Money used to be trustless because the physical thing used to represent value (shells, gold, silver, etc.) was physical and tangible and did not need certification from a third party. The need for accuracy triggered the need for breaking down value into its standard units (e.g., an ounce of gold) and subunits, and subsequently the need for third parties to certify the different forms of money (gold coins, and later paper “money” to represent gold units). The third parties initially were banks, until governments saw the enormous advantages not only of being the third party, but also the main source of currency.

There is not much difference between a central bank that keeps track of account balances and transactions, and a blockchain (for example, the Bitcoin blockchain). In the Bitcoin blockchain, ALL transactions are recorded and become unchangeable once recorded. The big difference between a central bank’s ledger database and the Bitcoin blockchain is that there is no third party to trust in the case of blockchain.

While it is true that Bitcoin has not become a medium of exchange despite several efforts by several companies, it does not mean that blockchain as an idea can not be used in indirect exchange (non-barter exchange). Bitcoin has two problems that prevent it from being used as medium of exchange:

The first problem is transaction cost and slow confirmations. The problem with transaction cost is now solved using Proof of Stake transaction confirmations and what I call “inversion of tragedy of the commons”. The original idea for inversion of tragedy of the commons was developed by the people behind EOS. In the EOS world, transactions are free and fast.

The second problem why Bitcoin has not (and cannot) become a medium of exchange is because its simplistic monetary policy is deflationary. The Bitcoin network puts a hard limit on the quantity of bitcoins that can ever be generated by mining. This means that its market value will continue to be volatile, with a heavy upward bias due to increasing demand. Bitcoin will continue to be a good store of value, but a very bad medium of exchange. No vendor in her right mind would accept it as payment because of the wild exchange rate swings, and no customer would be inclined to pay using her bitcoins because of the heavy upward bias in value.