Cryptocurrencies have a trust problem. Blockchain evangelists claim that with the advent of Bitcoin, centralized authorities and financial institutions will soon become obsolete. Blockchain technology will run the world and corruption will be engineered out of existence. Society will become “trustless.” Ironically, the vast majority of people . still don’t trust cryptocurrencies The evangelists claim those people don’t understand the technical innovations behind blockchains. (As though a lecture on consensus protocols should be all it takes for someone to surrender their incredulity and their savings account.) There’s a sleight of hand here: “with Bitcoin, you no longer need to trust any centralized entity or any counterparty. Therefore, Bitcoin is trustless.” So because we don’t need to trust banks or the person we’re transacting with, there’s ? no trust at all In reality, not trusting Bitcoin is completely reasonable. Because Bitcoin is not trustless. In fact, Bitcoin requires far more trust than the US dollar. The key innovation of cryptocurrencies is that they decentralize trust. They do not eliminate it. There’s no such thing as trustless Everything requires trust. Aside from tautologies, it’s impossible for you to verify anything without putting your trust . somewhere Take science for example. There’s no central authority in science — it’s all based on empirical observations, open publications, and decentralized peer review. Sounds kind of similar to the principles behind blockchains. So is it “trustless”? In theory, maybe. But in practice, science is built on a mountain of trust. Consider the trust involved in reading about a single scientific study. If you take the study seriously, what are you trusting? First, you’re trusting that the article you’re reading . You’re trusting that the datasets and , because you’re not re-running the regressions yourself. You’re trusting that they didn’t . You’re trusting that there aren’t , and that they weren’t . You’re trusting that , and there’s no contamination by something as simple as , or the fact that all of the . You’re trusting that the findings weren’t , or by a professor who knows they need to produce a certain result to advance their career. And, of course, you’re trusting that the researchers didn’t just . accurately reports what the study actually says statistics are correct p-hack their way into statistical significance more studies that show the exact opposite result shoved away into a file drawer the methodology is reproducible sex of the experimenters subjects were undergraduates motivated by industry funding outright fabricate data You trust science because you’re delegating your trust to the decentralized process known as “scientific consensus.” This sometimes works out, but . Science is not trustless. often it doesn’t You don’t trust science because it’s decentralized or trustless or anything like that. You trust it because, despite all of its problems, . It’s better than any other process we know of for advancing human knowledge. It worked damn hard for that trust, and now science holds significant sway in society. But you are still are right to trust science. science has worked The trust we place in science is orthogonal to it being decentralized. So what about cryptocurrencies? The trust in cryptocurrencies Decentralized cryptocurrencies imply you don’t have to trust a central party. After all, the Bitcoin protocol dictates that every node stores a record of every transaction and double-checks everything themselves. No trust required — right? Heat map of reachable Bitcoin nodes around the world ( ) https://bitnodes.earn.com/ Nonsense. The trust is not gone, it’s just distributed across more parties. So where is the trust now? It’s pretty much everywhere. You are trusting the developers not to build . You are trusting . If you don’t run a full node (which you probably don’t, there are only 10K Bitcoin full nodes in the world), then you’re . You are trusting the community not to . You are trusting and corporations not to shut down mining, or . You are trusting that markets are not (or that if they are, they’re being ). You are trusting miners and bad actors not to , or , or . You are trusting your wallet software to . You are trusting attackers not to split the network using . You are trusting exchanges to hold your assets and , or . And, of course, you’re trusting that however you’re storing your cryptocurrencies, you don’t get your credentials stolen. buggy or insecure software the miners not to collude explicitly trusting any full node you happen to connect to hard-fork away from you nation-states launch a 51% attack being manipulated manipulated in your favor frontrun you grief you attack the contracts you use generate cryptographically secure keys BGP routing attacks not get hacked not to hide it from you if they do Sure, in a simplified adversarial model where you hand-wave away all the details, cryptocurrencies have elegant security properties. But in reality, there’s a great ocean of trust that fills in all those gaps you waved away. Engineering is what fills those gaps. And solid engineering takes time. As in, more than a decade kind of time. Even still, 9 years after the creation of Bitcoin, cryptocurrencies have a lot of lingering unknowns. Do you trust that the consensus protocols are actually correct, and don’t have any ? Do you trust fees won’t just ? Do you trust that cryptocurrencies won’t just collapse under ? Do you trust that quantum computers won’t come along and ? Do you trust that even if they do succeed, nation-states won’t recognize the threat and immediately , except this time with the backing of geopolitical power? lurking major vulnerabilities balloon to becoming unusable network congestion break all the public-key cryptography replicate their successes It should go without saying that the US dollar requires a lot less trust than Bitcoin. No one can break the US dollar, but a motivated nation-state or corporation could easily manipulate or destroy Bitcoin. They would probably face meager consequences for it. This is not to say that Bitcoin is fragile, or that you shouldn’t use it. It’s a beautiful protocol, and the first decentralized currency to ever solve the double spend problem. And cryptocurrencies make different tradeoffs than fiat currencies. Seldom is one system strictly better than another — more often, it’s a question of what strengths and weaknesses you choose. But engineering is all about tradeoffs. In principle, decentralization can lead to more robust systems. But it’s obvious that . Bitcoin has not yet accomplished that Innovation requires trust Here’s the thing. Cryptocurrencies require lots of trust. . Early on in any system’s lifespan, . It’s an experiment. We’re still in the early days. And that’s okay of course it requires trust I believe cryptocurrencies are the future of finance. But if cryptocurrencies win, it won’t be because they’re “trustless.” They’re not. . They’ll have to solve actual problems better than fiat currencies do. It’ll be because they’re better If cryptocurrencies win, it’ll be because of their ease of performing micro and macro payments, their global availability, their faster clearing times, their cheaper fees, their immutability, their programmability, and their ability to disintermediate and automate costly financial relationships via smart contracts. For more of my thoughts on cryptocurrencies’ improvements over fiat, see: _It wasn’t too long ago that Silicon Valley scoffed at cryptocurrencies. All over coffee shops in Mountain View and…_hackernoon.com We already know blockchain’s killer apps Decentralized protocols are wonderful and fascinating. But decentralization for its own sake doesn’t get you anything. Trust is earned through years of good engineering, not through protocol design or elegant white papers. Despite all the mania of mainstream attention, cryptocurrencies are still in their infancy. Perhaps one day they’ll be even more robust than fiat, but we’ve got a ways to go. One thing is for sure: cryptocurrencies are already asking powerful questions about what money can be. Instead of being a contract between people and a nation-state, cryptocurrencies let us imagine: what if the monetary system were a community commons? Owned, managed, and governed by everyone? It’s a radical idea, and one of the most fascinating financial innovations in the last 50 years. As far as ideas go, I think it’s a pretty good one. But it’s risky. Don’t let anyone convince you it’s not. —Haseeb

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