Leviathan Smart Contract: Web3 Trust Theory Leviathan Smart Contract: Web3 Trust Theory

#DaoPoliticsS01 cover forklog
#DaoPoliticsS01 cover forklog

DAO Politics is a series of podcasts from ForkLog, in which we, together with invited experts, understand how decentralized autonomous organizations, and talk about their conceptual and technological foundations. In this issue, sociologist Pavel Stepantsov and I talk about how trust works in society and digital environments, whether social organization is possible without it, and what will happen to the institution of reputation in the Web3 world.

1. The question of trust is central to sociology. It was formulated by the American scientist Talcott Parsons, at the suggestion of which the Hobbesian problem came into scientific use. It sounds like this: how is social order possible? As we shall see, trust between people is an important part of solving this problem.

The philosopher Thomas Hobbes, who lived during the era of the English Revolution and observed the destruction of the usual social environment, came to the following conclusions in his work Leviathan, or Matter, Form and Power of the Church and Civil State (1651). People are bodies with carnal passions, but also possessing a mind. Thanks to him, a person understands that he wants to live in security and prosperity. But the presence of passions leads to the fact that one individual can never fully trust another. Therefore, in the natural – pre-civilian, pre-state – state, people live in the “war of all against all” mode. How can security be guaranteed if each of us has our own interests and goals? Hobbes’ answer is striking in its simplicity and paradoxicality.

He says that secure communication without the presence of external tools is impossible. Therefore, according to Hobbes, people delegate some of their natural rights, including the right to freedom and life, to the sovereign – a superhuman entity that arose as a result of a social contract. This entity is capable of coercion, as it is stronger than everyone and everyone. The sovereign may take the form of state power.

Thus, trust between people is possible due to the fact that there is a superhuman entity that acts as a guarantor of security due to the possibility of coercion. This idea was developed by Lorenz Kohlberg in his theory of the development of the moral subject and Talcott Parsons in the theory of social order.

Smart Contract for Leviathan: Trust Theory in Web3
Hobbes’ Leviathan as imagined by a 17th-century artist. Source: Wikimedia.

2. Trust is different. Sociologists distinguish three types:

  • interpersonal trust. It is based on the experience of communication with a specific person: a friend, a relative, a saleswoman from the nearest store. In such a case, no external validation is required;
  • institutional. Here, a person trusts a representative of an institution at the expense of the general reputation of social institutions, for example, state bodies. It is falling all over the world, but especially in Russia. Thus, during the coronavirus pandemic, Russians’ distrust of the healthcare system was revealed; in countries where it was traditionally high, this is observed to a lesser extent;
  • generalized trust. For example, to the territory. In an urban environment, this type of trust is especially pronounced. In the 2010s, parents of underage children were ready to send their child for a walk in the center of Moscow without supervision, although in their residential area they would not even let one go into the yard. And this is despite the fact that the objective indicators of crime within the boundaries of the Garden Ring are much higher than on the outskirts. This is how generalized trust in the “people in the center” is manifested. Another example is that a Harvard graduate generally trusts university people more. ivy leaguesthan others.

The era of modernity, industrialization is largely based on the latter type. In the post-industrial era, a class society is returning to us, based on a generalized trust in the representatives of your social stratum.

3. Organizations without trust are impossible. DAO participants do not trust each other, but the consensus mechanism. However, it is not perfect and, apparently, it cannot be. Therefore, no DAO will work without external, as in Hobbesian theory, mechanisms on which trust rests. In other words, for the functioning of the organization, a mechanism of coercion is needed that can be applied to its participants. So, for example, in traditional companies, shareholders can initiate a change in the board of directors if there are suspicions that they are not acting in the interests of stakeholders.

No interaction in conditions where trust is not provided by anything simply cannot exist. This is probably the unsolvable problem of the blockchain.

4. Behavior based on value for the group and humanity is based on rationality. It can be divided into two types:

  • formal rationality, which puts its own benefit at the forefront;
  • substantive, for which the priority is belonging to a certain group of people.

An example of substantive rationality is the issuance of interest-free loans by ethnic banks, where the value is shifted from one’s own benefit to the fulfillment of obligations to the community, the clan. This is one of the possible ways to develop DAO.

Smart Contract for Leviathan: Trust Theory in Web3
Hobbes’ Leviathan as Kandinsky 2.2.

5. The processes that are now observed in Web3 are similar to what happened in European society at the turn of the 19th-20th centuries. Rapidly growing cities were incomprehensible to new residents. This is what Web3 looks like now. As the German philosopher and sociologist Georg Simmel wrote, the city differs from the countryside in the number of people and the intensity of processes. You need to adapt to it, change your thinking in order to successfully interact with others in new conditions.

The city is anonymous. In it, you can afford to do what you would not dare to do in the village, where everything is in full view. The city is a space of formal rationality, orientation to one’s own benefit. In the village, on the contrary, one has to take into account many traditions and habits.

However, gradually the city refuses anonymity. In urban studies, it is customary to talk about the importance of urban communities: they are trying to create and develop them. Interestingly, Web3 also has a deanonymization request. We see a trend to distinguish between “correct”, “verified” and “incorrect”, “suspicious” wallets – these are elements of the institution of reputation. Perhaps in the future we will come to the conclusion that the main condition for trust will be the digital footprint of a person.

6. Smart contracts will not save you from irrational decisions. Such mechanics are a tool against fraud, which will invariably be, since agents are prone to risky and harmful actions for the organization at high economic risks. The code is not perfect, and the problem here is not technical, but social. Most often, a person is not and cannot be a specialist in all areas where he participates. The user does not read the smart contracts of the DAO he enters. Has the code been audited by an independent, reputable firm? Great, I’m in!

A new form of trust is emerging in institutions that sit above Web3 and are not part of a smart contract. People are irrational in their selective trust. Doesn’t a man vote for his country’s presidential candidate based on a marketing pamphlet with emotional slogans? A huge amount of sociological research shows that majority voting is not the best way to make a decision. But at the moment the only effective one.

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