15 ms·

I think the cost of trust is underestimated. All those shiny skyscrapers that the banks build? It's for trust, along with a good deal of banking licensing requ

I think the cost of trust is underestimated. All those shiny skyscrapers that the banks build? It's for trust, along with a good deal of banking licensing requirements and regulation. The example with the farmers' fields is quite valid. We forget in our relatively well-governed western nations that some governments really can't be trusted to simply keep records straight and not 'lose' vital documents, in cases where bribes abound. Another example is foreign exchange trading settlements; I can't trust that if I send you $500mn in swiss francs, you'll actually send me the equivalent settlement in USD. You might go bankrupt half way through the transaction. And so there exists an expensive jointly owned escrow bank for exactly this purpose, CLS bank. I'm sure there are many other examples, but the point is, trust is actually quite expensive.

asah 4y ago
Yes, and #include cost of military, courts and police ("guys with guns")
dale_glass 4y ago
Trust is expensive, lack of trust is even more so. Say, how would you build a skyscraper without trust? Are you going to set up an on-premises laboratory to test the quality of the concrete and steel? Are you going to personally verify the entire building's plans? Check whether the geological study was accurate? Follow every worker around to make sure they don't cut corners anywhere? The less you can trust that the many people involved did their job, the harder and more expensive it gets to actually get the work done, until it turns out it just can't be practically done. A lack of trust gets you a place like Afghanistan -- where the moment you stop looking stuff starts disappearing.
- mike_hearn 4y ago
  "you going to set up an on-premises laboratory to test the quality of the concrete and steel?" This isn't a good example because there are whole infrastructures to verify that buildings are being made "to code" and quality of materials is a part of that. E.g. this lab that tests steel: https://www.leica-microsystems.com/science-lab/steel-the-all-rounder-that-has-to-pass-many-tests/ https://www.leica-microsystems.com/science-lab/steel-the-all... Now what you're getting at is, OK, now you have to trust the lab. But that's OK because the incentives are better aligned. Trust is a thing with complex shapes. Maybe you develop trust in a single lab because being trusted is their whole business, and now you can easily switch between steel suppliers depending on who can sell the cheapest with peace of mind, so you've moved the trust problem around and reshaped it. A lot of trust problems in the business world are like this. You can't eliminate it entirely everywhere, but reducing the amount you need and reshaping it/moving it around is still useful.
  - dale_glass 4y ago
    Yes, but even that is potentially troublesome. If you're in a low trust environment, then probably nobody trusts the labs either. Like, why do the labs exist? Because the building companies really, really wants to build a solid building but the concrete industry is oddly shady? Or because there's an official/unofficial requirement for it? If the second, you easily end up with labs that rubber stamp whatever you want them to. Trust in this sense is something that needs to be encouraged society-wide. You can patch imperfections, but there's a very real limit to how practical that is.
    - mike_hearn 4y ago
      There's not really such a thing as low trust/high trust society. That's an abstraction that sounds good but hides too much detail to be useful when discussing specific projects. You can't just encourage everyone to trust everyone else. To the extent developed countries can be described as "high trust", it's not because they are just magically more trusting. They get that way because there are extensive and mostly working mechanisms to find and penalize betrayals of trust. Corruption is low in the west because corrupt people get caught and punished, and because once the problem gets small enough people won't just blindly accept it but will make an effort to report it and ensure it's resolved (vs when it's endemic). Stuff like concrete mixing is commodity, lots of small firms scattered around the world. They compete on price and delivery time so there's a temptation to cut corners. Delivery time is easily understood and measured, so is price, if you can properly measure quality then you can switch between providers easily. The alternative is that someone fixes the trust issue another way, like a big centralized mega-brand or having to in-source everything, but that comes with bigger downsides.
      - robertlagrant 4y ago
        Perfectly put. Needed a comment as well as an upvote.
      - bloopernova 4y ago
        This comment helped me to put into words something I've been thinking about recently. Propaganda that erodes the concept of truth in a society also destroys trust. While a dictator may benefit in the short term from confused opposition, their erosion of truth deeply damages the society on which their power depends. That being said, I don't know how long a truth-optional trust-destroyed society can last. For instance North Korea, but I know nothing about how much corruption exists there. (Apologies for being off topic)
- jacknews 4y ago
  I think what you mean by trust here is just a thin layer over a vast system of enforced checks and balances. Materials standards, building codes, fair contract law, etc, etc, etc, and the courts and police to back it all up.
- intrasight 4y ago
  >Trust is expensive Trust is free. Trust plus verification plus enforcement is expensive. If all we needed was trust, we could save ourselves trillions per year. When our machine overlords arrive, we'll be able to get buy on trust alone ;)
mike_hearn 4y ago
