The financial industry, like most others, is heavily reliant on trust to work properly. Banks and financial institutions were created to function as trusted third parties that would allow users to exchange funds securely, even with strangers. While this system has proven to be effective in many ways, allowing for the expansion of business and trade, it is designed with a single point of failure. This means that if a third party was hacked, attacked, or corrupted in any way, its entire system would fail. Several risks arise when a single entity is authorized to make the rules and enforce them.
How Does Crypto Remove Trust?
Cryptocurrencies were conceived as a method of eliminating these third parties and allowing for trustless, peer-to-peer interactions. Instead of relying on centralized authorities, users can rely on an automated system where the power is distributed. Cryptocurrencies are decentralized, so there is no single point of failure, and the rules are verified separately by every network participant.
To illustrate, let's say an individual attempts to validate a false transaction on the blockchain. Since this transaction will be reviewed by dozens or even hundreds of others, the fraudulent charge will be discovered and discarded. Trust is needed in any system, but instead of trusting a single entity, it is safer to trust a system of hundreds of validators independently verifying every action. The more extensive a decentralized network is, the more difficult it is to corrupt.
Do Cryptocurrencies Guarantee Zero-Trust Commercial Exchanges?
The answer is not as straightforward as it seems. Cryptocurrencies can deliver trustless payment solutions, but the payment is not the whole commercial exchange. Usually, a product or a service is provided before the need for financial compensation. In order to achieve full transparency, the buyer, seller, and the asset being exchanged all need to be validated.
A smart contract is a program designed to execute itself based on predefined rules without human intervention. As the exchange is taking place exclusively on the blockchain, it will be transparent and trustless. If the exchange only involves digital assets that live on the blockchain, such as NFTs, smart contracts can ensure the buyer receives the item before forwarding the payment to the seller.
Now let’s say someone wanted to exchange a physical object such as a sports collectible or piece of art. The blockchain has no way of identifying the object and verifying if the exchange really occurred before handling the payments. This presents a big limitation. Cryptocurrencies can only guarantee end-to-end trustless exchanges if the assets being transacted are digital. Even in those cases, we still don’t know the identity of the buyer and the seller.
How Can We Solve This?
The key to solving this problem is finding a trustless way for the blockchain to communicate with the physical world. Trusted third parties cannot be used to feed information to the blockchain, as that would contradict the decentralized system.
Black Ink Tech has developed a platform that uses hardware and software technology to collect tamper-proof data that is then autonomously uploaded to the blockchain. There is a minimum level of trust involved as it doesn’t rely on human intervention. The blockchain is no longer exclusive to digital assets; physical objects and services can now be registered and permanently stored. Furthermore, the actual event of the exchange, including the location, time, and participants, are all recorded and authenticated.
Going back to the previous example, in order to achieve an end-to-end, zero-trust sale of a sports collectible or piece of art, Black Ink Tech’s platform uses biometrics to record the identity of the people involved. By registering biometrics, proof of ownership of the item can be verified. Using GPS technology and blockchain timestamps, the location and time of the sale are also recorded. For full transparency, a unique token linked to that specific item can be issued and sent to the buyer. Then, all the tamper-proof metadata recorded about the where, when, who, and what will be autonomously uploaded to the blockchain and can be accessed by users at any time using Touch Audit capabilities. At that point, a smart contract will validate that data and finally release the payment.
The digital revolution is giving us the chance to distribute power previously controlled by long-standing centralized authorities. The blockchain introduces a way for people to transact with each other without any middleman in a zero-trust environment. Although this is revolutionary, it doesn't apply to the entire process of a commercial exchange. The blockchain can only provide trustless payments. That is why Black Ink Tech developed a platform that uses patented software and hardware technology to provide end-to-end immutability and transparency. The main goal of the platform is to take data from the real world and autonomously feed it to the blockchain without introducing a single point of failure.