The document discusses how to build trust in blockchain systems. It analyzes that blockchain claims to replace trust with technology, but verification does not equal trust. Trust is a psychological concept not digitized. Blockchain is one of four trust-building systems including morals, reputation, institutions, and security. Public blockchains rely solely on security and have high costs, while consortium blockchains that integrate institutions may achieve the expected level of trust. The public sector is best suited to introduce rules and laws to blockchain to realize trust between public and private sectors.

1. How to build a trusted blockchain system
Page: 1
How to build a trusted blockchain system
He has written some textbook grade such as Applied Cryptography, and
Bruce Schneier, a well-known American information security technologist who
teaches at Harvard University's Kennedy School, recently published a long
article in Wired magazine, the value of blockchain technology is strongly
questioned from the perspective of trust an security. The article points out that
blockchain technology claims to replace trust with available technology, but in
fact the verification made by the blockchain is not equal to trust and has
caused widespread debate among the parties.
In fact, the late US President Reagan once said: "Trust, but verify." Trust does
not mean verification, but verification is the practice that human society uses
to replace trust. Trust has always been a psychological issue, and trust has
never been digitized.
In the article, the author discusses four systems of trust building in human
society, namely, morals, reputation, institutions, and security systems. The
author believes that the these four systems work together to incentive
trustworthy behavior of human society. In the article, the author also
mentioned credit card system is a good example of the so-called
"intermediary trust." Intermediary trust is one of the four different “trust
structures” outlined in another book, Blockchain and the New Architecture of
Trust, because credit cards allow untrusting buyers and sellers to engage in
commerce. The author believes what blockchain does is shift some of the
trust in people and institutions to trust in technology.
Personally, blockchain technology is a technology that uses consensus
algorithms and some security technologies. However, the credit card system
is also a system product derived from technology, and the credit card system
is not equal to trust. People accept credit card systems not because they trust
the system, at least when the credit card was first released. People started
using credit cards based on applications derived from credit card-related
technologies. Moreover, the credit card system is not perfect, and this system
has been improving. Blockchain is also a technology that is only one of the
four systems of trust building that does not eliminate the human needs of trust
in morals, reputation, and institutions.

2. How to build a trusted blockchain system
Page: 2
The article uses credit cards and e-wallets as examples to illustrate that if an
e-wallet is invaded by a hacker, the user will lose all the money. This does not
seem to be a proper example, because individuals must obtain credit cards
through institutions, but in the current situation, on many blockchain systems,
individuals can build their own electronic wallets. In addition, is the e-wallet
privately owned or institutionally issued and regulated?
Just like private property, everyone must protect their own private property. If
the cost of protection is too high, or it is difficult to ensure safety, this is the
reason and function of institutions to enhance the protection of private
property. In the future, people may be willing to accept the use of electronic
wallets established and regulated by institutions in the blockchain system.
The author believes that the cost of blockchain trust is very high, personally
think that because the initial blockchain technology wants to establish a
system that is completely private and can be used openly, fairly, fairly and
safely. We should seriously face to the high cost problem of this ideal.
In the article, the blockchain is divided into two categories: public chain and
private chain. The three basic elements of the public blockchain are pointed
out: distributed ledger, consensus algorithm and cryptocurrency.
If all three elements of a public blockchain fit together as a single network that
offers new security properties, is it good for anything? The answer is of course
not. It is good to use it properly. It is not good to use it inappropriately. Human
society seems to never have a so-called perfect system. Even if humans
imitate the ecosystem of nature, it is difficult to be perfect. The author is
completely uninterested in some private chains that only use blockchain data
structures but do not have the above three elements.
Perhaps these three elements show the obvious characteristics of blockchain
technology with Bitcoin as the first application, but does anyone really like to
back up and store the entire system's transaction records (distributed ledger)?
The requirement of storage space, as well as the mining to maintain
consensus algorithms in the operation of blockchain systems, is the reason
for the high cost mentioned by the author. Mining is in fact an endless
decryption operation, coupled with the distributed nature, the requirement of

