Trust Asymmetry

In the traditional financial system, players profited from information asymmetries. In the blockchain financial system, they profit from trust asymmetries.Transactions are a flow, trust is a stock. Even if the information asymmetries across the medium of exchange are close to zero (as it is expected in a decentralized financial system), there exists a “trust imbalance”. There are different levels of trust among trustful parties: naturally, a merchant will trust a local broker more than its foreign counterparty. In the middle, there is no need to trust a bank, a correspondent bank, or even a government. People pursue their own self-interest: miners will verify transactions while it is profitable to do so, and over-the-counter exchanges will offramp to fiat as long as there is demand. And, whoever can level-up trust provides a valuable financial intermediation service — at least until the system becomes mature. This fluid dynamic follows Hayek's concept of monetary policy: “What we find is rather a continuum in which objects of various degrees of liquidity, or with values which can fluctuate independently of each other, shade into each other in the degree to which they function as money”. The financial flows modeling is rendered using Fields Finance (e.g. information theory and vector fields) and the socio-technical modeling of mass and information flow follows Forrester's System Dynamics methodology. Since the levels of trust are computed from the rates of information flows (attention and transactions), at the end, trust asymmetries are just a particular case of information asymmetries.

Trust Asymmetry (November 17, 2017). Available at SSRN: https://ssrn.com/abstract=3073410. DOI: 10.22541/au.151979448.82088697
November 17, 2017

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Sources: Available at SSRN: https://ssrn.com/abstract=3073410. 

DOI: 10.22541/au.151979448.82088697