Original Title: "DAOrayaki | What is a Trustless System"

Author: Samantha Marin
Translator: Dewei

At Bankless DAO, we often refer to blockchain technology as a financial revolution because smart contracts create systems that are trustless and permissionless. But what does the first word, trustless, really mean?

First, it is important to understand that trustless is not synonymous with untrustworthy. Saying a system is trustless means that it can operate without the need for trust in humans or institutions—it can happen without human intervention.

This may sound confusing right now, but I will delve deeper and provide examples below.

To understand trustless systems, we first need to understand a trusted or trust-based system, which is the world we live in today.

Definition of Trusted or Trust-Based Systems

Since ancient times, humans have relied on trust to cooperate. Here are some examples:

1. When you deposit money in a bank, you trust that the bank will keep your money safe so you can withdraw it when needed.

2. When you initiate a trade on Robinhood, you trust that Robinhood will execute the trade for you and not freeze the trading of that asset.

3. When you send money to a friend via Venmo, you trust that Venmo will deposit the money into your friend's account and not someone else's.

Trust-based systems are embedded in our society. As the examples above illustrate, they are prone to errors.

While people in developed countries may not frequently encounter blatant, life-altering trust issues, trust-based systems have produced significant negative outcomes, such as the housing crisis of 2008. For anyone living in developing countries or countries with unstable currencies, entrusting their finances and lives to the whims of government officials and corrupt politicians has proven to be a mistake time and again.

Before the 21st century, it was unimaginable to have a world without trusted systems. But with blockchain technology, everything is changing.

Definition of Trustless Systems

A trustless system is one that does not rely on participants to act in a certain way to achieve the expected outcome. The system operates without relying on humans. There are no intermediaries, such as banks or brokers, mediating events. You do not have to worry about whether the person you are interacting with is trustworthy. The system builds trust for you.

There is no need for a bank to hold your money, no need for a person to avoid your apple tree, and no need for a monk to pass along messages. There are no intermediaries or facilitators; the code performs the tasks.

Smart contracts are trustless systems. Blockchain technology uses smart contracts to facilitate trustless interactions between users.

Let’s break it down:

Strangers from different countries, speaking different languages, can send and receive tokens without an intermediary facilitating for them. Smart contracts execute transactions for them. It uses if, then logic statements written in code to carry out instructions. Users trust the integrity of the code rather than the moral standing of the individual or entity executing the transaction.

You do not have to trust someone to do something for you; instead, you replace that person and trust the code.

Moreover, transaction records are stored across the entire community: instead of a central authority, like Google, holding the information, the entire community holds it through a decentralized network. Multiple copies of the transactions are stored on computers around the world, so no single entity can alter the history of those transactions.

But it is important to note that no system can be completely and inherently trustless. Blockchains and smart contracts were initially built by humans, and their code must be reviewed by others. However, getting closer to a trustless system requires effort. When a system is in place that allows users to have a range of motivations and morals, people can cooperate more confidently and securely while contracts still execute transactions.

The if, then statements will execute regardless of your morals or those of the person you are trading with.

How Can Users Know if the Code is Trustworthy?

Once a smart contract is deployed on the blockchain, its code is publicly accessible. Most projects have a public GitHub and extensive documentation for the community to read, allowing users to research for themselves to determine if they want to interact with the smart contract.

Smart contracts are immutable, meaning that once they are deployed on the blockchain, malicious developers cannot change the functionality of the code. So this system can be considered trustless because users believe that malicious actors or developers cannot abuse their power and make significant changes to the project, such as freezing trading capabilities during the GameStop squeeze or collecting and selling user data without their knowledge. (Do you start to see how trust can let us down?)

Can Users Really Verify Everything Themselves?

When a new protocol or project is released, people analyze whether there are potential issues in the code. However, users do not sit by and watch every new block being minted to ensure that malicious actors have not tampered with anything. There are a series of protections in place, which will be detailed in subsequent articles.

Proof of stake and proof of work are consensus mechanisms that blockchains use to mint blocks and determine whether a block is secure or malicious. These two systems work in different ways, but they can prevent malicious blocks from being minted. These protections lead to the trustlessness of the system.

Is Trust Required to Exchange Any Form of Currency?

At the highest level, yes. Individuals must accept that tokens have value. For example, they must accept that ETH is a digital asset worth trading for other assets. This is similar to how people using cash must accept that the cash they are trading is valuable.

Trusting a scarce, tradable store of value (currency) is necessary for transitioning from a society that only exchanges goods to one where people with different interests can exchange value for what they seek.

TLDR

In our current trust-based world, transactions and systems go wrong because we rely on humans to execute and maintain them. We can use trustless systems to autonomously execute and record events instead of relying on human morals or intermediaries.

There are no systems that are completely trustless because everything must initially be built by people. Once a project is launched and running on the blockchain, smart contracts cannot be changed. Traditional hierarchies are removed, allowing users with different morals and values to still cooperate.