12 December 2022

Understanding the role of Trust in Web3

It is winter in the northern hemisphere, and also it is winter in web3. The usual cycle of cryptocurrency is that of busts and booms, but this low cycle, or “winter” as it’s commonly called, has been more brutal because the lows have been really low. I am talking about the collapse of Celsius, Luna, and FTX to name a few. The impact of these failures has been a deserved loss of trust in the cryptocurrency space by the main-stream audience.

I want to take this moment and unpack the role of trust in our ecosystem. To do that we need to talk about the layers that make up the system. The first layer, layer-0, is the human layer. Layer-0 consists of all the builders who build the technology that makes up the system. The next layer is layer-1, which holds the base layers of the blockchain and deals with infrastructure that makes everything in cryptocurrency space work. Examples of technologies in layer-1 are blockchains like Ethereum, Bitcoin, Solana and so on. Then there is layer-2, not to be confused with the infrastructure technology to scale base layer chains like Optimism or Arbitrum. Layer-2 in our context is where the applications that humans interact with live.

All these layers work together in a decentralized, open, manner. It means that web3 is an open-source community made up of groups of strangers who are loosely connected, working together in public with mixed-motivations. And because money is a major component of how the web3 community interacts, the opportunity to defraud is high. At layer-1, this problem has been solved by building incentives to prevent malicious behavior, for example proof of stake on Ethereum. This is why web3 is considered the trustless web, because at the base layer it is trustless.

The challenge of trust in web3 is at layer-0 and layer-2. At layer-0, there is no algorithmic way to access the true intent of a person. But at layer-2, the application layer, there is a solution: the creation of a reputation mechanism. Without such a mechanism in place, a decentralized system fosters an environment that is rife with the twin evils of fraud and coordination problems.

Enter Fimio. At Fimio, creating a coordinated reputation mechanism is where we shine. We focus exclusively on building trust-enhancing tools for the application layer. In our upcoming release, we will be launching an API that will provide a trust score for smart contracts on the Ethereum chain. At release developers will immediately be able to integrate the Fimio API into their products in multiple ways, but we are looking forward to working with builders on additional uses as well. A trust-enhancing API for web3–it’s not just exciting, we believe it’s necessary.

Overall, trust is a crucial factor in the success of the blockchain and cryptocurrency ecosystem. By building and implementing these trust enhancing products, we at Fimio can help to create a more secure and accessible network for all.

Collect this blog post as an NFT.