Disintermediation

Problems

Technologies that cut out intermediaries shake up the status quo and thus sometimes inspire fear.

• Firms that serve as intermediaries might fear losing customers.
• Agencies like the SEC might fear that a disintermediated world is not regulatable because so many rules assume the presence of intermediaries whose conduct can be directed and held to account.
• Law-enforcement agencies that rely on centralized intermediaries for information about their customers’ involvement in potential crimes might fear that they will not be able to protect the public in a disintermediated world.

Example

Telephone Operators

Commissioner Hester Peirce’s 2025 speech at the Science of Blockchain Conference offers a vivid metaphor for disintermediation, using the decline of telephone operators as a historical parallel to today’s cryptographic revolution.

1. The Telephone Operator Analogy**
   1. **Human intermediaries** once connected calls manually, often knowing the caller personally.
   2. This introduced **privacy friction**—especially for sensitive conversations.
   3. **Automated switching systems** replaced operators, offering:
      1. Greater confidentiality
      2. User autonomy
      3. Scalable infrastructure
2. Modern Disintermediation via Cryptography**

Peirce draws a direct line from that shift to today’s digital transformation:

1. **Zero-Knowledge Proofs**: Verify facts without revealing underlying data.
2. **Smart Contracts**: Automate agreements without centralized enforcement.
3. **Public Blockchains**: Enable transparent, tamper-resistant coordination.

These technologies allow for **disintermediated transmission of value and information**, echoing the benefits of automated dialing but applied to finance, identity, and governance.

Identifier Management

• Just as operators were replaced by **automated systems**, centralized identity brokers can be replaced by **verifiable credentials**, **decentralized identifiers**, and **context-aware access protocols**.
• The goal: **minimize unnecessary intermediaries** while preserving **accountability**, **privacy**, and **ethical agency**.