Bitcoin, once ridiculed as money for geeks and then condemned as a tool for criminals gained much wider understanding from the mainstream in the last year. More people are realizing that Bitcoin opens doors to financial freedom. With it, we can transfer any amount of money anytime, anywhere in the world instantly, securely and without permission. What enables this truly peer-to-peer transaction is Bitcoin’s underlying technology of the blockchain and its core invention of distributed trust. This is portrayed as a shift into trusting math instead of central banks and governments. Some critics view it as cold algorithms replacing the human trust that is a foundation for healthy society. But is this true? What does decentralized trust mean?

Before we dive into this question, let’s first look at the model of trust in existing systems. Virtually every human interaction in society is based on trust. As society developed into modern nation-states, interaction that was experienced in small communities faced the issue of scalability. To solve this problem, society became more and more centrally organized, implementing representation as a form of governance. In this model of centralization, access to the network is closed, with only a few having full credentials to view and administer the system. Entry and participation into such a network required permission from these appointed administrators and necessitated the walls and borders around its spoke and hub structures.

For instance, to assure the equal application of laws and guarantee the basic functioning of the legal system, we need to trust police, lawyers, judges and politicians. In this case, trust is derived from a central authority through a careful vetting process that separates experts from non-qualified actors and is delivered through layers of bureaucracy. No matter how good the intentions are of those who created it, systems of representation enable levers of control that have always been susceptible to corruption.

Over time, the divide between those who govern and all others widens, making the whole system vulnerable to single points of failure and internal abuse of power. Once elevated, these experts are increasingly divorced from the interests of the common people. Those who manage the networks become a new class of professionals. They hold all keys to the castle and guard the hierarchical structures of power distribution.

This centralization of trust often results in disempowerment of ordinary people, where legitimacy and authorship is transferred from citizens to institutions, politicians, lawyers and economists. As a result, much of the power to make vital decisions about ones own life tends to be forfeited, along with the right to trust one another to freely associate, innovate and build community on shared values.

Permission to Transact

The current financial system as a part of centralized society mediates essential human interaction. Modern transaction systems have been drastically altered from a form of exchange experienced in ancient times. In his book, Debt: The First 5,000 Years, anthropologist David Graeber (2011) described how before the invention of coin or cash, money was a credit arrangement. He dismantled the economists’ myth of barter as the origin of money. Contrary to how most people have been taught, in those times when people exchanged goods with one another what they were actually doing was a form of giving – as a neighborly favor.

He explained how in ancient Mesopotamia, exchange was based on horizontal social relations expressed in the sense of our indebtedness to one another; you helped me, so I feel I owe you and wish to give in return for your favor. Long ago in these small communities, humans were using an elaborate credit system to keep tabs on those favors and account our obligations toward one another. Back then, people were more able to interact face-to-face and develop trust. Economic interests that bind people were more direct and close to neighborly favor, with individuals genuinely wanting to help one another. A balance was struck when the favor was returned.

Money in the modern state has become extremely centralized. It has come to function as debt, transforming social relations into power dynamics and installing interest obligation that is abstracted from interaction between everyday people. Graeber described how this was advanced further through the invention of debit and credit cards, which has recently created a largely cashless society. He noted how the shift into transacting digital currency through the modern credit system has transformed the relationship of those who engage in monetary exchange:

“All of these new credit arrangements were mediated not by interpersonal relations of trust but by profit-seeking corporations and one of the earliest and greatest political victories of the U.S. credit card industry was the elimination of all legal restrictions on what they could charge as interest” (p. 368).

In the realm of finance, the schism between ordinary people and ‘experts’ has taken a form of creditors and debtors. In modern times, the basic human action of borrowing, lending and exchange has been mediated by private companies, banks and payment processors such as Chase, Visa and MasterCard. One’s ability to transact with one’s fellows now largely requires permission from these mega corporations.

