Why Is Blockchain Trustless?
As discussed in the previous section, blockchain technology provides a spectrum of revolutionary benefits. When combined, these values of security, decentralization, privacy and transparency offer the most profound quality of blockchain: trustlessness - a model that does not require trust to safely interact and transact.
Trust is, and has always been, the fundament upon which we make our decisions when transacting with one another. It is how we decide whether the party that we are interacting with are dependable and likely to fulfil their side of any deal. However, the nature of trust, or more precisely how it is determined, has not always been what it is today. As the history of how we determine value evolved, so did the range of people that we could transact with. Whereas once it would only be the people in our immediate vicinity, like a town or city, with the dawn of the internet the marketplace grew to include almost everyone in the world.
One of the main problems faced by internet users today lies in their ability and knowledge of who they can or cannot trust. This constant need for managing trust has become big business for some of the largest companies in the world, a bill footed by the user. The largest e-commerce platforms proudly offer guarantees and reviews of sellers while financial platforms promise to safely hold money in escrow until a transaction is cleared, albeit for a fee, whilst also reserving the right to freeze all funds whenever they see fit. This arguably gives such companies a disproportionate amount of control over its customers. Furthermore, as detailed in our security segment of the Lisk Academy, the need for these companies to store such vast amounts of personal data about their users, as part of deciding who is trustworthy, also presents a further problem in regards to privacy. That is down to the fact that even these huge, reputable organisations are not safe from hacking attempts and are often targets of such attacks.
This raises the question of how much should we be willing sacrifice or pay to be able trust one another?
Blockchain technology offers the potential to entirely reshape this dynamic, creating a system where trust is no longer an issue, as it is simply no longer required. In blockchain, cryptology completely replaces third parties as the governor of trust. Participants on the network run complex consensus protocols to unanimously and securely agree on what should be added to the distributed ledger of blockchain, whilst also ensuring its integrity at all times. As it is these failsafe protocols providing the basis for trust, it allows for the removal of middlemen and, as a result, decrease in the overall cost of transacting. The ledger of blockchain technology can not only facilitate transactions but can also unquestionably prove ownership of anything, from information to land, without the need for a central authority.
With the growth of IoT (the internet of things) and automation of essentially every aspect of life, the potential use cases for blockchain will be continuously growing as blockchain will allow for the recording of information in a credible manner.
Furthermore, through the utilisation of smart contracts, blockchain contracts that execute automatically once their terms are met, there is no disputing whether a party fulfilled obligations as doing so is automated against clearly defined terms. This removes the notion of disputing contracts, a key function of lawyers today, as well as a considerable amount of paperwork. This indubitable aspect of blockchain also contributes to its trustless nature.
A simple example would be renting an apartment. A blockchain application, allowing for a smart contract that executes when a tenant collects their keys can be created. This guarantees that the tenant can gain access to the property without being dependent on the landlord, whilst equally ensuring that the landlord gets paid once this action has occurred. This removes the chance of either party disputing that the other action took place, eradicating the need for mediating parties and as a result lowering costs.
The use of these contracts extends further than only legal matters. Smart contracts aren’t entirely like contracts in the traditional sense, as they can execute any function, right down to the most macro level. This means that a smart contract that executes when a lorry driver delivers a freight can easily be created, for example. This scraps the need for lengthy paperwork, removing time barriers and potential for human error. It isn’t a case of whether a third party is trusted to carry out their tasks, as it is an automated and immutable system in which there is no trust required.
This shift away from a reliance on humans to incorruptible ledgers can also carry through into everyday life. For example, smart contracts can be implemented to guarantee the quality of food across the supply chain. Whether that the blockchain being used to note the exact moment a fish is caught or a smart contract paired with a thermometer to ensure it is always kept at a certain temperature. The potential applications of blockchain technology are truly endless.
Rather than building on the system of relying on third parties to maintain trust, blockchain does away with it completely and offers the potential to develop a new, trustless system.
5. Blockchain Use Cases
Now that we have understood the many theoretical aspects of the blockchain technology, it is important that we investigate how it is being put to real use. In this chapter, we will focus on the real life applications of blockchain and how they are disrupting the world as we know it. Starting with the most mainstream example of blockchain use cases, Bitcoin, we will move on to see how blockchain is changing anything from government and finance, to shaping the future of Internet of Things and data storage.