Blockchain’s Potential to Transform Trust

After rising to unprecedented heights in 2017, Bitcoin value suffered a dramatic free fall in 2018 — as did many other digital currencies. Accompanying the crash were new waves of criticism and plenty of cases of chicanery. Markets ebb and flow, and like everything else, crypto is subject to the tides. At the dawn of 2019, what remains shiny and solid amidst all the wreckage is the fundamental crypto-enabling technology: blockchain.

Transient value in tokens may shift — but blockchain remains undiminished. More than ever, decentralized technology is poised to challenge the supremacy of powerful institutions parading as society’s guardians of trust, exchange, and commerce. After all, Bitcoin was created soon after the 2008 financial collapse, when trust in our government and financial systems were at an all-time low.

Democratizing trust

In the big picture, crypto wasn’t the only community to take a hit in 2018. On the finance front, centralized establishment organizations faced their own regular run-ins with shattered credibility (recent headlines name JP Morgan, Citibank, and Wells Fargo among others).

And in the tech world, the actions and motivations of data-gatekeeping behemoths such as Google and Facebook were also increasingly called into question. Trust seems under siege.

Despite the erosion of traditional mechanisms, the foundation of our global economy has been guaranteed for centuries on trust — and that’s not going to change. This is one reason the crypto ecosystem will only grow more powerful in the coming year. For a long time, in economics, the inequality-trust hypothesis has argued that income inequality has a direct effect on health by affecting people’s psychosocial well-being. In addition, social trust is thought to mediate the association between income inequality and health. Take Brazil, for example, a country rich in natural resources but with extremely low levels of trust and high levels of corruption has one of the highest rates of socioeconomic inequality. Yet, Japan, a country with very few natural resources but an abundance of trust has developed into a technological and global superpower. In the end, bilateral trust, between society’s people, financial systems and governments are what differentiates first world countries to third world markets.

In a world where central governance of trust is feeble — Blockchain intrinsically generates trust and provides an alternative to antiquated methods for governing economic transactions and agreements. Its distributed ledger technology (DLT) allows peers to build credence collaboratively and eliminates the need for a suspect or prohibitively costly third-party validation. That’s a model for democratizing trust.

Disruptive Blockchain companies rising from the ashes

One 2018 report found that the average lifespan of a blockchain project was around 15 months. Of more than 80,000 blockchain projects launched, only 8% were still active. This frightful statistic actually says something important about the crypto crash — wheat and chaff are being separated with great efficiency.

Legitimately innovative blockchain companies will endure and mature, while over-hyped pretenders without business plans will fail. For the most part, crypto startups trying to gain a quick buck have already gone under, whereas companies using blockchain to solve real problems are just starting to gain traction.

The transition is visible: From payment and financial services companies competing with PayPal to social media services that provide a censorship-resistant alternative to Twitter. Companies structured on the blockchain are leveraging decentralization as a differentiator and will continue to quietly grow their footprints.

Connecting with the conscious consumer

Transparency is now a hallmark of corporate responsibility. Currently, most companies lack the ability to track supply chains and data transactions secure and in detail, making it difficult to determine compliance with ethical standards, much less assure product authenticity or origin. I believe that by 2020, blockchain will change that.

Blockchain technology is already championing ethical business practices by providing consumers with a deep understanding of supply chains — from massive yellowfin tuna caught in Fiji to fresh, leafy greens purchased at local grocery stores. DLT can provide both immutable, fine-grained provenance tracking and compliance assurance. In the midst of Facebook data leaks and its egregious Cambridge Analytica Scandal, secure decentralized social networks such as SteemIt have gained traction surpassing Bitcoin in daily operating transactions.

One of blockchain’s most compelling features is the ability to facilitate “smart contracts,” or automated agreements that go into effect when certain conditions are met to provide a self-verifiable, self-executable, and tamper-proof method for enforcing the conditions of an underlying agreement. DLT enables corporate responsibility initiatives and supports brand integrity as consumer demand for transparency, fair trade, ethical sourcing, and sustainable goods continues to grow.

Moving toward mass adoption of decentralized technology

In the wake of the 2018 crypto crash, we will see successful blockchain applications evolving from industry fluff into real use cases showing tangible financial results and benefits that exceed traditional means. This process of refinement will foster widespread adoption by leading, multinational corporations beyond pilot testing.

Enterprises such as Amazon and Walmart have already started experimenting with blockchain, but we’re still more than a year away from seeing those experiments play outside of the sandbox. When enterprises (and governments) do finally deploy DLT projects on a large scale, they will be cautious and focused on internal or business-to-business use cases initially.

That’s to be expected. DLT may change the world, but it won’t happen overnight. Blockchain innovators are still tasked with solving for scalability, navigating the emerging regulatory landscape, and enhancing user experience to support growth.

In 2019, peer-to-peer distributed networks and DLT will continue redefining our concepts of trust and integrity. Blockchain will be further harnessed to transform how society operates with a more equitable digital paradigm.

The crypto markets crashed in 2018, but blockchain didn’t. It still has the potential to catalyze global cooperation and allow individuals to better govern personal digital identity — instead of relying on banks or credit clearing-houses or Silicon Valley tech giants. Distributed systems based on blockchain will help us create companies, institutions, and customs that are more transparent and ethical.

Blockchain’s Potential to Transform Trust was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.