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The Technology of Trust in Web3 Investing
A fundamental breakthrough in computing is changing investing, markets, assets, trading, and how people communicate and collaborate. Cerulean believes it can drive climate positive action at scale.
WHERE THE NEXT INTERNET CAME FROM
Investing in the third-generation Internet, or Web3, brings with it a new set of terms and technologies. These are being used to define and to build a more open, transparent, and equitable Internet - an Internet that is truly global in its accessibility by all (most) humans on Earth, an Internet that puts individuals before corporations (or even nations), and an Internet that is built with more open and shared resources that in turn promote collaboration, innovation, and help create a strong community of people who can work together to make better technology for a better world.
Based upon its logic and its ethos, Web3 technology is sometimes called democratic in the true meaning of the Greek etymology of the word: "demos" (people) and "kratos." (power) or "power in the hands of the people."
And it is powerful indeed. Web3 is being built upon several breakthroughs in computer science: public-key cryptography (from the 1970s), mathematical hash functions & consensus mechanisms (the 1980s), peer-to-peer networking (the 90s), and cloud computing (the 2000s), each of which were first successfully integrated in 2009 into a system of independent nodes all running the identical copy of a database (blockchain) and a protocol (program) to allow peers, or users, to interact without central control point. There is no Facebook, Google or Microsoft in control. In this “next Internet,” protocols run independent of central control, supported through the democracy of active users and reliant on open source Internet infrastructure to operate continuously. To twist an old tagline from Sun Microsystems – in Web3, the Internet is the computer.
We call this Internet computer trustless because it is used and governed by all its users, and it is not owned or controlled by any one person (or corporation). Decades of combined efforts of computer scientists, cryptographers, mathematicians and software engineers, delivered a public good -- a community-computer, owned and governed by 100 million people, operating continuously for 14 years without interruption, degradation or the "tragedy" we assume besets all “commons” eventually. This is not only a technology breakthrough, but a promising breakthrough for human society.
Its promise bears repeating. The next Internet is being built upon democratic technology that can generate and sustain public goods while not befalling the tragedy of the commons.
But such a powerful promise also challenges us to learn some of the fundamental concepts that make such innovation possible. At Cerulean we've got a running list of many key concepts in Web3 here, and we thought we'd start this series with one of the most counterintuitive concepts - the idea that in order to have truly democratic technology you shouldn't have to trust anyone. You need, so called, trustless computing.
HOW TRUSTLESS COMPUTING CREATES A MORE TRUSTWORTHY INTERNET
So to get at what it means to operate in a system where we are not required to trust (that is, a trustless system), let's first examine the role of trust in our day-to-day lives.
When we place our trust in other people we know our trust can be misplaced or violated because all people make mistakes and people can also be dishonest and malicious. Trust is essentially the hope, or a leap of faith, that people will not be irrational, incompetent or deceitful.
When we get conned, when we're defrauded, when people are treated unfairly or simply don't get what they were promised, it's almost always because we trusted someone or something to be fair, honest, forthright, and incorruptible. Or just simply trusted them to do what they said they would and be who they claimed to be.
When we place our trust in groups of people, organizations and corporations, we can find that they too are not what they appear, that they have unexpected weaknesses or faults. Or, that they operate on a culture of avarice and a plan to deceive.
When trust fails at that level, we ultimately place our trust in institutions to help us deal with, or countermand the untrustworthy. We trust government, religious or secular institutions but we find sometimes even the law is unjust, the clergy are unworthy and our social contracts are weak. We find our banks fail, our politicians lie, our clergy cheat and our social and community institutions do not deliver.
We trusted Equifax to keep our financial data, not sell it; we trusted Facebook to help us find friends, not make enemies; We believed they would; we trusted them. But that trust was broken, violated.
There are many factors in day-to-day life that keep the basic social contract of trust functioning and effective. Market forces help us trust the vast majority of businesses because if they cheat some customers, fewer, if any, will do business with them in the future. We trust that most people in our work and social life will tell us the truth, or risk being called out by others for lying and likely lose their reputations, their friendships or their jobs.
But these forms of trust become weaker the larger our circle of contacts becomes and the more frequently we interact. Moreover, the risk of misplaced trust increases in our hyper-connected Internet world of social media, email, messaging and other digital points of connection.
Truth is, the more people and entities we connect with online the less connected they are to the immediate consequences of social shame or market forces that we rely on to undergird our trust. And that distance means we are less connected to some trusted third-party we can appeal to for safety, recourse or retribution.
But what if we didn't have to rely on trust at all. What if we could make decisions without relying on trust, without taking a leap of faith that people would deliver on what they promised and that what they said was true.
Trustless computing is all about creating a safe and secure digital environment where you can interact and transact with others -- to buy and sell things, exchange information, and even vote -- without having to worry about whether the people running the system are trustworthy or not.
In a trustless environment you can verify so you don't have to trust.
Trustless computing is about creating computer systems on the Internet where you don't have to trust the people or companies who run them. With trustless computing, you can be sure that your information and transactions are secure and accurate, without having to rely on the honesty or authenticity of the people who are running or using the system.
This is possible because trustless computing uses something called a blockchain, which is like a digital record keeping track of all the transactions and interactions between all parties in a completely transparent and secure way. It's almost impossible for anyone to cheat the system or another participant because the blockchains at the heart of trustless computing are not controlled by any one person or organization (that is, they are decentralized).
Decentralization and blockchains are the backbone of trustless computing, where many smaller computers work together from the same set of instructions to create a giant network with no single, central point of control.
Now imagine the impact decentralized, trustless technology can have in communities where institutions, governments and the law are unreliable, unavailable or downright untrustworthy. Or in communities where trust is a scarce resource, controlled by oligarchs and plutocrats at their own discretion and in the service of their own interests. Or in emerging markets and developing economies where the underlying value of an asset is difficult to ascertain or subject to changing conditions in the real world.
In the next chapter, we'll cover another of the many topics fundamental to Cerulean’s investments in earth-scale technology with the power to balance economic opportunity and healthy ecological systems.
Please, take a look at the list and let us know which we should cover next.
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