3. How to build a trusted blockchain system
Page: 3
network bandwidth and computing power can not be underestimated.
The design of cryptocurrency, used in bitcoin, seems to be more like Satoshi
Nakamoto's demonstration and promotion of blockchain technology, making
blockchain technology a friendly technology that people can personally touch
and use. One of the functional characteristics of cryptocurrency is that the
settlement can be made quickly and accurately. This cryptocurrency works in
a similar way to casino chips.
Everyone who enters Las Vegas casinos has to exchange their gambling
funds into chips. The casino is responsible for protecting the physical and
financial safety of the customers. They don’t care how the customers use the
chips. When the customer leaves the casino, immediately cash based on the
chips held by the customer.
Blockchain’s transaction makes each transaction safe by encrypting both
parties to the transaction and the transaction process. Through the consensus
algorithm, the transaction and the ledger can be made public, fair and just,
and there is no need to verify historical transactions again at the time of
settlement.
What if the blockchain transaction does not use cryptocurrency? There are
no special differences. The blockchain system works much like a source code
version control system used in software engineering to track down all past
changes to a source code. Therefore, it is proposed to apply blockchain
technology to agricultural resources. But some people will ask, if there is no
cryptocurrency, how can the miners who maintain the consensus algorithm
get reasonable reward? This is a problem, but there are some blockchain
systems that are suitable for commercial operations. The maintenance of
consensus algorithms no longer uses mining and reduces the cost of
operations.
Understand the characteristics of blockchain technology, blockchain
technology will be interesting and easy to use as long as the application
scenario is appropriate. Blockchain technology is known as FinTech and has
also been talked for so many years, but the financial industry is not widely
deployed and applied. The main reason is because the blockchain is a
technology, and any industry that deploys new technologies is a huge

4. How to build a trusted blockchain system
Page: 4
investment. The problem is that blockchain technology is an innovation in
system technology, not a change in interface technology.
The so-called interface technology, such as credit card, third-party payment or
mobile payment, changes in the payment operation interface is most
sensation to the user. System technology changes, like a bank to replace the
internal system by IBM, Microsoft, or Alibaba, what is the relationship with
users?
This should be the reason why Intel used to promote "Intel Inside".
Customers buy a computer or notebook, the most direct feeling is the
operating system, discussing the hardware requirements of Windows or Linux
systems, it is difficult to compete with the system software manufacturers to
seize the dominance of personal computer specifications, how can Intel not
get angry!
After spending tens of millions of dollars to change the system based on
blockchain technology, can the operator charge from users? The answer is
negative. For more fees, there must be new applications.
What kind of new application can charge customers and can charge more?
Look at Alibaba's double eleven, the ability of payment to reach 256,000
transactions per second, and Bitcoin only 7 transactions per second. It seems
that there is a certain degree of difficulty to replace the current financial
system with a blockchain system, which is also a real barrier.
What are the insecure problems in the systems currently used in the financial
industry? Of course, it's not safe enough. According to the discussion in the
article, the trust established through the four systems is generally accepted,
and according to the author Bruce Schneier, blockchain technology is not
safe! After all, they are all existing security technologies, and so far no
security technology is completely safe. So the author asks "Do we have to
trust the blockchain?"
Why is trust built through the four systems trustworthy even if it is based on
the same security technology? The difference is because the blockchain
system has no morals, reputation and institutions? If this is the reason, it
would be nice to integrate morals, reputation and institutions into the

5. How to build a trusted blockchain system
Page: 5
blockchain. The blockchain system that cannot be integrated into these three
systems is a public blockchain system. Based on the public traits, the mining
transaction costs of public blockchains and the maintenance costs of public
accounts are very high, transactions, ledgers and e-wallets can only be
protected by security technology, which is indeed a big problem.
On the contrary, the private blockchain that the author is completely
uninterested in, integrates into the characteristics of the institutions, and
expands the scale to a consortium blockchain, can it be trusted?
It seems the problem is still in application. Which application scenarios require
the characteristics of blockchain technology? What do financial companies
claim to invest in blockchain technology? What new applications can bring
new profits to the industry?
As the author mentioned in the article, the operation cost of public blockchain
is high, and just can rely on security technology to support trust, just like the
operation of bitcoin, the system has a problem, and the user is almost crying.
But the consortium blockchain seems to have the opportunity to reach the
level of trust that the author expects. The author's institutions contain rules
and laws. What kind of institution is the easiest to introduce rules and laws?
Public sector.
In other words, the official is the most suitable unit to refer to the blockchain
technology. Through the use of the public sector, the private sector systems
can easily access and use the blockchain system. Through the realization of
trust, the blockchain system can create new profits for the public and private
sectors can also achieve the goal of serving the people.
Although the development of blockchain technology was originally intended to
create a commercial transaction system that does not require government and
management mechanisms, the author reminds us that without the
management mechanism of the public sector, the data that the blockchain
system can trust is not always valid before the law. How much trust can the
morals and reputation of private enterprises (eg IBM /Maersk) can achieve?
Just like a patent application, if you want to obtain a national or international
patent license, the certification of a private enterprise is difficult to implement
effectively. The human world is just like security technology, not perfect.

6. How to build a trusted blockchain system
Page: 6