Web3 / DeFi Trust Deep Dive

We should understand the nature of trust in some of our newer evolving financial systems, especially as they merge or outright collide with traditional systems. Part of the whole sell for DeFi is about being able to securely transact in so-called – and unfortunately labeled – trustless environments. What “trustless” really means and enables here is permissionless execution without dependence on discretionary gatekeepers. Or rather, trust comes from sources other than the default historical authoritative nature of traditional centralized institutions within traditional finance, as enabled and regulated by government. Regardless of whatever more self-sovereign dreams of DeFi may have been or remain, this realm does not eliminate the influence of law, regulation, or government, especially once assets touch the real world. Still, DeFi reduces reliance on operational discretion of institutions, and provides a variety of new values from Global, always-on settlement to programmable money, interoperability, inclusion, and so on.

Cryptography, consensus, and smart contracts could reduce or eliminate the need to trust intermediaries when moving value. This isn’t the absence of trust, but the absence of someone who can arbitrarily say no. Even if trust moves from familiar institutions, users still must implicitly rely on code, infrastructure, governance, and economic incentives instead. As we build these things into our products or choose to use them as personal financial tools, we should understand what we’ll need to evaluate.

Heading into 2026 the debate is over regarding the value of DeFi or CeFi or whatever we call it and if it will go mainstream. It’s going mainstream. This should be clear enough, even if Crypto may continue to have a wild-west feel to it in some aspects. Decentralized tech, blockchain, and whatever other new acronyms we come up with provide stunning new value. The only questions will be which projects can they be applied to and how fast. Even though the original bitcoin protocol is pushing towards its second decade anniversary and ideas for digital money are a lot older, it all still seems new as a practical matter. (Though ok, Ethereum is still just a bit over ten years old at this point.) It may feel newer to some than others, which is typical of the diffusion of innovations into markets. Still, we have major issues. The value is here. It’s just that amidst much of the breathless hype are also some underlying truths practitioners should be aware of and deal with, whether we’re users or builders of products and services.

This market evolution has mirrored every other, including of course the internet itself. Blockchain enables trust and identity layers that didn’t come built in to the original internet. At the same time, “Trustless” is one of the most overused words in crypto. DeFi wallets (consumer or institutional) do not eliminate the need for trust. They play a role in deciding where it lives, how visible it is, and how strictly ideas of trust are enforced. As DeFi scales, goes cross-chain, and absorbs real world assets, (or at least their synthetic tokenized representations), these design choices should be explicit. What follows are some practical discussions of the trust stack as they currently exist so we can understand what products or services we may choose to use, or what else we still need to build.

Trust Primer

Forget tech for a moment and take a simple definition of trust. Trust is the expectation that another actor or system will behave as promised in situations where outcomes cannot be fully monitored or enforced. In social science and economics, trust arises when one party becomes vulnerable to another based on beliefs about competence, integrity, and incentives rather than direct verification. At its core, it’s often a mix of believing someone can do something and that they will do it. (The difference here being something like you may loan money to a friend trusting they intend to pay you back; that they would do this. But the other question is if they actually can.) This is why there’s a huge credit industry. This is why brands exist as shortcuts for quality and decision-making, alongside counterfeits. Importantly, trust is not the absence of risk; it is a structured acceptance of risk shaped by institutions, history, and incentives.

Now back to DeFi. One of its core goals is to reduce reliance on trusted third parties and intermediaries. There were other motivations, but this was a central one. While the 2008 financial crisis was not the direct cause of Bitcoin’s creation, DeFi emerged in its aftermath. The Bitcoin whitepaper appeared as the crisis unfolded, so it could not have been the trigger, but the timing clearly crystallized the problems Bitcoin sought to address and provided an ideological spark. More broadly, the need for trust mechanisms exists because we are a mobile, transacting society. We usually don’t know our counterparties, a condition that has existed since we moved beyond small communities. Soon, we will also expect agents, AI or otherwise, to transact on our behalf. For all of this, trust remains necessary, often in the form of credit or tokens.

DeFying DeFi

If you’re paying attention, you’ve noticed that Web3 and decentralized finance are going mainstream. Sort of. Much of what’s called DeFi is actually more centralized, or CeFi. There’s nothing inherently wrong with that. A large part of DeFi’s original ethos was philosophical, even political, centered on ideas of sovereign control. Those benefits are real, and many people value them. But there are also clear drawbacks. One of them, ironically, is too much control. Many people don’t want to bear the full risk of making a single mistake that could wipe out their finances or assets.

That’s why professional firms are increasingly entering the decentralized technology space. Consumers and businesses can capture many of the benefits of decentralization while reducing exposure to its sharpest risks. This is often as simple as choosing more consumer-friendly or centralized options, especially when priorities are practical, like faster or cheaper settlement. Of course, those choices carry their own risks. It ultimately comes down to where you choose to take risk as an individual or organization. This piece isn’t about praising DeFi or CeFi. That’s already been done. It’s about getting clear on trust in this new landscape so we can better understand risk and evaluate vendors, products, and services accordingly.

