Can blockchain technology build trust?

Amidst the ongoing war in Ukraine, questions of trust continue to burden the world: Will NATO allies prove faithful? Will economic and military partners comply with treaty obligations? Do the negotiating parties have good intentions in peace talks? Trust is at the heart of international politics. It is central to the trust citizens have in their leaders, and to the faith 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 movement, transactions and interactions of users and goods in the network domain. It can be a powerful tool to increase trust in international cooperation through its reliability, decentralization and transparency.

THE IMPORTANCE OF TRUST

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

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

Since the start of the pandemic, China has lost confidence in its role in global supply chains, especially for medicine and medical equipment. China has also lost global trust due to its lack of intellectual property protection. In response to concerns about intellectual property rights, the United States imposed a series of bans on telecom equipment made by Chinese companies such as Huawei and ZTE, resulting in huge losses 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 to a zone of trust,” Park said, South Korea should adopt a “policy of trust.”

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

BLOCKCHAIN’S POTENTIAL FOR DIPLOMACY

Blockchain can contribute to the politics of trust in international relations because of the transparency tools built into the technology. Blockchain works differently than traditional bookkeeping and record keeping databases because it timestamps and hashes each transaction along with past information to build a chain of blocks of information, which are recorded by multiple decentralized parties in the network, so it is nearly impossible to surreptitiously delete or tamper with the history of the database.

Blockchain’s reliability means that nations can 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 are automatically written and distributed among all participants in the network. This decentralization makes the blockchain politically agnostic, giving it a level of authority to govern public behavior and exchange.

The shared accountability and built-in protocols of the technology can also eliminate large transaction costs and bypass middlemen found in privatized banking and communications chains. And blockchain can disrupt patterns of distrust in contract enforcement due to human error or dishonesty with smart contracts, which are self-executing digital contracts based on pre-designed agreements. Smart contracts can facilitate complex interactions and impose automatic contract guarantees, which can contribute 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 sea transport and secure food supplies. Blockchains can also be extended to international governance, with mechanisms to manage energy supplies, support arms control and enforce wartime sanctions.

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

Blockchain’s technical design will be crucial to ensure effective implementation in international governance. Its design should include decisions about how parties are granted access to the network, what computer algorithm will be used to achieve consensus, and how the blockchain is interconnected 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 support is available from experts, research institutions and companies such as IBM and Oracle.

If implemented correctly, blockchain can help build trust by establishing a clear record of behavior and exchanges between global parties. It can confirm and enforce trade policies, promote global cooperation and simplify sanctions verification steps. Blockchain technology is an important new tool for advancing international trust policy, and global leaders should use it.

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.

Yu Amy Xia is affiliated faculty at the Global Research Institute and 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.