In a trustless system, the participants involved do not need to know or trust each other or third parties for the system to work. In an environment where trust is not required, there is no single entity that has authority over the system, and consensus is reached without participants needing to know or trust anyone beyond the system itself.

The trustless characteristic in a P2P (peer-to-peer) network was introduced by Bitcoin, as it allows all transaction data to be verified and stored immutably on a public blockchain. This issue has some exceptions, such as the case of wrapped Bitcoin and stablecoins.

Trust exists in the vast majority of transactions and is a vital part of the economy. However, trustless systems have the potential to redefine economic interactions, allowing people to trust abstract concepts, rather than institutions or third parties.

It is important to consider that trustless systems do not eliminate trust completely, but rather distribute it into a type of economy that incentivizes certain behaviors. In these cases, trust is minimized, but not eliminated.

Centralized systems are not trustless, as participants delegate power to a central point in the system that then authorizes to make and enforce decisions. In a centralized system, as long as the intermediary is trustworthy, the system will work as intended. However, serious problems can arise if the trusted entity is not trustworthy. Centralized systems are subject to more failures than decentralized systems. Data can also be altered or manipulated by the central authority without any public authorization.

When it comes to money, centralized systems are likely to have a broader appeal than trustless decentralized systems, as people tend to be happier directing trust to organizations than to systems. While organizations are made up of people who can easily be corrupted, trustless systems can be controlled entirely by lines of code.

Bitcoin and other PoW (proof-of-work) blockchains achieve the lack of need for trust by giving economic incentives for honest behavior. There is a monetary incentive to maintain the security of the network and trust is distributed among many participants. This makes the blockchain more resilient to vulnerabilities and attacks, while also eliminating single points of failure.