One of the core innovations unfolding in the web3 space is the utilization of smart contracts to facilitate interpersonal dynamics, thus augmenting, if not altogether supplanting, any requisite counterparty trust.

The idea is that counterparty trust has long required the parties involved to take measures to establish said trust, measures which may be time-consuming or costly, and that the minimization of such costs could be a boon for business.

In general, the motivation behind the development of trustless technology is to minimize counterparty risk, or the chance that someone doesn’t keep their end of the deal. While the term ‘trustless’ itself may seem counterintuitive to those first hearing it, the aspiration is one of efficiency and safety. That said, what role does trust then play, in a trustless regime?

It could be argued that trust is built between those who mutually incur certain counterparty risk, and yet manage to live up to their own promises and prove to each other that they are reliable associates. From here it could only be surmised that, if counterparty risk itself is to be minimized or even virtually erased, such trust would have less occasion to develop.

The paradigm shift of trustlessness may force us to rewire our very mode of judgment, our ability to discern trustworthy from untrustworthy behavior, and may even impact how reputation and credibility work on the wider social level.

Colleagues and Counterparties

The trustless technology in question may more emphatically apply to counterparty dynamics, but it also applies to internal dynamics between colleagues, both horizontally and vertically.

If payroll can be automated with a six month runway by a smart contract, employees may have less need to trust management in that capacity. If an organization’s treasury, or some auxiliary revenue inlet, is equipotently managed by a multisig, or by an even wider array of stakeholders, the risk of embezzlement would seem drastically minimized.

These scenarios are not presented as airtight examples of trustless technology, but merely as food for thought, to illustrate how internal dynamics of trust may be effected alongside external counterparty dynamics. And here too trust is built between colleagues who stake their reputation on one another to whatever degree. In fact, trust is arguably more important between colleagues than between counterparties, just as a greater trust is given to those whom one reveals vulnerability than to those from whom one shields vulnerability.

One critical prognosis of the development of trustless technology, insofar as it impacts internal affairs, is that it may entail a colder and less familial morale among colleagues. If you have no need to trust those with whom you work every day, you then need to go out of your way, as it were, to establish such trust. That is, if daily operations do not naturally entail occasions to build trust, and instead colleagues need to seek other such occasions, it could be argued that such a learning curve may come at the expense of collective efficacy as a business unit.

Being forced to trust colleagues within a ‘trustful’ system would seem a sort of natural binding agent, an arrangement which cultivates the interpersonal integrity of the organization. Erase such an arrangement, and it’s not so much that this integrity will necessarily decay, but rather that those involved will need to seek out new ways to establish trust.

Implications for Identity Verification

In lieu of truly trustless technology, we have become accustomed to systems of reputation and credibility to ensure, as best we can, that people follow through on their promises and generally operate in a responsible manner. In a trustless arrangement, might such methods become obsolete?

That is to ask, in an arrangement where counterparty risk and colleague risk are lessened, might there be less of a need to Know Your Counterparty, or to Know Your Colleague? A radical prospect, no doubt, but one with fascinating implications, implications arguably favorable to individual privacy and self-sovereignty.

If we may gaze into the fog ahead, we may imagine such an eventual arrangement wherein knowing the name of your counterparty or colleague becomes less of a necessity, and more of a supplemental factor, perhaps even a superfluous one. If risk assessment can be exercised at the level of inspecting and agreeing upon smart contracts to deterministically execute transactions and other business maneuvers, might there be less of a need for the counterparties to stake their reputations by exchanging such basic personal information as their names?

Even if such exchanges are not done away with, they may be handled in more sophisticated ways, so as to prune back levels of disclosure rendered excessive by advances in trustless technology.

There are zero-knowledge solutions being developed, which would enable counterparties to convey to one another that they are each a unique person, that they each live in the same nation, that they are both over 18 years old, and other such identity parameters - all without requiring them to explicitly disclose, publicly or privately, such information. As interesting as these solutions are, here is not the place to dive into such detail.

A Healthier Business Culture

While these technologies are bound to find some abusers and engender unforeseen problems, we, as its wielders, are ultimately the primary determinants of such outcomes. If we understand this technology, and consider the impacts it may make on our best practices and our ethical standards, we stand a chance at ushering in a healthier environment in which we may all go about our business and our lives.

It is possible, under our careful stewardship, that this technology may lead us to an arrangement where there are fewer opportunities to breach contractual obligations, and where we enjoy greater privacy and control of our personal information. The success of this transition, I would suspect, may largely depend on our ability to preserve healthy dynamics of trust, despite any lessened necessity thereof.

This article was originally published via Mirror on 01/21/23, as an entry of the first volume of Automatos, from PubDAO.