What does it mean to have a trustless environment?

Web3 has brought a new organizational methodology to the forefront of popular and technical thought. What if we could get rid of the arbiters who validate non-cash transactions between us? The promise of blockchain is to offer transactions that can be trusted because the system itself has trust baked into it.

The term “trustless” is a bit misleading — from what I understand, the technocratic use of the term really means the absence of a central entity to offer trust and confidence between parties wishing to transact with one another. It's not only the technical aspect of the system but the built-in incentives — bad actors may be identified... though I am realizing a gap in my knowledge now. How would bad actors be identified on Bitcoin, Ethereum, or other blockchains?