Trust is an essential attribute to conduct business, exchange goods, information, and other valuable assets. Transactions of monetary value demand a high level of trust between parties. To provide this trust, intermediaries and legal entities with a firm grasp on the law verify the documents and thereby establish one-time trust.
These traditional protocols of trust like legal entities, centralized authority, banking systems, credit rating agencies are being disrupted by new trust enabling instruments.
In this part of the article, we are establishing the transformation towards the trust economy and discuss the roles of blockchain as an integral part of it to help build trust in the Digital and global economy.
New Age Trust evaluation
Ride-Sharing apps rely solely on the customers’ rating of drivers’ performance to book the ride. Home-owners rely on the review of paying lodgers by other home-owners who have already hosted them, to let the lodger into their homes. These scenarios show us that, few positive comments by customers such as ourselves helps to build trust in strangers. The notion of word-of-mouth by reviews and ratings is gaining large scale popularity to build credibility and reputation, one review or rating at a time. And the larger populace is growing accustomed to the idea of trusting complete strangers based on other’s positive or negative opinions of these strangers.
This is called a trust economy.
While the new instruments of trust for Peer-to-Peer transactions are not completely overturning the older trust protocols like credit ratings, guaranteed cashier checks. The new trust mechanism is relying on the reputation and digital identity of the transacting parties- elements of both of these will soon be stored and managed through the blockchain network.
Blockchain can be the solution to manage Digital Identity and History
Elements of reputation and digital identity for individuals could be their financial and professional histories – tax information, consumer preferences, medical records amongst others. Companies could sustain reputational identity to establish trustworthiness to do business or to be a vendor.
In the trust economy, it is the individual or a company’s identity, that confirms their presence in a community, ownership of assets, entitlement to benefits or services, and on a deeper level, the identity proves the individual’s or the entity’s presence.
Apart from the trust layer that blockchain creates, Blockchain also allows for selective sharing of information with others to exchange and transact assets safely and efficiently. And one of the biggest advantages offered by blockchain is that smart contracts can also be integrated.
This mechanism has the ability to transform Identity into a manageable attribute that can be embedded or molded into individuals or organization’s every interaction. This further will increase the reputation of their identity, increasing the trust factor.
Blockchain-based trust economy is creating a remarkable shift from centralized trust agents to the individual. This decentralized authority does not mean the end of banks, credit agencies and other entities that acted as intermediaries to build trust. Blockchain as a gatekeeper of trust and identity, means businesses need to evolve and find new ways to engage with the individual – find newer ways to add value and utility to individuals in the growing trust economy.
What makes Blockchain the gatekeeper of trust?
Blockchain is a distributed ledger that allows for exchange information that can be recorded and shared with the community. Each and every member of this community will hold and maintain their copy of the information and all members need to validate the changes to the information collectively. The nature of data stored can be transactions, contracts, assets, identities, or practically anything that can be stored digitally. All data entries are permanent, transparent and searchable, thereby allowing for all the histories to be recorded as well, creating an audit trail. Blockchain makes it possible to enforce privacy selectively, allowing protection of sensitive information from those without access to it.
In Blockchain, cryptology replaces the third-party intermediaries as trust builders.
The need for portable, manageable identity grows in the trust economy, and individuals and organizations can use blockchain to
- Store Digital records
- Exchange digital assets without friction
- Execute smart contracts
In the next part, we will dive further into these three main ways blockchain helps to build the trust economy.
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