The major technological challenge in digital transactions is the problem of double spending. This is because any kind of digital money can be easily duplicated. And, it is possible for the duplicated money to be spent for more than once.
Also, it is possible to replicate digital information quickly than physical notes. To solve the double spending problem in digital money, it is important for someone to keep a record of all the transactions. Before the coming of the decentralized technology, a centralized authority kept track of all of these transactions. And, it was the only way to get it done.
Decentralized record keeping is the process by which cryptocurrencies overcome the double spending problem. The DLT is a lot like a file in which everything from the initial distribution of the digital money and the subsequent transactions are kept track of. Every user maintaining a node will have an up-to-date copy of the transactions. Thus, there is lot of power consumed in the decentralized process of creating trust and therefore it is not clear if this can be really sustainable. The decentralized trust assurance process comes with economic limitations. Also, there need to be network participants who are honest.
However, every user in the network will be able to verify the copy of the ledger to cross check if a transfer has taken place or not. They can also track attempts to double spend. All the cryptocurrencies are dependent on the distributed ledger and every protocol has a different method of getting updated. The operational set up is different.
Cryptocurrency protocols also make use of permissioned DLT, which is a payment documentation mechanism in which only the trusted participants in cryptocurrency will be able to update. These are known as trusted nodes. So, the decentralized ledger system has a branch which recognizes the importance of some kind of mechanism to ensure trust. Just to state that establishing trust is a crucial element and it is not possible to have a completely trustless system which is decentralized, but is still trustworthy.
In the process, only specific institutions which work a lot like central authority will be recording the transactions. So, it just looks like the search for the ultimate source of trust will never end.
Anything working permissioned with trust is not a surprise. The curiosity is about whether a Permissionless system will provide for trust. Many are not in agreement with this possibility. This is something we will know with time.
