Unpacking the relevance of interpersonal trust in the blockchain era: Theory and experimental evidence

Abstract

Despite being proclaimed a “trust-free” technology, the link between blockchain and interpersonal trust remains understudied. By considering one of the most prominent use-cases of blockchain - smart contracts, we argue that the non-punitive nature of smart contracts may facilitate trustworthy behavior in human interaction by encouraging trustees to view themselves as internally motivated cooperators and to honor the trustor’s move that exceeds the encoded response. We test this argument through an online experiment in which the hallmark property of smart contracts—automated enforcement—is exploited. The results show that trustees in the experimental treatment return ten percentage points more than their counterparts in the trust treatment, thereby exhibiting a more trustworthy behavior. This experimental evidence shows that the presence of blockchain technology does not crowd out all properties of trusting behavior from human interactions.