“The way to make people trust-worthy is to trust them” – Ernest Hemingway (1899 –1961)
In this second blog article, I wanted to talk about trust. Specifically, how trust can be enhanced while still adhering to the core concepts of decentralized payments on the marketplace.
The Need for Trust.
In 1953, Ernest Hemingway wrote the above quote in a letter to Dorothy Connable to warn her about people he trusted who had exposed his private life. It is true that trust-worthiness is not an innate property of social interactions – trust feeds itself. To build it, we usually need time and consensus, not necessarily unanimous, not even majoritarian but the longer, the stronger, the better.
When ordering goods online, we usually make a payment and trust that these goods will be delivered to us. To build trust with the merchant, we may have read reviews and ratings (reinforcing via consensus), maybe we have known them for a long time or are just confident that the protocol and purchase agreement has us covered in case of non-delivery.
Similarly, to acquire assets issued on the Stellar network, we must first establish trust with the issuer, specifically in his/her capacity to honor a redemption request (i.e. if we hold USD, we expect the tokens to be redeemed for fiat at some point).
That virtuous circle of trust may be impracticable to boot in an open marketplace environment as assets and issuers are often transients. How can trust be enhanced so that merchants and buyers are more likely to engage in transactions on the marketplace?
Booting the Virtuous Circle of Trust.
Aiming to develop a platform where currencies are used as a medium of exchange for goods and services where everyone can participate poses many challenges and transience, as explained above, may be the biggest issue for irregular and/or new merchants. Luckily, several options are available for immediately improving buyers’ trust:
Using Stellar Protocol
All merchants are encouraged to set a home domain (recorded on the blockchain) against their account and use a toml file to provide principal contact details, assets information and general conditions.
Since Litemint performs automatic lookup on assets, merchants following the Stellar protocol automatically benefit by having their offer listings flagged as verified on the marketplace. Additional links are also provided to buyers so they can perform due diligence.
This method is a convenient way to reduce the transience of merchant offers and strengthen initial buyer trust.
Follow this official Stellar link for more information about the process. Merchant Hubs are also encouraged to provide tools for merchants to facilitate their home domain setup.
Using Merchant Hubs
Merchant hubs primarily aim to offer B2B and global federation services to merchants.
It is important to note that merchant hubs are not expected to hold transaction funds and intervene during the payment between the buyer and the seller – payments shall remain decentralized.
Although optional, merchants may decide to join these hubs to also increase their buyers trust. Effectively, as hubs are more permanent in nature, they can be used for growing trust by providing, for example, reputation and verification services or even, assuring buyer protection by requiring merchant guarantees.
Whether they operate on vertical sectors or remain generic, merchant hubs create interesting opportunities for businesses and merchants alike while providing an additional layer of trust to buyers.
Other expected B2B services from merchant hubs are exposure boost, listing management (e.g. automatic price conversion) and federation lookup for merchant accounts.
Further information will be provided on merchant hubs in the coming articles so stay tuned!
It is not possible to entirely remove trust from our social interactions. Even blockchains are not trustless as we simply trust that the majority is right, we trust distribution and software as well. Technically, we also consensually assume the computational complexity of the Elliptic Curve Discrete Logarithm Problem (ECDLP) which has never been proven. It is always as a social group that we implement the protocols and safeguard for trust.
As final reminder, Ernest Hemingway added that Dorothy Connable should be “a little bit careful” in dealing with trust. In the blockchain world too we have that mantra “Don’t trust, verify”.
Always trade safely!
Founder at Litemint. Developer with 10+ years of experience working for financial firms BGC Partners and Crédit Lyonnais Bank (Crédit Agricole) in London and Paris. Honorable Mention Prize Winner at the 2014 Linux Foundation & Samsung Tizen App Challenge. Co-founder of Israeli-based video game company Massive Games. Founder of award-winning UK-based studio Okijin and Magnetwork.