October 1, 2022
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Can Blockchain Technology Build Trust?

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Amid the ongoing war in Ukraine, questions of trust continue to burden the world: Will NATO allies prove faithful? Will economic and military partners adhere to treaty commitments? In peace talks, do negotiating parties have good intentions? Trust is at the core of international politics. It is central to the confidence that citizens have in their leaders, and to the faith that leaders have in their own judgments, policies, and abilities. Trust is hard to earn and even harder to maintain. 

In a world rife with conflict, as global leaders seek to build and secure trust, blockchain technology offers an innovative and valuable tool to increase transparency in international cooperation. Blockchain creates a distributed ledger, which is a database that different users share in a transparent and egalitarian way that records all the movement, transactions, and interactions of users and goods in its network domain. It could be a powerful tool to increase trust in international cooperation through its reliability, decentralization, and transparency.  

THE IMPORTANCE OF TRUST

“Trustpolitik” is a system of politics based on the consideration of trust between countries and interactors. Trustpolitik is all around us, and when trust breaks down, so does peace. The latest round of ceasefire negotiations between Ukraine and Russia stalled amid doubts that Russia was not serious. Russian officials have given inconsistent statements about Moscow’s aims, prospects for a cease-fire, and ultimately for peace. And so, war rages on. 

Blockchain’s reliability means nations could come to the negotiating table based on a common set of facts and information. If properly implemented, blockchain can help build trust by establishing a clear record of behavior and exchange among global parties.

Since the start of the pandemic, China has lost trust in its role in global supply chains, in particular for medicine and medical devices. China has also lost global trust due to its shortfalls in intellectual property protection. In response to intellectual property concerns, the United States placed a series of bans on telecom equipment made by Chinese companies like Huawei and ZTE, resulting in a tremendous loss for the related businesses. 

In 2011, South Korea’s then-President Park Geun-hye wrote that a lack of trust has long undermined attempts at genuine reconciliation between North and South Korea. To “transform the Korean Peninsula from a zone of conflict into a zone of trust,” Park said, South Korea should adopt a policy of “trustpolitik.” 

And issues of trust have always been a part of the politics of nuclear weapons. Skeptics of the Iran Nuclear Deal argue that Iran cannot be trusted to respect a revived nuclear deal. In March, talks to revive the deal paused amid US concerns about Iran’s undeclared nuclear material and activities. Current issues over nuclear proliferation are reminiscent of older debates over trust between the United States and the Soviet Union. In discussions about nuclear disarmament, President Ronald Reagan often said, “trust but verify.” Blockchain verifies.

THE POTENTIAL OF BLOCKCHAIN FOR DIPLOMACY

Blockchain can help contribute to trustpolitik in international relations because of the transparency tools built into the technology. Blockchain works differently than traditional databases for bookkeeping and record-keeping because it time-stamps and hashes every transaction along with the previous information to build a chain of blocks of information, which is recorded by multiple decentralized parties in the network, so it is almost impossible to surreptitiously delete or tamper with the history of the database.

Blockchain’s reliability means nations could come to the negotiating table based on a common set of facts and information. Blockchain records are not owned or designed by a single organization, but written automatically and distributed among all participants of the network. This decentralization makes blockchain politically agnostic, giving it a level of authority to govern public behavior and exchanges. 

The shared accountability and the embedded protocols of the technology also could eliminate large transactional overhead costs and sidestep middlemen that exist in privatized banking and communications chains. And blockchain can disrupt patterns of mistrust in contract execution due to human error or dishonesty with smart contracts, which are self-executing digital contracts that are based on pre-designed agreements. Smart contracts could facilitate complex interactions and impose automatic contract guarantees, contributing to greater trust in transactions.

Blockchain has gained recognition for its applications in cryptocurrency and financial markets. But it has also been developed to secure voting in elections in Brazil, manage nuclear material in Finland, facilitate ocean transport, and ensure food supplies. Blockchains could be extended to international governance as well, with mechanisms to manage energy supplies, support arms control, and enforce wartime sanctions.

Any institution can design and initiate blockchains to reinforce international cooperation. For example, the US Treasury could build a blockchain with businesses around the world to monitor sanctions, and the European Union could establish a blockchain with energy companies to manage oil supplies.

Blockchain’s technical design will be essential to ensure effective implementation in international governance. Its design should include the decisions on how parties are granted access to the network, which computer algorithm should be used to achieve consensus, and how the blockchain is connected with other systems. Successful blockchains should be created with the consensus of all parties in the network. Today policymakers have a diverse set of options when designing blockchains for global governance to meet their specific requirements. Technology supports are available from experts, research institutions, and companies such as IBM and Oracle.

If properly implemented, blockchain can help build trust by establishing a clear record of behavior and exchange among global parties. It can affirm and enforce trade policies, promote global cooperation, and simplify the steps of sanction verification. Blockchain technology is an important new tool for the promotion of international trustpolitik and global leaders should use it. 

Yu Amy Xia is a faculty affiliate at the Global Research Institute and a professor of business at William & Mary’s Raymond A. Mason School of Business. Her research interests include contract design, risk management and new technology in supply-chain management.

Nitya Labh is the incoming James C. Gaither Fellow at the Carnegie Endowment for International Peace. She is a research assistant in William & Mary’s Blockchain Lab.





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