Although trust is a fundamental pillar of our interactions, whether in financial transactions, data sharing, or governance, increasingly, trustless systems have been replacing existing processes. However, tensions have been evident as trustless systems become more mainstream and we humans have to adjust to the changing paradigm.

 

In an increasingly digital and decentralised world, trustless systems are revolutionising the way we conduct transactions, share data, and interact online. Built on innovative technologies like blockchain, these systems promise efficiency, security, and transparency.

Across the Caribbean region, we are continually being confronted with matters related to trust and trustless systems. For example, Jamaica has been in the process of rolling out its National Identification System (NIDS), which should have in place the attendant security measures to limit tampering and provide authoritative verification. Further implementation is at a stage where the first batch of the associated physical identification card, which should include biometric data, is being issued. On the other hand, in Guyana, members of the country’s Elections Commission have been advocating for the implementation of biometrics by way of electronic fingerprint technology to identify voters at elections. However, arguments are being raised about the constitutionality of such measures.

However, the increased integration of trustless systems does not appear to have resolved fundamental trust-related issues, and arguably, may even have exacerbated them in some instances. In this article, we outline what trustless systems are, some advantages and disadvantages associated with their use, and more importantly, some of the complexities and points of friction between trustless systems and the concept of trust.

 

Trustless systems 101

At their core, trustless systems are frameworks that eliminate the need for intermediaries or centralised authorities to establish trust between parties. Instead, they rely on cryptographic protocols, consensus mechanisms, and decentralised networks to ensure the validity and security of transactions. Hence key characteristics include:

  • Decentralisation. No single entity controls the system; decision-making and validation are distributed across the network.
  • Transparency. Transactions are recorded on a public ledger, ensuring visibility and accountability.
  • Immutability. Once a transaction is added to the ledger, it cannot be altered, reducing the risk of fraud.
  • Automation. Self-executing agreements with predefined rules, such as smart contracts, automate processes, further reducing reliance on intermediaries or external intervention.

For example, in a traditional financial transaction, a bank or payment processor acts as an intermediary to verify and facilitate the exchange. In a trustless system like Bitcoin, the blockchain, which is an immutable, decentralised ledger, replaces the intermediary. Every transaction is verified by a network of nodes using cryptographic algorithms, ensuring accuracy and eliminating the need for a central authority.

 

Pros and cons of trustless systems

Without a doubt, there has been considerable excitement associated with trustless systems, especially with the upsurge in cybercrime and malicious actors who steal or otherwise manipulate data. Key benefits of trustless systems include the following:

  • Increased security. As decentralised and cryptographically secured networks, trustless systems are less vulnerable to hacks and fraud compared to centralised systems.
  • Increased transparency: Thanks to the public nature of trustless ledgers, all participants can verify transactions, which in turn fosters accountability.
  • Greater inclusiveness. Trustless systems facilitate global participation by allowing individuals without access to traditional financial systems to access such platforms and conduct secure transactions.
  • Censorship resistance. No single entity can control or block transactions. The rules of the system tend to require consensus or unanimity, ensuring a freer and more open system.
  • Cost-effectiveness. Finally, in removing the intermediaries, as highlighted in the banking example, trustless systems tend to have reduced transaction fees and operational costs.

Conversely, there are challenges associated with the use of trustless systems, some of which are outlined below.

  1. Scalability issues. Many trustless systems, especially blockchain-based ones, struggle with slow transaction speeds and limited capacity as networks grow.
  2. High energy consumption. Consensus mechanisms like proof-of-work (PoW) consume significant amounts of energy, raising environmental concerns.
  3. Irreversibility: Although immutability is a strength of trustless systems, it can also be a drawback. Mistaken or fraudulent transactions cannot be reversed, posing risks to users.
  4. Regulatory uncertainty. The decentralised and often anonymous nature of these systems can lead to conflicts with existing laws and regulations. Further, such systems remove sole control or oversight from regulators, which tends to be at variance with existing rules.
  5. User unfriendliness. Finally, for non-technical users, understanding and interacting with trustless systems can be challenging, which can hinder take-up and adoption.

 

Trust versus trustless

Although organisations appreciate the value and benefits trustless systems offer, a critical point of contention centres around the automated nature of these configurations and the loss of control that is experienced. Trustless systems work well due to the limited interventions permitted based on the predefined rules established. However, we often want the flexibility to cater to the exceptions, which, if implemented, can water down the strictures necessary to operate successfully in a trustless environment.

Similarly, humans can sometimes have a desire to short-circuit a process in the name of efficiency. However, if such discretion is permitted in what should be a trustless environment, the rules and structures would be undermined.

To that end, and as an example, blockchain-adjacent systems have been developed that contact some features of the technology but not all. For example, these systems may use a distributed ledger but not in a fully decentralised and public network, or transactions are not being made on a public ledger.

Further, when the ‘human element’ is considered, trustless systems can be unforgiving of human mistakes and frailties. For example, mistakes in a transaction, such as sending money to the wrong address or misconfiguring a smart contract cannot typically be reversed. Or, if by chance private keys are lost, it often means permanent loss of access to one’s digital assets.

We also need to be mindful that social engineering and scams can still occur in trustless systems, as the human tendency to trust individuals can be exploited. Scammers can still trick users into revealing their private keys or other sensitive information, and bad actors can impersonate trusted developers or community members to push malicious updates or proposals. In essence, the absence of intermediaries does not prevent human-targeted fraud.

 

Final thoughts

Although trustless systems are reshaping the way we think about trust in the digital age, challenges still exist, some of which are inherent to the technology itself. However, the human element can also undermine the strengths – even human intermediaries are removed from the equation. Humans still want flexibility and control.

For trustless systems to achieve mainstream success, they must not only excel technologically but also address the human factors that influence trust, adoption, and functionality. However, as the technology matures, trustless systems may still become the backbone of a more open and equitable digital future.

 

 

Image credit: kiquebg (Pixabay)