If A and B don’t know and don’t trust each other, they usually need a trusted third party to serve as an intermediary to verify transactions and enforce them. With smart contracts & blockchains, you don’t need those trusted intermediaries anymore to clear or settle your transactions. Take the example of buying and selling a car:
If Alice wants to purchase a car from Bob, a series of trusted third parties must verify and authenticate the deal. The process differs from country to country but always involves at least one, but usually more, trusted third parties: motor vehicle registration authority, in combination with a notary and/or insurance company. It is a complicated and lengthy process, and considerable fees for these middlemen apply.
On the Blockchain, once all involved authorities and companies are on a blockchain, a smart contract could be used to define all the rules of a valid care sale. If Alice wanted to buy the car from Bob using a smart contract on the blockchain, the transaction would be verified by each node in the Blockchain Network to see if Bob is the owner of the car and if Alice has enough money to pay Bob.
If the network agrees that both conditions are true, Alice automatically gets the access code to the smart lock for the garage. The blockchain registers Alice as the new owner of the car. Bob has € 20,000 more on his account, and Alice € 20,000 less. No middlemen required.
On the Blockchain, who owns what is transparent and at the same time anonymous or pseudonymous. This means that every computer running the blockchain protocol could check whether a certain person is the rightful owner of the car or not.
Stealing cars won’t be as easy today, especially once we have smart keys granting access control verified on the blockchain to unlock our future vehicles. As the car owner, you could authorize other people to drive it (stating the public key of the respective individual). In such cases opening the car would only be possible with a smart key on the Blockchain.