Distributed ledger technologies - a new model for trustworthiness?
Distributed Ledger Technologies (DTL), such as Bitcoin and Ethereum, give us insight into radical new ways of managing trustworthiness, albeit in the limited domain of digital currency transactions and 'smart' contracts.
They are based on two core ideas. Firstly there is a shared, distributed, immutable ledger that records an audit trail of transactions. Secondly, a record enters the ledger only when it has been validated by a distributed set of independent actors (called 'miners'): only then does a transaction become accepted by the community.
Trustworthiness in the DTL system is built on the community of stakeholders trusting at least 50% of the miners, and the technical robustness of the protocols and technologies that support the ledger and associated processes. This approach to trustworthiness is radically different from traditional methods, such as independent certification by formal security validation, and reputation systems in social media.
In some sense, DLT offers a special blend of these two extremes: brings cryptographic 'strength' to consensus, and relaxes the requirement for a trusted certifier. Because the approach is so different, we should consider the potential that it may bring relative to more traditional methods.
Particular examples of DLT have now been applied for some time. Bitcoin is an electronic currency system that supports a virtual currency, and allows the general public to make payments for goods and services that are obtained outside of the Bitcoin system. $60 billion marcap bitcoins are in circulation. $800m transactional value per 24 hours, and is currently valued at 4,000 BTC/USD.
There have been several examples of systems built on 'smart' contracts using Ethereum at their core. Ethereum has a marcap of $30 million, with an Ether, their unit of currency, at 323 USD growing rapidly from March 2017.
These markets are young and uncertain, and there are many unanswered questions. Yet the technologies have been applied in the wild, and registered on the radar of the established financial authorities.
Perhaps there are parallels we could leverage.