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Part 2: A Better Solution

In the previous part of this article (Part 1: The Problem) we talked about the broken trust in our legacy financial system and the common misconception about trust in digital money systems.

It is in the nature of things that when you place your trust in another person, you expose yourself to risk. Thus, when you place your trust in other individuals, such as by entrusting them with your money you expose yourself to risk, as these individuals may use your money for purposes other than those previously agreed upon and intended. In the worst case, they may waste or gamble away the money, leaving them unable to pay for the damage they have caused. This is what frequently occurs in our current fiat-based financial system (e.g. through inflation, expropriation, bank failures, etc.).

An analogy for placing trust in someone is handing them a knife. You could give a knife to someone you don’t know and request their assistance in preparing a meal. However, by handing over a knife to someone you don’t know, you actually expose yourself to risk, such as being stabbed or attacked.

This analogy suggests that one should be wary of the person to whom one entrusts a knife, rather than the knife itself. Because a knife in itself is neutral, but it can either be used for good or for bad.

Exactly the same applies to trust. Just as essential as a knife in a kitchen, is trust in a digital money system.

Therefore the solution is not to get rid of the knife [trust], but to reduce the risk of the unknown variable (in this case “the someone you don’t know”) with someone you trust. This is what we called ‘good trust’ in the section Perspectives on trust.

So, have we chosen the wrong ‘enemy’?

We have battled tooth and nail against trust, rather than against the individuals who make a system insecure (and thereby untrustworthy). This is where all of the phrases such as “trustless system”, “without the need to trust a third-party middleman”, “crypto proof instead of trust”, “no trusted parties”, etc. come from. But no matter how many times a common misconception is repeated, it does not make those words any more true.

According to Satoshi’s reasoning, if trust can be betrayed, then trust is bad and must be eliminated from the system (to escape the risk of a breach of trust). However, this is a fallacy for the following two reasons:

  1. It’s impossible to eliminate trust from a digital money system; and
  2. not all forms of trust are negative.

If trust can not be eliminated, it must be replaced. And when the required trust is satisfied by good trust, everything falls into place perfectly.