You actually know something about the finance industry, not sure this is the thread for you ;) You're absolutely right about the core problem. I worked for several years on an 'enterprise blockchain' system. We often called it distributed ledger technology because our platform didn't actually use chains of blocks or proof of work, and it didn't have a token or anything like that. It was essentially a type of database but it had a lot of ideas from Bitcoin in it and was blockchainy enough that customers accepted it as such. I have to admit, at the very start I was skeptical about why so many large companies seemed to want this stuff. Like Tim, I also spent a lot of time talking to staff at these large institutions to understand where they were coming from. Unlike him I didn't work for AWS which is pretty much the exemplar of centralised infrastructure, so maybe it was easier to pick up on some of the more subtle issues involved. There are a few things to understand about businesses that decided they wanted blockchain: 1. They have complicated inter-firm communication and synchronization needs. 2. They solve those needs today via creating centralized trusted intermediaries (like CLS). This comes with a world of pain and problems like the obvious "too big to fail" issue that was exposed in 2008, but there's also a lot of less obvious problems, like these institutions immediately becoming stagnant rent seekers who don't innovate. 3. They exist in markets that lack obviously dominant players who can push things forward. Many people in the tech world don't understand this because we rely so heavily on a handful of ultra-profitable, ultra-huge tech firms that spend lots of treasure on giving out freebies and standards setting, but that's abnormal. So they heard about how Bitcoin can synchronize different companies view of a real financial object like a ledger without a SWIFT-like organization sitting in the middle, and thought "yes that sounds like what we need". And they're kind of right, as long as you think in terms of business problems rather than technology! "Blockchain" is a concept that works for them speaking in the purely abstract social sense because it acts as a neutral rallying point. If one company in a market observes that maybe having a giant specialized too-big-to-fail clearing house like CLS isn't the ideal way to solve atomic transactions, and they go to their partners saying "hey let's use this cool thing we designed" the answer will always be no because their partners will say, why should we empower our competitor? Blockchain as a concept is owned by nobody, and the core idea is that it empowers nobody, so it acted as an enabler for conversations that would otherwise never have happened. Whether the final result actually uses proof of work or even has blocks at all actually isn't so relevant except in the sense that business owners don't want to get ripped off by people lying to them about what they built. Tim Bray should really understand this dynamic better than most people because he created XML, which crops up in the enterprise space all over the place, often in ways that aren't really appropriate. Something like protobufs would have been a far better fit but they use XML. Why is that? Well, XML went through a massive hype wave ~20 years ago thanks to the W3C relentlessly pushing this vapourware "semantic web" concept, so for a brief period XML was the future of everything. Again, this created a socially acceptable rallying point at which complex inter-firm business problems could be solved in a relatively decentralized way. The tech got used regardless of merit simply because it was something everyone could agree on and unlike ASN.1 the protocols/tooling was free. Back to blockchain. The platform I designed for this use case (Corda) was a competitor of the DA platform used in ASX and has done relatively well in the market - it reached number 1 by number of projects using it and unlike the ASX case actually has real deployments that are actually decentralized. Over 90% of Italian banks are using it for inter-bank reconciliation! [1] There are other projects that use it too which seem to be working (I'm not involved in any of them directly and haven't worked on Corda for several years now). You never hear about them on HN because they're too Starship Enterprise to be interesting to the crowd here, but the idea that there are no working blockchain projects isn't actually true. We managed this partly by walking the tightrope between what people said they wanted (blockchain!) and what they were telling us they actually wanted in customer interviews (what we came to call distributed ledger technology). There was definitely a fair bit of overlap but not enough to just throw Ethereum at a problem and call it solved. What they really needed was a combination of better inter-firm messaging, signing/cryptography, atomic financial transactions without a CLS-style intermediary that actually takes custody of the assets, a robust identity framework, good developer support and training materials etc. Some of this can be found in blockchain related research like BFT algos, others were somewhat solved already, but blending them together into a coherent platform was hard. There's lots more that can be said about this - some customer projects failed, but the reasons ran the gamut from tech to social/political/business reasons. It wasn't as simple as "blockchain is a scam", which is what Bray seems trying to imply here. There actually is a there, there. It's just really, really hard to solve these problems without a hype wave to coordinate and synchronize intent. [1] https://www.r3.com/case-studies/spunta/ https://www.r3.com/case-studies/spunta/
loudmax 4y ago
Rather than saying trust is expensive, I would express it as trust is precious. By analogy, sunlight and air are cheap, not expensive, even though we can't live without them. If either of these were in short supply they would become extremely expensive. But since they're abundant we don't normally dwell on their value. In a civilized society with a stable government, we take trust for granted. That's how society is able to build skyscrapers and shipping terminals and air travel. If society collectively loses trust in itself, we will lose these nice things. Trust is a feature of living in a liberal democracy. Autocracies may manage it too, but their historical record is questionable. So trust is precious, but I wouldn't express it as trust is expensive because it creates far more value than it costs.
buttersbrian 4y ago
Trust is arguably the most expensive thing in society. For those looking for a fun read about trust read some Francis Fukuyama.

