Libertarian proponents of crypto currency and decentralized finance wish to create a trustless society. They wish to minimize the scope of trusted third-parties such as governments, banks and public insurance. The rewards are lower taxes and a greater control over one’s own fate. But what are the costs?
To trust somebody else is to outsource responsibility to them as well. The more I trust my employees, the less I am worried about what they are doing in their 8-hour shifts. The more I trust my public insurer, the less I am worried about my access to healthcare. The more I trust my bank to secure my savings in the local currency, the less I have to worry about its safe custody.
The alternative – to design a trustless society – may protect you from somebody else exploiting you. However, the onus now falls on your shoulders – to be your own bank, your own insurer, and your own police force. Do you trust yourself to do a good job on all those fronts?
By not trusting somebody else, you don’t live in a trustless society. You are merely trusting yourself with everything.
2 thoughts on “The illusion of a trustless society”
So which is good?
Both choices have their pros and cons.
Despite the bailouts after the financial crisis and with countries indiscriminately printing money, I still trust the traditional banking system with the majority of my assets. I do have a minimal amount stashed away in my ‘own’ bank though.
I think this debate is healthy. It’s great that governments now face stiff competition from cryptocurrencies and decentralized finance. However, it is important to not get carried away by either side.