I believe

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The old turnip farmer has fallen upon hard times. His wife has died and his crop has failed.
One day, a local merchant visits him and asks to borrow some turnips. The old fellow shrugs, rummages around in his sack, and produces a couple of dried-up, cankered tubers.
“It isn’t much,” says the old man.
“It’s just what I need,” says the merchant.
“Well, it’s all have. You needn’t borrow it,” the old man says, “you can just have it.”
The merchant thanks him and bids him good-day.
“What did you do that for, Dad?” asks the merchant’s daughter, when he returns home that evening. “You don’t even like turnips. And you are very wealthy. You could buy all the turnips you could want from the grocer down the road. Why impose your will on that poor old farmer?”
“Because now I am in his debt,” replied the merchant, “and he needs feel no shame to ask a favour of me.”

Credit
/ˈkrɛdɪt/ (v.)

A merchant’s ability obtain goods or services before payment, based on the provider’s trust that the merchant will subsequently pay for them. (From the Latin, credere, to believe.)

A feature, not a bug.

Trust is fundamental to every legal, political, and financial system that has ever existed. It is the one component of a prosperous polity that cannot be dissolved by technology. Trust converts the “single-round” prisoner’s dilemma — in which a rational homo economicus would, and therefore should, throw her co-conspirator under the bus — to the “iterated” prisoner’s dilemma, in which the longer term benefits of not doing that outweigh the undeniable headrush it would provide in short term if you did.

If you know you will a fellow merchant again, and go through this again — or even if you aren’t pretty sure you won’t, but can’t quite be sure — the rational thing to do is cooperate, at least as long as your co-conspirator does.

Trust is a moral imperative, not a legal one. It derives its power from the very fact that it is not backed by obligation. It is not a compulsion; it is a voluntary submission to the mercy of a third party in the hope of a reciprocal submission back. It is to make oneself vulnerable for the betterment of all. It explains the fable of the wealthy merchant who accosts the elderly pauper.

Other variations:

A gentleman’s word is his bond.

“I meant what I said, and I said what I meant. An elephant’s faithful one-hundred per cent.”

To trust someone is to take a risk.

Rules are a poor proxy for trust

Prevailing orthodoxy is to taxonomise, categorise, and eliminate every foible, variable, weakness, and risk, as you go, delimiting, boxing, reducing and bit-crushing risks down into their smallest components.

“By so isolating and atomising risks,” the orthodox are prone to say, “you eliminate them, you see.”

A great risk in the system is that posed by humans beings: all their inconstancy, unreliability, stupidity or mendacity. Thus, eliminating risk tends to be conflated with eliminating individuals, or at least the need to trust them. Hence, a millenarian yen to rid the present system of the need for trust, replacing it with rules and technology.

To be clear here: distributed ledgers do not reinforce trust between merchants: they eliminate the need for it.

So in the same way that rules, playbooks and policies override the judgment of and confidence in individuals using them — thereby deprecating those individuals and stunting their ability to connect on an emotional level — the will to eliminate trusted intermediaries in a distributed ledger system has the same fundamental shortcoming.

Trust is a feature, not a bug.

By way of analogy, converting a moral obligation to someone else (say, “pick your children up promptly at the conclusion of today’s kindergarten session”) into a financial one (if you arrive more than ten minutes after the session ends, you will be charged a late collection fee) has the same effect. Now there is a price on your time: I can pay for my delinquency without compunction.

Social relationships, friendships and emotional connections — which modernists view as irrelevant at best, or more likely indications of graft or nepotism in the system — in fact have a perfectly sensible role: they reinforce bonds of trust between participants.

Now to be sure: this may be unfair to outsiders who don’t have those connections or any way of making them — but the answer is to create opportunities for those at the margins, who might otherwise be disenfranchised (as they are systematically deprived of the opportunities to enter the market in favour of insiders) to build those social relations. For example: be imaginative about your hiring choices. Why do you reflexively hire from magic circle firms and Russell Group universities? but a decentralised ledger where no-one needs to trust others in the market is hardly a decent no substitute. You cannot banish bonds of trust.

The answer is not to prevent these activities, but create alternative structures which lower the barriers to entry into relations of trust for those without the necessary connections.

See also

• Debt: The First 5,000 Years
• Bitcoin is Venice