Dr. Felix Greve

Trustworthy is more than tamper-proof

Garbage in, perfectly preserved garbage out

Blockchain technology offers distributed, verified records representing any kinds of data, including software programs, often referred to as smart contracts. Correctly applied, it provides a high degree of certainty that data has not been tampered with since it was originally written into the ledger. But it cannot guarantee veracity or trustworthiness of such data. Understanding this is essential. Falsification of stored data is hard. But manipulation or mistakes during while data is being stored is just as easy as with any other technology. Data stored in the blockchain is tamper-proof, but not inherently trustworthy.

This understanding is crucial to comprehend the real life implications of Blockchain solutions, both in their potential and limitations. From a legal perspective, Blockchain provides us with a novel digital recording machine. This “Paper 2.0” is disruptively better than its predecessor because it provides more reliable documentation that is more useful in a digital environment driven by automation of declarations and commercial exchanges.

That said, declarations or allegations do not become true or legally binding because they have been recorded in a Blockchain. Information validated by Blockchain can be just as easily unauthorised, faked, illegal or unintentional corrupt.

Trust is ultimately a social issue and cannot be solved by technology alone. That is why Vereign is not only following technical best practices but also proven social models to address trust insufficiencies in a digital age.

The automation of data input is only feasible where the real world can be measured objectively, for example weight, temperature or wind speed. But even in those limited situations it is only reasonable to automate, in case we are able to provide sufficient assurance of probability that the automated input is correct and not tampered with, always considering the individual stakes involved. In particular: the higher the stakes involved, the more complex and expensive it becomes to provide a sufficient technical solution.

Consequently there are many scenarios where a human interface will continue to be a necessity. Even though we will be able to automate and fast-track economic processes, we remain bound to trust an individual or a group of consenting human beings responsible for data input.

As an example, consider frequently mentioned use cases for a real-life Blockchain application: a commercial registry or land registry. The prevention of tampering is only a very small part of their value to society. Much more important is the trustworthiness of the data recorded. In a country where governance has failed or social structures do not provide sufficient proof, there is no trust in the official registry. Such a registry is worthless and often times challenged legally, politically and socially.

This problem is as old as humankind itself and over the centuries we have tried multiple social approaches to solving the challenge. The current economic and legal systems are the result of empirical knowledge. In it, the due diligence function for significant transactions is often provided by a legally privileged and supervised profession, the notaries.

Of course notaries are also human beings and may be corrupted. But in such cases the person would typically lose their reputation, license to operate, therefore their livelihood, and may face legal repercussions. So in the vast majority of cases it is in a notaries own self interest to remain truthful and trustworthy. This alignment of interests in combination with social and legal mechanics have proven to be successful overall. Consequently, for some transactions the involvement of notaries have been made a legal requirement by different jurisdiction throughout the world.

Except as otherwise required by law, all involved parties might also agree on appointing an independent expert witness as real-life “Oracle.” This mutual agreement requires all parties to know or at least trust that same expert. In local economy this may still be achievable, under some additional effort and costs. But in a distributed, global economy, agreeing for all parties to place their trust into an expert witness is likely going to be hard.

A solution to these challenges cannot be based on technology alone. Rather we are forced to draw the lessons and consider the establishment of new, independent self-governing bodies of experts or the utilisation of already established organisational structures.

Blockchain technology is a game changer on the technological level. It cannot however change the basics of social mechanisms for trust just as it cannot change the laws of nature or the laws of applicable jurisdictions. We are therefore well advised to build on established knowledge instead of relying on a Blockchain miracle to magically end all real-world dependencies and century old social and economic challenges.

At Vereign we believe the combination of disruptive technology with real world best practices is what will allow Blockchain and society to flourish together.