Trust is a fundamental and multifaceted concept that underpins the seamless operation of financial markets and transactions. Its significance spans various research domains, with recent years witnessing a multidisciplinary approach to studying trust, particularly in the context of social modernization. Recognized as a social and abstract construct, trust is interpreted through diverse lenses. Guiso et al. (2004) examined trust as both a mechanism for reducing transaction costs and a cooperative tendency. These perspectives highlight differences in the mechanisms through which trust is generated, with trust evolving through specific social cultures and repeated business interactions. Against the backdrop of the digital age, this study seeks to explore how blockchain technology and smart contracts can revolutionize the existing financial trust framework. By investigating the evolving mechanisms of trust formation, we aim to understand the transformative impact of these technologies on the financial sector.

Sociological research has viewed trust as an operational mechanism within social relations, emphasizing that trust’s occurrence, dimensions, and evolution are intricately linked to changes in social structures, and it is inseparably associated with risk. Concurrently, psychological studies have highlighted the interplay between trust and traditional social interactions rooted in geographical and familial ties. Consequently, sociologists have elevated the study of trust to a systematic, social, abstract, and decontextualized level, thereby enriching the understanding of trust’s mechanisms and structural dimensions.

Moreover, within the realm of management research, trust has been closely connected to the economic transaction environment. Here, trust has been found to be linked to efficiency, employee relationships, and enterprise development. Importantly, trust can extend its attributes beyond individuals to encompass corporate reputations and brands within the corporate environment.

Against the backdrop of the contemporary digital society, technographic research has explored the interplay between technology and trust. Technological trust is deemed an essential complement to interpersonal and institutional trust. Studies from a technological perspective generally concur that trust can be derived from technology and that the object of trust can be a technological artifact. Hence, trust is a systemic entity intertwined with social processes, human self-identity, ethical values, and the context of modernity, time, and space.

Notably, trust research varies across different fields, showcasing distinct variances in the formation, construction of mechanisms, and development of trust theory between Western and Chinese contexts. Western trust formation has its roots in discussions by German sociologist and philosopher Georg Simmel, who introduced the idea of “general trust” (Geory, 1979). Subsequently, scholars like Niklas Luhmann expanded upon this concept, viewing trust as a mechanism for simplifying social complexity beyond limited rationality and incomplete information in human-social interactions. In contrast, Coleman’s Rational Choice Theory, developed by American sociologist James Samuel Coleman, approaches trust from an economic perspective, emphasizing rational calculation in trust-based actions (Bi et al. 2021) (Yang et al. 2021) (Leung et al. 2022). Trust, seen as a form of social capital, is understood to reduce the cost of monitoring and punishment.

Chinese trust formation, influenced by traditional agrarian civilization and the clan system, often relies on family lineage, leading to an emphasis on relational trust. Chinese sociologist Fei Xiaotong’s work in “Earthbound China” (1998) introduced the concept of differential order patterns and relational orientation of trust in Chinese society, arguing that individual-centered trust decreases as the radius of relationships expands. In societies characterized by close acquaintances, relational trust plays a dominant role in social interactions, significantly affecting financial activities. In financial settings, there exists a personalized trust between participants, giving rise to opportunities for offers and commitments, underpinning personalized exchange relationships.

In contemporary times, the dynamics of social transformation emerge as a crucial factor in promoting the formation of centralized trust mechanisms. As Wang (2019) has pointed out, modern society has witnessed a shift from a society of acquaintances to a society of strangers, leading to challenges in forming direct trust relationships quickly, particularly in financial interactions with unfamiliar parties due to information asymmetry. Consequently, credible third-party authorities are required to establish a credible medium for information provision and interaction to mitigate adverse selection and moral hazard, especially in monitoring and enforcing mutual commitments among private individuals. Centralized financial institutions, backed by government credit, have emerged as trust-generating entities, providing a foundation for maintaining mutual trust and reasonable behavioral expectations in interactions among unfamiliar parties.

In this context, this study seeks to explore the evolving mechanisms underlying trust in the financial domain, with a particular focus on the impact of blockchain technology and smart contracts. The advent of blockchain and decentralized technologies is rapidly transforming the foundations of trust and transparency in financial systems. Traditional financial architectures have long relied on centralized institutions such as banks, regulators, and legal frameworks to mediate trust. In contrast, blockchain introduces a new paradigm where trust is algorithmically managed, fundamentally altering the social contract between users and financial intermediaries. Despite the promise of increased transparency and autonomy, concerns about security, bias, and interpretability persist.

This paper contributes to the discourse by demonstrating how blockchain technologies reconfigure traditional trust mechanisms in finance. The main findings highlight that while decentralization enhances transparency, it also introduces new vulnerabilities that require institutional adaptation. The originality lies in proposing a layered model of trust evolution integrating both technological and sociological dimensions. Policy implications include the need for adaptive regulatory standards that balance innovation with risk mitigation. The remainder of the paper is structured as follows: section “Literature review” reviews the literature; section “Mechanisms of trust formation in finance: evolution and implications” elaborates the conceptual framework and methodology; section “Trust realization mechanism in finance: traditional contract vs. smart contract” analyzes trust formation through blockchain; section “Case study: JP Morgan’s Quorum blockchain platform” discusses implications; and section “Conclusion” concludes with future directions.