On Trust Paradigms, Business Models and Innovation
Trust has meant different things for different generations. This fast changing perception of trust creates serious challenges to the status quo, and at the same time massive opportunity for disruptive value propositions.
We are just an advanced breed of monkeys on a minor planet of a very average star. But we can understand the Universe. That makes us something very special. — Stephen Hawking
Since the internet spread up, in the 90s, our connectedness exploded. As people started connecting with other people all over the world, new trust models emerged and online trust structures started to build up. Now, with the advent of blockchain as a decentralized store of value and utility, brand new trust models are in the cooking. The difference this time is that trust doesn’t necessarily depend on companies or governments anymore.
1500 — Handshake based Trust
Over many centuries, the only concept of trust was closely connected to the people one personally knew. Family, friends and people one had personal and professional relationships with. One might trust some people who were trusted by trustees. The circle was really tight, and mostly limited to in-person relationships. Certainly today this is still the baseline trust model for everyone, although it’s far from being the only one.
1900 — Institution based Trust
As democracies matured, things like taxes and criminal records evolved and created new concepts of trust. Those were used to standardize trustworthiness metrics so they could be understood by everyone in a community. One could then tell if it was safe to trust an unknown individual, based on those records.
As banks and large companies also popped up in every major city, industry specific trust metrics were created to get more granular on the trust standards across society. For instance, financial institutions created the credit score to standardize the measurement of trust across the financial markets.
2000 — Online Institution based Trust
As the internet came up, players like Amazon or Microsoft emerged as market dominant players on their verticals. We learned how to trust them to the point of ditching our go-to offline places where we used to go shopping, or the old tools we used to use to do our jobs.
With other online dominant players, such as Google or Facebook, it wasn’t a simple substitution of service providers. As they provided totally novel and differentiated value propositions — online search and social networking — we bended our trust models even more to accommodate our usage of such services. We give them our data, despite having learned over the years to turn a blind eye to their terms of service — which often are quite aggressive for the user.
2010 — Community based trust
As internet connectedness increased and device sizes decreased, conditions were created for new tech disruptions. These new tech possibilities allied to the millennial appetite for adopting novelty created the ideal scenario for companies such as Uber or Airbnb to pop up for every use case where the Gig Economy model make sense. These players created a new trust model based on the opinion, where an individual as a trust rating as high as the trustworthiness consensus of the community who interfaced with that individual before. These rating based trust systems enable us to trust individuals we don’t know and about whom we have very limited information. We would never rent our spare room to that group of unknown foreigners, nor take a ride at that random guy’s car. However we do it, because everyone who did it before us said they are trustworthy. We learned to trust the opinion of the crowd, even if we still need to trust the institutions who collect and store all the data to support the model.
Trust. But verify! — Ronald Reagan
2020 — Decentralized Trust
With the advent and adoption of blockchain based technologies, the data storage layer of things becomes decentralized, and data doesn’t necessarily need to be collected, stored nor managed by any institution whatsoever anymore. We can still have the community consensus to provide us with the trustability rating of a certain individual, and that’s it, we can let go of the trust issues with the central authority. However, despite the fact that all this looks amazing, it’s not so simple. The inner structure of these blockchains and the mining incentives will tend to force these value chains to be token based, and as such, trust will also be tokenized most often than not.
2020+ — New Business Models based on Decentralized Trust
If we isolate Trust itself from the business model that depends on Trust, the immediate use case that comes to mind is the Token Based Registry model. In that case, the community members can rate any individual, and their opinion is as strong as the amount of tokens they hold. Although there are some challenges to operate this model in smaller communities, at scale it should be self sustainable.
Other business models imply implementing the services rendered by the Gig Economy companies, but built on the blockchain. That decentralizes the business model and the underlying Trust along with it.
Is this a challenge or an opportunity for your company?
The key question right now is to figure out what business models this new reality unveils. What kind of value chains make sense only on top of a decentralised trust model? Certainly a lot of ICOs seem to have legit answers to this dilemma, and it’s exciting to see them implementing their proposed approaches.
This paradigm shift is a huge opportunity for startups and large companies alike. Although, big companies have also the added opportunity of making their existing operations more efficient by removing most of their internal slack.
Regardless, this is a pivotal time for every company that depends on trust from their users and clients — which arguably comprises every company on earth. For some companies this is more top of mind than for others. Some have ongoing PR train wrecks due to trust issues from their user base, for those this might be a once in a lifetime opportunity to recover. For all others, this is a great time to get involved in the new paradigm, since it will likely bring massive change in the years ahead and possibly significant disruption to their markets.
This article was originally published here.