Trust is vital for any transaction, especially one that involves money. Money cannot move without trust. Neither can it exist.
Currently, with centralized systems, participants in a transaction need to trust each other or a third party for transactions to be successful. With blockchain, a decentralized system, things take a different route. The revolutionary technology introduces a trustless system.
This new technology does not require participants to know or trust each other for it to function. It also does not need a third party. The system has no single authority in control of everything. The consensus is achieved through the trust of the system.
Here are two incidences where trustless has been used in mainstream media:
“Why we need “Trustless” cryptocurrency exchanges.”
(Cointelegraph October 18, 2017)
“Trusted vs. Trustless: The role of trust in the means of exchange operation.”
(Hackernoon March 14, 2019)
Bitcoin, the first cryptocurrency, introduced the concept of trustless transactions way back in 2008, with blockchain technology powering the new wave of digital coins.
With blockchain, trustless systems have the potential to enhance or improve how people transact. People no longer have to put their trust in unreliable institutions and third parties.
How Trustless Systems Work
Contrary to popular belief, trustless systems do not completely eliminate trust. The systems simply distribute trust in an economy that incentivizes certain behaviors. What this means is that there is no single authority to trust fully but several people. Trust is minimized instead of getting eliminated.
For example, currently, most blockchains utilize proof-of-work algorithm consensus to add blocks to a blockchain, which is simply to verify transactions.
The proof-of-work concept requires miners to compete to solve complex mathematical problems, with the first miner to solve the problem getting rewarded. The rewards are the incentives for good behavior while operating in a trustless system.
Centralized vs. Decentralized Systems
Centralized systems are systems that require trust. They are what many people have been using and still use to date. Almost all financial systems are currently centralized.
Most people have faith in centralized systems because they have stood the test of time. This is even though they are plagued with a lot of problems. Some of the problems plaguing centralized systems include a single point of failure, system attacks, and hacks. They are also quite slow and prone to errors.
Decentralized systems maybe still new in some people’s eyes but continue to prove more effective than centralized systems. With a trustless system, some of the problems that plague centralized systems disappear. For example, people no longer have to worry about hacks or system attacks.
Furthermore, a trustless system enhances the speed and efficiency of conducting business. Without third parties, people have direct means of transactions. People also don’t have to worry about high transactional fees.
Trustless systems might still be new, but they are quickly picking up pace as they continue to prove to be the best solution to problems that have crippled centralized systems. More and more people, organizations, institutions, and businesses are transitioning to trustless systems, and the future seems bright.