanced books came to mean clean businesses, and everyone associated with the management of the books–accountants to bankers to lawyers — were raised to societal eminence, earmarked as trust keepers of human society.
Emergence of Programmatic Technology and Disruption of Trust
Programmatic Technology was first adopted to streamline the purchase of ad space. Through a demand management technology platform, one could set various conditions around pricing, quantity, and timing, and companies were all of a sudden able to purchase advertising through software rather than the traditional means of RFP and human interaction. What the advertisers cherished most, though, one can argue, was the sense of enhanced control.
Regardless, the increasing adoption of programmatic software allowed firms and individuals to exchange money for services or goods, such as advertisements, instantaneously and at almost infinite scale. Furthermore, with the ability to set concrete conditions against bids, programmatic technology enabled a far more precise manner of exchange, removing human error and bias significantly.
The launch of Bitcoin in 2008 ushered in the next generation of Programmatic Technology. Banking on the openness of the Internet and security assured through the use of cryptography, bitcoin, a version of digital cash, can be transferred on a peer-to-peer network built on an underlying blockchain technology. The goal of the technology, as stated in the white paper released by its obscure founder, is a “purely peer-to-peer version of electronic cash that allows online payments to be sent directly from one party to another without going through a financial institution.” Akin to the disruption that was brought about by the introduction of programmatic advertising, Bitcoin brought the promise of programmatic transactions.
As is, the blockchain technology behind Bitcoin enables trustless transaction between peers. Despite the lack of a central mediating authority, Bitcoin’s decentralized approach includes incentives for its continued existence through a network of peers called miners. Trust, then, is established on the blockchain through an immutable ledger, whereby each transaction is contingent on all preceding transaction, and is copied across a distributed network of nodes, so that there is no need for one central authority or third party to verify and validate transactions.
While the value proposition of anonymity initially catalyzed the adoption of Bitcoin, the cryptocurrency is now used globally as a transactional currency and a store of value. Early use cases varied from remittances to fee-less transactions.
Despite the promise of a more trustworthy system, there has been a proliferation of mistrust as people have jumped at the opportunity to profit and take advantage of its seemingly precarious system. According to Forbes, as of February 2018, nearly half of 2017’s ICO-backed projects have already collapsed. This comes in the form of both ICO scams as well as poorly executed plans. Furthermore, as far back as 2014’s Kin ICO, phishing scams were launched whereby a fake URL was circulated encouraging individuals to contribute to a fake version of the Kin ICO. With so much money at stake, and a new type of mistrust invading blockchain, a new form of trust was ushered in with Ethereum and the establishment of Smart Contracts.
Ethereum & The Apotheosis of Trust
The premise of Ethereum, as argued by Ethereum’s founder in his 2013 white paper, was that Bitcoin lacked a scripting language which could support the development of applications and support movement of the platform’s currency. After failing to convince the bitcoin community of this, he launched out on his own to invent and found Ethereum, described in the whitepaper as a “decentralised mining network and software development platform rolled into one.” This platform would enable the creation of new cryptocurrencies and applications that share a single blockchain or cryptographic ledger.
With Ethereum, the first turing-complete system was established on the blockchain. This allowed for a more decentralized blockchain, whereby not only cryptographic currencies and their transactions could be recorded on a single public blockchain, but programs could run on it right alongside. Among the applications this capability gives rise to, trustless smart contracts happen to be the most forward-looking and radical.
Smart Contracts and its applications
Smart contracts on Ethereum allow peers to not only transfer digital coins and tokens in a decentralized manner, but also pave the way for an entirely new methodology of arbitration-free asset exchange embedded on and executed by code. Leveraging on this capability is WandX, a decentralized platform I’d written about earlier.
Smart contracts are self-executing lines of codes that can be programmed to carry out any number or kinds of binding transactions. Pioneered on Ethereum, Smart contracts are a revolutionary application of blockchain technology through which transactions are recorded in response to an event, like completion of a task or the achievement of a set goal.
While the promise of smart contracts was established with Ethereum, programs, software and applications to create, manage, and facilitate these smart contracts needed to still be built. With that in mind, the WandX trading protocol was born.
“How can users create and trade digital assets recorded on a blockchain better?”
WandX aims to solve for ‘how users create and trade crypto assets recorded on a blockchain in a way that’s unaffected by risks imposed by the market ’ by providing a decentralized platform for creating and trading in crypto finstruments.
At face value, WandX’s decentralized platform allows crypto asset holder to manage their risks better, by way of crypto asset portfolio creation and management, as well as smart contracts-enabled, order book-free asset trades and transfers that happen directly between peers. In doing so, fees are reduced to nominal levels with the removal of costly intermediaries. But what’s more striking is that WandX has succeeded in furthering the natural evolution of programmatic trust on the blockchain, on the back of a smart contracts-enabled exchange ecosystem.
It’s Time We Learn to Trust More than Just Our Eyes
Modern day economies have evolved substantially to accommodate the need for trust entities. Unfortunately, in establishing third party entities entrusted with the creation and maintenance of trust, our financial institutions have imposed a tremendous cost upon anybody aiming to transact value of any sorts.
From family remittances, to simple bank transfers among friends, to stock trading and put options, the financial institutions of today have succeeded in extracting value in every transaction. With the decentralized world of blockchain and cryptocurrencies, we are finally seeing the promise of a trustworthy system that do not impose high costs. After all, as a society we have been able to build trust with our neighbors for millennia. It’s finally time we learn to trust even more.
Originally posted on WandX blog - Read more: https://blog.wandx.co/programmatic-trust-on-the-blockchain-c41ac61134c9#ixzz5Joxcz5UD