Bitcoin Does Not Remove Trust, It Moves It

Talk to a Bitcoin enthusiast for long enough and you will hear a sentence of this shape: Bitcoin does not require trust. You just need to look at the algorithm.

I have written before about what the advocacy leaves out. This post is about that one sentence, because it is wrong in three separate ways, and each of them is instructive about how trust actually works.

Nobody Looks at the Algorithm

Start with the literal claim. Most people have never looked at the algorithm and never will. That is not a criticism of them; it is how human beings acquire confidence in anything.

Nobody boards an aircraft because they understand Bernoulli's principle. Most of the passengers on your next flight have not heard of it. They fly because they have watched flying work for other people, because there is a regulator whose job is to ground unsafe aircraft, because the manufacturer has an obvious incentive not to kill its customers, and because the airline trains its pilots. Each of those is a piece of trust in an institution or an incentive, and the passenger's confidence is the sum of them.

That is how trust is built: by watching it work for others and by relying on institutions whose incentives you can read. Verifying the mathematics yourself is available to a vanishingly small minority with the training to do it. When that minority is made up of respected scholars and engineers, it spreads its confidence to everyone else through blogs, interviews and, not least, by visibly buying in. Which is a social process, exactly like every other one. Notice how far that is from "just look at the algorithm."

A Perfect Algorithm Still Needs Trust

Grant, for the sake of argument, that the algorithm is flawless. Does that mean no trust is needed?

Unpack what the sentence actually means when the enthusiast says it. It means: you do not need to trust a government that issues money and can print more of it, because nobody can print Bitcoin. Fine. That is one specific trust removed. Nobody can debase your coins by fiat.

But money is only money if other people will take it. So you now need to trust that a great many other people trust Bitcoin, and will go on trusting it. The proof of that trust is use: if the group using it is small, I cannot buy groceries with it, I cannot be paid in it, and that discourages me from holding it. My hesitation is not about the code. It is about my lack of confidence that other people are confident, which is trust of the most ordinary kind, pointed at a crowd instead of at a central bank.

You have not removed the trust. You have moved it from one counterparty you can name to millions you cannot. Whether that is an improvement is a real question, but it is not the question the sentence pretends to have settled.

And You Still Have to Trust the Government

The third layer is the one enthusiasts least like to hear.

Suppose I want to put my savings into Bitcoin. Governments can tax it punitively. They can instruct banks to have nothing to do with exchanges. They can declare exchanges illegal. They can, in the extreme, lean on internet providers to interfere with the protocol. I am not claiming any government will do these things; the probability is low. But it is not zero, and a person moving a life's savings needs quite a high confidence that it will not happen.

That confidence is trust in how an institution will behave in the future, which is precisely the kind of trust Bitcoin was advertised as making unnecessary. The design does not remove the government from the picture. It changes the government from the issuer of your money into a party that can hurt your money, and you must still form a view about its intentions.

Why the Sentence Survives

If it is wrong three times over, why is it repeated so often?

Because it flatters a particular self-image: the person who trusts nothing and verifies everything. That is not a person who exists. Everyone who holds Bitcoin is trusting the people who did look at the code, the crowd that gives it a price, and the states that permit it to be traded. They have simply stopped noticing, because the trust is diffuse and the old trust was concentrated in one visible building.

The honest version of the claim is smaller and defensible: Bitcoin replaces trust in a single issuer with trust in a protocol, a community and the forbearance of governments. Say that, and the argument about whether it is a good trade can begin. Say "no trust required," and you have told me you have not thought about what trust is.