Trust: the root issue with Bitcoin
30 Mar 2017

“from studying hundreds of networks and marketplaces, there is a common pattern that people follow, and I call it ‘climbing the trust stack.’ … On the first level, you have to trust the idea… The second level is about having confidence in the platform… And the third level is about using little bits of information to decide whether the other person is trustworthy.

Now, the first time we climb the trust stack, it feels weird, even risky, but we get to a point where these ideas seem totally normal. Our behaviors transform, often relatively quickly. In other words, trust enables change and innovation.”

– Rachel Botsman, We’ve stopped trusting institutions and started trusting strangers, TEDSummit 2016

I have multiple negative perspectives regarding Bitcoin as a prominent cryptocurrency platform. The reason is not that I’m a non-Millennial curmudgeon keeping a death grip on the technology of yesteryear whilst flailing blindly with a stick at the newest innovations. I absolutely trust the idea that cryptocurrency is the way forward, and can enable financial independence and lowered costs of banking for the masses. In other words, I’m just hanging out on the first level of the trust stack.

My issue is making the leap to the second level: having confidence in the Bitcoin platform.

Consider these facts:

The US dollar was backed by gold and silver until 1971, and is now backed by the “full faith and credit” of the US government. Other world currencies share similar stabilizing characteristics. So what is Bitcoin backed by? In simple terms, its monetary value is based on the aggregation of investments of traditional currencies with decentralized control and oversight. Therefore, if I decide to purchase Bitcoin with my traditional, reliable US dollars, I’m transferring my trust to a system that leaves me with no recourse if it fails.

While Bitcoin innovation possesses high potential for social, technological, and scientific value, the platform has not established the trust basis to be able to scale up and spread that value globally. Until it does so, I’m comfortable down here on level one, hoarding my theoretical gold bars and scrap silver.

 

Michael Carter

Michael Carter is an expert consultant and thought leader in the area of Financial Crimes which includes Bank Secrecy Act / Anti-Money Laundering, OFAC programs, export compliance, and counter terrorism financing. His Twitter feed curates the latest in #AML#ITAR#FCPA#EAR, and #WhiteCollar crime & #compliance news.

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