Trustless vs trusted

The concepts of "trustless" and "trusted" systems are extensively discussed in the context of blockchain and decentralized finance (DeFi). Here are key insights from experts:

1. Definition and Spectrum:

   • Trustless systems: These are designed to minimize reliance on third parties or intermediaries. Actions within these systems can be verified without needing to trust any single entity. For example, Bitcoin and Ethereum utilize decentralized protocols that operate automatically once conditions are met 1.
   • Trusted systems: These rely on intermediaries or central authorities to ensure transactions and operations are completed correctly. For instance, traditional banking systems depend on financial institutions to manage and verify transactions 2.

2. Spectrum of Trust:

   • Experts recognize that no system is entirely trustless. Instead, there's a spectrum ranging from highly trusted to highly trustless systems. For instance, some DeFi applications require human input for governance (trusted), while others like Uniswap operate with minimal human intervention (more trustless) 3 4.
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       1

       Trustless Stablecoins

       00:22:55
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       2

       Building Trust in Web 3

       00:32:38
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       3

       Trust Spectrum Explained

       00:00:14
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       4

       Trust in MakerDAO

       00:32:41
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       5

       Trustless vs Trusted: A Diagram Debate

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       6

       Trustlessness in Crypto

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   • Eric Wall and David Hoffman debate the placement of various assets on this spectrum. Wall suggests that fully trusted systems (like traditional banks) should not be represented on a trustlessness diagram, advocating for a clearer distinction 5.

3. Practical Implications:

   • In systems like MakerDAO, some aspects are trustless (automated contract execution), but human involvement in governance (adjusting stability fees, debt ceilings) introduces elements of trust 4.
   • The goal in blockchain technology is to increase trustlessness wherever possible, thereby enhancing sovereignty and reducing the need for trust in human intermediaries. This is particularly emphasized in discussions around Ethereum and other smart contract platforms 6.

4. Future of Trust in Web 3:

   • Marc Andreessen discusses how Web 3 aims to bring trust to an untrusted network by integrating economic and transactional trust mechanisms into the blockchain. He envisions a future where the global economy could operate on such a trust-enhanced decentralized network 2.

Understanding these discussions helps clarify how blockchain and DeFi aim to balance and transition between trustless and trusted environments for greater efficiency and security.