The concept of trust is a fundamental pillar for the harmonious functioning of modern societies. Since time immemorial, trust has been the foundation on which social, economic, and political relations are built. Traditionally, the management of this trust has been centralized in state institutions, such as governments, notary offices, and regulatory bodies. These entities are responsible for ensuring the enforcement of contracts and the protection of citizens’ property rights.

However, the global landscape has been changing rapidly. In recent years, we have observed a significant decline in people’s trust in state institutions. Corruption scandals, administrative inefficiencies, slowness, lack of transparency, and the perception that these institutions cannot keep up with technological evolution have all contributed to this crisis of confidence. This raises a crucial and urgent question: how can we restore and strengthen trust in an increasingly complex and interconnected world?

In this context, blockchain technology emerges as a potentially transformative solution, marking a significant shift from centralized trust management to a decentralized model. Blockchain, a distributed and immutable ledger, offers an alternative for trust management that does not rely on central authorities. Instead, it operates on a decentralized network where each transaction is verified by multiple participants, thus ensuring greater transparency and security.

This new technological approach challenges the traditional role of state institutions in building and maintaining trust in society. Historically, state institutions have been compulsorily established as monopolistic guardians of public trust, ensuring that social and economic interactions occur fairly and predictably. However, this trust was not earned but imposed by force of law.

The following figure, based on a 2017 Pew Global Research survey, illustrates the level of trust in government institutions in various countries. The data reveal a worrying picture: lack of trust is a serious problem, especially in Latin American countries like Brazil.

The survey shows that, in countries like Brazil, only 24% of the population trusts that the government will do what is right for the country, with a number very close to zero demonstrating full confidence. This low level of trust is symptomatic of structural problems such as corruption, administrative inefficiency, and lack of transparency. Such factors undermine public trust and negatively affect economic development and social cohesion.

Source: Pew Global Research. 2017. “How much do you trust the national government to do what is right for our country?”

The crisis of confidence in state institutions is not exclusive to Brazil. In contrast to Asian countries, other Latin American countries, such as Venezuela, Argentina, Mexico, Chile, Colombia, and Peru, also have low levels of trust, as indicated by the figures. This widespread distrust of government institutions is fertile ground for adopting alternatives that can more effectively re-establish trust.

Blockchain technology emerges as a potentially revolutionary solution against this backdrop of mistrust. By offering a way to manage trust in a decentralized, transparent, and immutable way, blockchain eliminates the need for centralized intermediaries. This technology can be particularly beneficial in countries where trust in state institutions is low, such as many Latin American countries. Blockchain can be applied in several areas traditionally relying on centralized intermediaries, such as public registries, notary offices, and regulatory bodies, providing greater transparency and security.

Blockchain is a distributed ledger technology that allows the creation of a secure, transparent, and immutable digital ledger. Each transaction or record is verified by a network of computers, eliminating the need for a central authority. This consensus mechanism ensures all network participants can access a single, unalterable data version, significantly increasing transaction trust.

One of the most attractive features of blockchain is its transparency. Each transaction is recorded in a block that is visible to all network participants. Once a block is added to the chain, it cannot be changed or deleted, ensuring the records’ immutability. This transparency and immutability are key to ensuring that all updates are verifiable and secure, increasing confidence in the authenticity of records and reducing the risk of forgeries.

In this context, registration institutions, such as notary offices, can be replaced or have their functions integrated into the blockchain, allowing real estate transactions and other registries to be carried out more quickly and efficiently. This change can significantly reduce the costs associated with records, especially those related to verifying paper documents, making the process more cost-effective and accessible. In addition, the immutability of blockchain makes it difficult for fraud to occur in public and notary records. Once a record is added to the blockchain, it cannot be altered or deleted without the network’s consensus, ensuring that any attempt at fraud or manipulation is easily detected and corrected.

Another crucial benefit of blockchain is decentralization. By removing centralized intermediaries, blockchain reduces transaction costs and increases efficiency. In public records, verifying and updating records can be automated and carried out more quickly and efficiently.

In addition, the security of the blockchain is based on advanced cryptography, which protects data from unauthorized access. Additionally, the decentralized nature of blockchain makes it less vulnerable to cyberattacks since there is no single point of failure. Sensitive information is better protected against data breaches in public records and notary offices. At the same time, the blockchain can be configured to ensure data privacy, allowing only authorized parties to access the necessary information.

Blockchain represents a technological innovation with the potential to profoundly transform the trust market, especially in contexts where distrust in state institutions is prevalent. Based on principles of transparency, immutability, decentralization, and security, the technology offers a robust solution that can revolutionize sectors dependent on public trust by eliminating centralized intermediaries. This reduces costs and bureaucracy and mitigates the risk of fraud and manipulation, restoring confidence in the authenticity of records.

In countries like Brazil, where trust in government institutions is low, blockchain adoption can be especially beneficial. By providing a more reliable and efficient alternative for managing property rights and contracts, blockchain has the potential to drive economic development, increase financial inclusion, and promote a fairer and more transparent society.

In conclusion, blockchain is not just a technological solution. It’s a paradigm shift in the way we manage trust. By adopting this technology, we can build a future where centralized intermediaries do not enforce trust but emerge from a decentralized and transparent system that benefits everyone. With blockchain, we can restore public trust, reduce transaction costs, improve process efficiency, and create a more secure and reliable environment for transactions and property rights records, marking a significant breakthrough for society.

Authored by Cristiano Oliveira, Head of Research at Rivool Finance.