An environment where there is no centralized authority.
A trustless system requires no parties to know one another or trust one another. The concept of trustlessness is considered the bedrock of cryptocurrencies. It was first introduced first by Bitcoin, the flagship and first cryptocurrency that was created. This is because BTC enabled all transactional data to be verified and stored on a blockchain, the distributed ledger technology behind cryptocurrencies.
Trustless systems enable participants to carry out transactions in a peer-to-peer (P2P) setting. It enables individuals to place trust in abstract concepts rather than in people.
Trustless systems are the opposite of centralized systems, such as banks. This is because traditional financial services involve using an authority to verify data and make decisions. Centralized systems are considered vulnerable to theft and hacks. There is also the possibility of data being altered or manipulated. It doesn’t mean that cryptocurrencies cannot be hacked — however, the decentralized nature of cryptocurrencies and the ability to not have to place trust under a central body is often touted as one of the biggest strengths of crypto assets.
Centralized systems are undoubtedly more popular than decentralized systems. But one key advantage trustless systems have over decentralized systems is that they can completely be governed by a computer code.
Bitcoin and Proof-of-Work blockchains try to secure trustlessness by offering rewards and economic incentives for solving problems. Maintaining network security is often rewarded with monetary incentives. This is done by distributing trust through several participants. This way, blockchain is usually considered immune to major hacks, and single points of failure are typically eliminated.
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