asah 4y ago

Yes, and #include cost of military, courts and police ("guys with guns")

dale_glass 4y ago

Trust is expensive, lack of trust is even more so. Say, how would you build a skyscraper without trust? Are you going to set up an on-premises laboratory to test the quality of the concrete and steel? Are you going to personally verify the entire building's plans? Check whether the geological study was accurate? Follow every worker around to make sure they don't cut corners anywhere? The less you can trust that the many people involved did their job, the harder and more expensive it gets to actually get the work done, until it turns out it just can't be practically done. A lack of trust gets you a place like Afghanistan -- where the moment you stop looking stuff starts disappearing.

mike_hearn 4y ago
"you going to set up an on-premises laboratory to test the quality of the concrete and steel?" This isn't a good example because there are whole infrastructures to verify that buildings are being made "to code" and quality of materials is a part of that. E.g. this lab that tests steel: https://www.leica-microsystems.com/science-lab/steel-the-all-rounder-that-has-to-pass-many-tests/ https://www.leica-microsystems.com/science-lab/steel-the-all... Now what you're getting at is, OK, now you have to trust the lab. But that's OK because the incentives are better aligned. Trust is a thing with complex shapes. Maybe you develop trust in a single lab because being trusted is their whole business, and now you can easily switch between steel suppliers depending on who can sell the cheapest with peace of mind, so you've moved the trust problem around and reshaped it. A lot of trust problems in the business world are like this. You can't eliminate it entirely everywhere, but reducing the amount you need and reshaping it/moving it around is still useful.
- dale_glass 4y ago
  Yes, but even that is potentially troublesome. If you're in a low trust environment, then probably nobody trusts the labs either. Like, why do the labs exist? Because the building companies really, really wants to build a solid building but the concrete industry is oddly shady? Or because there's an official/unofficial requirement for it? If the second, you easily end up with labs that rubber stamp whatever you want them to. Trust in this sense is something that needs to be encouraged society-wide. You can patch imperfections, but there's a very real limit to how practical that is.
  - mike_hearn 4y ago
    There's not really such a thing as low trust/high trust society. That's an abstraction that sounds good but hides too much detail to be useful when discussing specific projects. You can't just encourage everyone to trust everyone else. To the extent developed countries can be described as "high trust", it's not because they are just magically more trusting. They get that way because there are extensive and mostly working mechanisms to find and penalize betrayals of trust. Corruption is low in the west because corrupt people get caught and punished, and because once the problem gets small enough people won't just blindly accept it but will make an effort to report it and ensure it's resolved (vs when it's endemic). Stuff like concrete mixing is commodity, lots of small firms scattered around the world. They compete on price and delivery time so there's a temptation to cut corners. Delivery time is easily understood and measured, so is price, if you can properly measure quality then you can switch between providers easily. The alternative is that someone fixes the trust issue another way, like a big centralized mega-brand or having to in-source everything, but that comes with bigger downsides.
    - robertlagrant 4y ago
      Perfectly put. Needed a comment as well as an upvote.
    - bloopernova 4y ago
      This comment helped me to put into words something I've been thinking about recently. Propaganda that erodes the concept of truth in a society also destroys trust. While a dictator may benefit in the short term from confused opposition, their erosion of truth deeply damages the society on which their power depends. That being said, I don't know how long a truth-optional trust-destroyed society can last. For instance North Korea, but I know nothing about how much corruption exists there. (Apologies for being off topic)
jacknews 4y ago
I think what you mean by trust here is just a thin layer over a vast system of enforced checks and balances. Materials standards, building codes, fair contract law, etc, etc, etc, and the courts and police to back it all up.
intrasight 4y ago
>Trust is expensive Trust is free. Trust plus verification plus enforcement is expensive. If all we needed was trust, we could save ourselves trillions per year. When our machine overlords arrive, we'll be able to get buy on trust alone ;)