The Man in the Middle

Through institutionalizing a monopoly that removes and outlaws effective competition, money printers and creditors can now act like the new Kings who dictatorially direct and divert the flow of finance. Predatory lending and the gutting of anti-trust and usury statutes that had once protected ordinary people have now normalized a kind of extractive debt peonage, while these investment firms and bankers institutionally protect their obscene profits and investments (gambling) with zero interest credit made available through central banks who print money out of thin air. They set contracts on their terms because they know that our crucial transactions depend on their monopolized trust. Individuals have largely become unable to freely choose whether to enter into a relationship or negotiate the terms of a contract without this unelected man in the middle.

Third party authority of a centralized system has interests quite different from that of the individuals exchanging goods or services. For example, someone who lives in the U.S. wants to purchase goods from Indonesia, uniting her interest in enjoying the product with the seller’s desire to share the product with an agreed upon means of exchange. When interests are joined and based on genuine goodwill, it can be a real exchange, creating value for both parties. However, the middleman in a centralized Visa or Western Union-like payment system has no real relation to the shared interest between the buyer and seller beyond the collection of transaction fees and maintaining their monopoly within the system. These third parties act as gatekeepers to authorize the transaction, thus controlling access to the financial network. This unregulated rent-seeking behavior has now exploded, leading to a system of private taxation that is obscenely profitable. The result is that the wealth distribution today is quickly coming to resemble that of the medieval era.

We may be tempted to view such a system as based on trust. In reality, this is disingenuous. It is actually a system based on obedience and coercion. It is another form of control camouflaged as a necessary service. Private companies lock people into a relationship based not on equality of peers but on an imbalance of power through this monopolized payment system and the arbitration that comes with it. Centralized trust discourages the two parties from developing personal relations out of themselves and freely determining the course of their own transaction. With charge-backs, payday loans, massive transfer fees and subprime mortgages and without the individual’s capacity to set terms of contract and rights to exchange, we have become automatons programmed to dutifully obey rules set by the controlled market vultures that get fat by extracting massive wealth from the 99.9 %.

Trust is something that can never be required or enforced from outside. Grown organically, it is the basis for any meaningful human interaction and will only be developed through a relationship based on equal peers. For trust to be possible, each person needs to freely form relationships out of themselves, independent of power structures that might interfere with that process.

In Each Other We Trust

Why do we need these private companies to mediate interaction? Why do we need their authority in basic human activities such as exchange, innovation and sharing? The simple answer is, we don’t! Bitcoin currency as the essential unit of value and the payment network of the blockchain replaces trust in governments and banks with mathematics. Its distributed consensus network simply eliminates the need to trust anyone.

Silicon Valley tech entrepreneur and author Andreas Antonopoulos describes Bitcoin’s security model as trust by computation:

“Trust does not depend on excluding bad actors, as they cannot ‘fake’ trust. They cannot pretend to be the trusted party, as there is none. They cannot steal the central keys as there are none. They cannot pull the levers of control at the core of the system, as there is no core and no levers of control.”

Math guarantees the integrity of the system without anyone needing to trust one particular person or company. With ‘In Crypto We Trust’, what is eradicated is not human trust, but the mandated trust in a third party. Bitcoin solves the scaling problem of ‘In Each Other We Trust’. By removing the need for any central authority, cryptographic security of mathematics unlocks autonomy of trust; the ability for each person to directly and freely choose who to associate, interact or exchange with. With this, our innate capacity for trust that has been compromised by the artificial system of hierarchy can now be restored.

This new stateless currency distributes peer-to peer digital cash and enables neighborly favor at a global level that once was experienced only in a local community. The blockchain, a transparent global asset ledger keeps track of everyone’s transactions and facilitates circulation of currency as social relations.

Blockchain-based cryptocurrencies bring the source of legitimacy in the realm of finance back to individuals. Anyone can download a simple application on a computer or smart phone and by keeping their own private keys, they can start their own money system or bank. It is an open source network where each person can freely enter into relationships bound only by simple mathematical rules that set out an agreement on how to exchange value.

The unmediated flow of finance directed through networks of equal peers has the potential to dissolve the abstracted stagnation of onerous debt and foster a trend of reciprocal exchange based on our own indebtedness to one another. With this independence achieved through algorithmic regulation, we can now claim the power of consensus and create a new global civil society upon the foundation of trust in our fellows.