In business, trust is more important today than ever, especially when it comes to the relationships businesses build with clients, customers, employees, and all stakeholders. While many business owners may not realize it, trust is at the foundation of the survival and success of any business. Without trust, there cannot be a successful, sustainable business.
In this digital era, with the relationship between consumer and business often involving a long-distance, sight-unseen aspect, trust is more critical than ever before. Where consumers once were able to engage directly with shop owners and their employees, the rise of ecommerce has altered the way in which businesses conduct transactions, engage in dialogue, and maintain customer satisfaction. Thinking strategically about trust is critical in any type of relationship, but in business relationships, success is dependent upon a wider network of positive, trustworthy relationships and transactions.
What is the role of blockchain in developing trust in business?
Starting with a shared and distributed ledger, where the transactions are stored in vast and various places, this decentralization not only increases the speed of business transactions, but also the security of them. According to Don Tapscott, the co-founder of the Blockchain Research Institute, the blockchain is “a highly processed thing, sort of like a chicken McNugget and if you wanted to hack it, it would be like turning a chicken McNugget back into a chicken.” This increased processing makes blockchain a database that is virtually impossible to hack, and which could improve efficiency, transparency, and trust.
While the notion of shared public ledgers may not sound particularly profound or innovative, neither did double-entry book-keeping or joint-stock companies at one time. Similarly, blockchain is a deceptively mundane process that has the potential to completely transform how individuals and businesses collaborate and cooperate.
While this is great news for businesses interested in improving the transparency of their transactions, this is bad news for centralized institutions and bureaucracies like banks, clearing houses, and governmental authorities who were previously deemed the only ones sufficiently trustworthy to handle such transactions. Given the decline in trust in governments, blockchain technology could definitely be seen as a positive, especially for those organizations like Fr8 network and Nanovision, who are utilizing blockchain technology to revolutionize their respective industries with freight coin and health blockchain startups.
What about Bitcoin? While Bitcoin enthusiasts may be excited about the idea of a pure, digital currency disconnected from a central bank, the real innovation is not the digital coin itself, but the “trust machine” that mints them. Cryptocurrencies have a series of characteristics that make them stronger than most physical money-based currencies out there. Since everyone will be able to access the code behind the currency, everyone will also be able to ensure that no one is taking shortages that benefit themselves, implying a true democratization of monetary systems and embracing a revolutionary “trust machine.”
The attractiveness of this is significant in crypto’s financial growth and development, as it allows more than a narrow focus on payment systems due to blockchain’s ability to encode and store highly sensitive information and personal details through the use of smart contracts. These contracts allow peer-to-peer transactions that minimize the need for brokerage, reduce costs associated with middlemen, and increase the ease and efficiency of getting things accomplished, reducing the time of “settlement lags.”
Working relationships that have been built on trust have a distinct competitive advantage because trust is so valuable and so rare. The level of trust a business is able to achieve with his or her associates and consumers is contingent upon their perceptions of the business’s ability, honest, and integrity. Blockchain will be key to redefining and reestablishing such trust.
As Botsman indicated in the Wire, “How much should be pay to trust one another? In the past year, I’ve paid my bank interest and fees, some hidden, to verify accounts and balances so that I could make payments to strangers. I’ve spent thousands of dollars on lawyers to draw up contracts because I am not quite sure how another person will behave…It would seem we pay a lot for people to lord over our lives and double-check what’s happening.”
Blockchain ultimately challenges the need for these “trusted intermediaries” as part of our world; lawyer Aaron Kelly, who specializes in entrepreneurial and startup law, is just one of those intermediaries switching up strategies to accommodate the technological boom.
What are some ways blockchain and cryptocurrencies might improve the level of trust in your industry? Share your insights in the comments.