Deductive Certainty? Exploring the Boundaries of Trust Formation in Smart Contracts on Blockchains

We offer a new perspective on trust formation in smart contracts on blockchain that is based on deduction rather than induction. This shift in perspective allows us to explore the boundaries of trust in IT systems, analyze the conditions under which trust becomes dispensable, and unpack the sociotechnical complexity of supposedly “trust-free” systems. Through this approach, we introduce three key concepts: deductive certainty, a state in which an individual has full knowledge of the other party’s future behavior based on deduction; the possibility of deductive certainty that an IT system may provide; and deduction-related trust, a new type of trust rooted in the possibility of deductive certainty. We use these concepts to analyze smart contracts on a blockchain as a technology that offers the potential for deductive certainty by enabling complete deduction. Our analysis reveals the conditions under which smart contract-based applications, also known as dApps, can become “trust-free” and why, in practice, they often are not. Based on a sample of 536 dApps and a user survey, we provide evidence supporting our theoretical claims. Our findings suggest that the possibility of deductive certainty plays a significant role in forming initial trust in dApps. However, we also find that new users rely on both deduction-related trust and classical inductive trust, with the two sources of trust reinforcing each other.