Is the World Ready for a Trustless Economy?

@karenshidlo

Digital Marketing Native, Blockchain Babe, NFT Nerd, Web3 Content Creator at Fiat24

Credibility

Trust is a powerful word and a difficult sentiment to feel nowadays, especially in the context of finance. With recent banking scandals spanning from 2022 into this year, reminiscent of the 2008 crisis which inadvertently boosted crypto into the mainstream, decentralized finance is increasingly becoming an attractive alternative.

At the heart of the Bitcoin is a “trustless” foundation, allowing all transactional data to be verified and immutably stored on the public LEDGER blockchain. In this trustless system, no single entity has authority and consensus is achieved without participants having to know or trust anything but the system itself.

Despite the promise of such an economy, it does require that people place trust in abstract concepts rather than institutions or third parties, meaning that we are swapping one for the other and never reaching a fully “trustless” world, but one where trust is minimized.

Global crypto markets continue to experience a boom, with the total crypto market cap above $1T in 2023, and DeFi as a niche segment continues to grow, with around $52 billion of value locked in it. 

But as momentum builds, are we really ready for a trustless economy?

The concept is and model is certainly promising, but there are several hurdles to overcome before we can really begin to see it impacting our daily lives. 

For a start, how many people in your life (outside of your professional circle) know about blockchain technology? And to what degree? There is still a long way to go until society at large embraces it the way we’ve all learned how to use apps on our phones and the internet as we know it today.

This ties in with the current complexities of not only understanding the mechanisms, but also being able to use related technologies and products. Until Web3 applications and protocols more closely resemble those of Web2, - or at least become simplified - mass adoption is unlikely. 

Finally, and perhaps most importantly, regulation is just not up to scratch yet. Due to its inherent nature of not having a central authority to oversee or enforce rules, issue surrounding compliance and accountability are yet another restrictive factor when it comes to implementing this trustless economy.

Having said all of this, banks and financial institutions are beginning to pave the way for decentralization, with numerous players showing a growing interest in crypto and DeFi. 

“Seen as a potential threat to their business model, it is likely only a matter of time before banks start to embrace digital assets more, meeting mounting pressure to adapt and integrate new technologies. It will require significant investments, as well as a waiting game to see how regulatory frameworks are established, but they simply cannot avoid crypto and the trustless model increasingly being thrust into the forefront of financial news worldwide,” says Yang Lan, co-founder of blockchain-based banking dApp Fiat24.

A combination of factors are needed

Transparency, consensus mechanisms, security and user-friendly interfaces are just some of the key requirements to be met in a diverse combination of factors necessary to make a trustless economy a reality and not simply a vision for the future.

Overall, achieving a trustless system requires a combination of technical, social, and economic factors. It requires a robust and decentralized infrastructure, a community committed to transparency and security, and easy-to-use tools and interfaces that make it accessible to a broad range of users.

The Crypto Writing Contest is sponsored by NOWPayments. NOW Solutions is an ecosystem of enterprise solutions that allows businesses to integrate crypto and benefit from it. NOW Solutions includes ChangeNOW, NOWPayments, and many other solutions. ChangeNOW is an instant exchange (swap) platform that supports 800+ assets. NOWPayments is a non-custodial crypto payment gateway that lets you accept payments in 160+ cryptocurrencies, with auto coin conversion available. Accept crypto NOW!