Concept of a trustless system

While doing a financial transaction using fiat currency, we have a third-party ledger that maintains information about every transaction. Some of these third-party trust systems are VISA, MasterCard, banks, and so on.

Blockchain has changed the landscape of this trustless system by making everyone part of the ledger. Hence, it is sometimes even called a distributed ledger; everybody doing a transaction in blockchain has a record of other transactions that have happened or are happening in the blockchain-based Bitcoin system. This decentralized ledger gives multiple authenticity points for every transaction that has happened; plus, the rules are pre-defined and not different for each wallet user.

On a further note, blockchain does not actually eliminate trust; what it does is minimize the amount of trust and distributes it evenly across the network. A specific protocol is defined using various rules that automatically encourage patrons on the basis of the rules followed. We will be discussing this in depth in later chapters.