Blockchain is building a Trustless Society.
What does it mean for us?
When we think of trust, we don’t necessarily apply it to our day to day lives. In actual fact, we trust things a lot more than we give them credit for. This especially goes for a lot of Western Millenials. Trust is what we have in our governments, trust that the paper money they issue will always be worth something.
But wait! You cry – it’s backed by gold! Or interest! Or GDP!
Yes and no. The USA dropped their gold-backed currency in 1970s, thanks to President Nixon.
Governments don’t “print money”. They set interest rates to their banks, who then print the money based on the interest they are able to pay back.
Where trust is important.
When you begin to think about a lot of these things and look at history to see where these things have failed and fallen over, you realise that trust is a large part of the system. You can also see how thinly held together our economy and global standing is. A lot of seasoned investors have been through bul and bear cycles a few times over. When crashes happen, they happen in a fantastic fashion.
So, when you think about the intentions of banks and governments or corporations (Facebook, anyone?) you can begin to see where trust comes into play.
How is Blockchain “Trustless”?
Blockchain is based on DLT (distributed ledger tech). In a nutshell, it means that data is distributed over many ledgers stored around the world. Whether this is in the form of mining rigs, nodes, validators or some other term, the overall generalisation applies. No one company or group can control what happens on the blockchain (for established cryptocurrencies).
That is why when money is sent via Cryptocurrency, you cannot reserve the transaction. They can be traced quite effectively however, and as the technology continues to evolve, a lot of governments are realising that Cryptocurrencies are actually more traceable and secure than standard fiat currency.
Considering the way we trust virtually everything in our day-to-day lives, it isn’t hard to imagine that blockchain’s underlying DLT might pave the way to create more trustless systems. For example, when a new business is setting up its suppliers, the first few orders are often tenuous. Money has to be paid prior to the product arriving. If the product arrives and is faulty, you’re relying on the factory in China/India/Wherever to own up to it and do something about it. But what if we could create a system that would aid both sides? Where your money could be secured via the blockchain, where the supplier knows it is guaranteed. Those funds wouldn’t be released until you were satisfied, protecting your interests too.
Adding other assets to DLT.
Beyond that simple explanation, blockchain is looking to revolutionise all sorts of markets that no one had thought about when it was first created. Tokenisation refers to the creation of digital assets that reflect real assets – real estate, for instance. Imagine if instead of a local office that controlled and had to be trusted with the documents and filing, a blockchain could maintain the ownership ledger for all real estate. Title certificates would be locatable on the blockchain. Property transfers would be done virtually instantly, as soon as the funds appeared – in the corresponding blockchain.
Everything can be “tokenised”.
There is even talk about precious art being tokenised. This means that multiple people could own “shares” of this art piece and be able to sell their stake in it on a liquid market 24/7. Ownership would be undeniable, highly verifiable, and easily managed. Even public shares are looking to have an equivalent digital asset created.
The possibilities are now endless. As the technology evolves and gets better, more avenues continue to open up.