mike_hearn 4y ago

You actually know something about the finance industry, not sure this is the thread for you ;) You're absolutely right about the core problem. I worked for several years on an 'enterprise blockchain' system. We often called it distributed ledger technology because our platform didn't actually use chains of blocks or proof of work, and it didn't have a token or anything like that. It was essentially a type of database but it had a lot of ideas from Bitcoin in it and was blockchainy enough that customers accepted it as such. I have to admit, at the very start I was skeptical about why so many large companies seemed to want this stuff. Like Tim, I also spent a lot of time talking to staff at these large institutions to understand where they were coming from. Unlike him I didn't work for AWS which is pretty much the exemplar of centralised infrastructure, so maybe it was easier to pick up on some of the more subtle issues involved. There are a few things to understand about businesses that decided they wanted blockchain: 1. They have complicated inter-firm communication and synchronization needs. 2. They solve those needs today via creating centralized trusted intermediaries (like CLS). This comes with a world of pain and problems like the obvious "too big to fail" issue that was exposed in 2008, but there's also a lot of less obvious problems, like these institutions immediately becoming stagnant rent seekers who don't innovate. 3. They exist in markets that lack obviously dominant players who can push things forward. Many people in the tech world don't understand this because we rely so heavily on a handful of ultra-profitable, ultra-huge tech firms that spend lots of treasure on giving out freebies and standards setting, but that's abnormal. So they heard about how Bitcoin can synchronize different companies view of a real financial object like a ledger without a SWIFT-like organization sitting in the middle, and thought "yes that sounds like what we need". And they're kind of right, as long as you think in terms of business problems rather than technology! "Blockchain" is a concept that works for them speaking in the purely abstract social sense because it acts as a neutral rallying point. If one company in a market observes that maybe having a giant specialized too-big-to-fail clearing house like CLS isn't the ideal way to solve atomic transactions, and they go to their partners saying "hey let's use this cool thing we designed" the answer will always be no because their partners will say, why should we empower our competitor? Blockchain as a concept is owned by nobody, and the core idea is that it empowers nobody, so it acted as an enabler for conversations that would otherwise never have happened. Whether the final result actually uses proof of work or even has blocks at all actually isn't so relevant except in the sense that business owners don't want to get ripped off by people lying to them about what they built. Tim Bray should really understand this dynamic better than most people because he created XML, which crops up in the enterprise space all over the place, often in ways that aren't really appropriate. Something like protobufs would have been a far better fit but they use XML. Why is that? Well, XML went through a massive hype wave ~20 years ago thanks to the W3C relentlessly pushing this vapourware "semantic web" concept, so for a brief period XML was the future of everything. Again, this created a socially acceptable rallying point at which complex inter-firm business problems could be solved in a relatively decentralized way. The tech got used regardless of merit simply because it was something everyone could agree on and unlike ASN.1 the protocols/tooling was free. Back to blockchain. The platform I designed for this use case (Corda) was a competitor of the DA platform used in ASX and has done relatively well in the market - it reached number 1 by number of projects using it and unlike the ASX case actually has real deployments that are actually decentralized. Over 90% of Italian banks are using it for inter-bank reconciliation! [1] There are other projects that use it too which seem to be working (I'm not involved in any of them directly and haven't worked on Corda for several years now). You never hear about them on HN because they're too Starship Enterprise to be interesting to the crowd here, but the idea that there are no working blockchain projects isn't actually true. We managed this partly by walking the tightrope between what people said they wanted (blockchain!) and what they were telling us they actually wanted in customer interviews (what we came to call distributed ledger technology). There was definitely a fair bit of overlap but not enough to just throw Ethereum at a problem and call it solved. What they really needed was a combination of better inter-firm messaging, signing/cryptography, atomic financial transactions without a CLS-style intermediary that actually takes custody of the assets, a robust identity framework, good developer support and training materials etc. Some of this can be found in blockchain related research like BFT algos, others were somewhat solved already, but blending them together into a coherent platform was hard. There's lots more that can be said about this - some customer projects failed, but the reasons ran the gamut from tech to social/political/business reasons. It wasn't as simple as "blockchain is a scam", which is what Bray seems trying to imply here. There actually is a there, there. It's just really, really hard to solve these problems without a hype wave to coordinate and synchronize intent. [1] https://www.r3.com/case-studies/spunta/ https://www.r3.com/case-studies/spunta/

loudmax 4y ago

Rather than saying trust is expensive, I would express it as trust is precious. By analogy, sunlight and air are cheap, not expensive, even though we can't live without them. If either of these were in short supply they would become extremely expensive. But since they're abundant we don't normally dwell on their value. In a civilized society with a stable government, we take trust for granted. That's how society is able to build skyscrapers and shipping terminals and air travel. If society collectively loses trust in itself, we will lose these nice things. Trust is a feature of living in a liberal democracy. Autocracies may manage it too, but their historical record is questionable. So trust is precious, but I wouldn't express it as trust is expensive because it creates far more value than it costs.

buttersbrian 4y ago

Trust is arguably the most expensive thing in society. For those looking for a fun read about trust read some Francis Fukuyama.