Is Blockchain Really Trustless?

What do people mean when they say that blockchain is “trustless” - and is it really?

When I go to the grocery and buy bananas and pay with my bank card the grocery must trust that they will receive the money that I agreed to pay at the time of the transaction. As much as the grocery likes me, they trust their bank more than they trust me. And the grocery’s bank trusts my bank because they hold the record of exactly how much money I have in my account. They also trust that my bank will send that money to their bank and that my bank will debit my account by the correct amount so that I can’t spend the same money more than once. 

All of that requires trust between a number of centralised third parties.

When it comes to Blockchain there are no banks or other central authorities. Instead there is a ledger that is held on thousands of different computers (known as nodes). The ledger shows all transactions that have happened since the beginning of the ledger. By inspecting the ledger, anyone can see how many tokens I have and every record of when I spend my tokens resulting in a decrease in my token balance and the increase in someone else’s token balance. 

Notice that I did not say money or cash - I said tokens. Blockchain records tokens - not fiat or cash based transactions.

Unlike the bank where only the bank can see the entire ledger, on the Blockchain everyone can see the entire ledger. As customers of the bank, we have to trust that the bank will always have the right information and that no one will be able to tamper with it. We also trust that the bank will ensure that only we can spend our money.

On the Blockchain everyone can see the ledger. 

To create a new entry in the ledger there is an agreed protocol that ensures that new transactions are valid (is the transaction properly signed and authentic) - and possible (Is there sufficient token balance to complete the transaction). This process is called verification. When several nodes verify a transaction and they all agree then it is said that they have reached consensus and now the transaction can be written into the Blockchain. 

To tamper or change the ledger not only do you have to update the keys that link each block together - you have to make sure that you update every single copy of the ledger across 1000’s of nodes.

In Blockchain you don’t have to trust a central authority or 3rd party - like a bank. But there are some things you do have to trust.

You have to trust that the algorithm that protects the ledger from being changed works - and you have to trust that the network of nodes has not been compromised to the point that they can create false entries in the ledger. 

Bottom line - you still have to place your trust but instead of placing your trust in a central authority where you can’t see inside, you have place your trust in a network of computers and an algorithm.