Why DeFi “Trust” Claims are at Least Partly Garbage

Full Decentralized Maximalists like to extol certain virtues like Code is Law and Cryptographic integrity, and so on that all lead to this New World being so much safer and more trustworthy than the old. The problem is that a lot of this hype is true, while at the same time other parts are somewhere from “ok, maybe mostly true,” to “kind of not really.” The worst part? Some things are true, but as a practical matter, not really. Let’s turn on some sarcasm for a moment. For example, you can easily make a super secure wallet. One that you yourself can’t even get back into. Ever. Is that secure? You betcha. Totally secure. True. Good idea? Obviously not.

The best way we can likely take advantage of the new is to understand the layers and where the trust points are. And also remember that some of the claims may be true one day, but are still aspirational right now.

Here we go. Let’s start with wallets because that’s where most begin their interface with everything else. One of the biggest myths in crypto is that DeFi wallets are trustless. I don’t know why. I think maybe it’s just a good pithy phrase to say. In reality, wallets sit at the intersection of cryptography, software, governance, and the real world. They don’t eliminate trust. Maybe they manage it across layers. Understanding those layers is becoming essential as DeFi collides with scale, cross-chain activity, and regulated assets.

The Chain Is the First Trust Anchor

Every wallet begins by trusting the underlying blockchain. Consensus rules, client implementations, and canonical chain state are taken as ground truth. When a wallet connects to Ethereum, it assumes the network is enforcing validity correctly and that signatures and state transitions mean what they claim to mean. This is hard cryptographic trust. If this layer fails, nothing much else matters.

Every wallet starts by trusting a blockchain’s consensus rules and client software. Using Ethereum as a chain of choice, when a wallet connects, it assumes:

the chain’s consensus rules are valid,
the client implementations are honest,
and the canonical chain reflects reality.

This is hard cryptographic trust: signatures, mathematical proofs, and block validation. If this layer fails, everything fails. Example: Wallets like MetaMask rely on Ethereum’s finality guarantees and verified client behavior to determine balances and transaction validity. The key term here is “consensus mechanisms.” Here’s the good news. This layer seems fairly solid for top Layer 1 blockchains. Most of the problems we’ve seen have been at the interfaces to them or bridges and such.

Infrastructure Expands the Trust Surface

Infrastructure can mean a lot of things. For now, I’m limiting to the Nodes that take on Remote Procedure Calls (RPCs) from client software. Most users do not run their own nodes. Wallets rely on RPC providers and infrastructure services to read chain state and broadcast transactions. That introduces operational trust. You are trusting availability, accuracy, and neutrality. This is not enforced by cryptography. It is enforced by reputation, contracts, and habit. When infrastructure providers throttle, censor, or fail, wallets still function, but reality can be distorted.

One reason most users don’t run their own nodes is chains get huge fast. Wallets therefore trust infrastructure providers. By default, many wallets route requests through services like Infura or Alchemy. Supposedly upwards of 90% of DeWhatever traffic runs through just these two. There’s other options, but these are the 800-lb gorillas. Even if you fully trust Infura, Alchemy, or any other RPC provider, their availability risk looks a lot like an AWS or hyperscaler outage. They might be perfectly honest, and yet on occasion fail. And we’ve seen this happen. When a major provider has an outage, wallets can’t fetch balances, transactions won’t broadcast and users think “the chain is down.” But the chain is fine. The access layer failed. This undercuts the idea that decentralization automatically implies resilience. I am not trying to disparage either of these providers. They’re top of the industry because they do a great job. Just understand that resilience depends on diverse access paths, not just decentralized consensus. A decentralized chain accessed through a centralized pipe behaves like a centralized system in practice.

This trust is operational, not cryptographic. Is the Remote Procedure Call (RPC) returning accurate state? Is it censoring or rate-limiting transactions? Is it logging user metadata? Example: MetaMask’s default RPC historically pointed to Infura, which sparked debate after Infura geofenced sanctioned regions in 2022. Maybe that seems morally correct or legally required. At the same time, no one can legitimately claim neutrality of decentralized at that point. Is this a problem? Not really. You know, until it is. Concentration may be natural for some types of things and business entry into commoditized sectors with existing gorilla marketshare owners isn’t usually a recipe most VCs want to fund. It might be more costly to build products using multiple RPCs to get to blockchains, but that is an option to mitigate this issue.

Layer 2 Systems Add New Assumptions

Layer-2 networks shift execution off the base chain while relying on it for settlement. Various types of rollups do things like add cryptographic validity proofs showing computation was done correctly without revealing underlying details. Wallets must now trust sequencer behavior, exit guarantees, and proof-verification assumptions. What’s really happening is that users trust cryptographic proofs or fraud-proof mechanisms to correctly represent computation that occurred off-chain. These systems are powerful and seemingly sound, but they introduce new failure modes that do not exist at Layer-1. Trust is not removed, but redistributed. As usage grows, wallets increasingly operate on Layer-2 networks.

Example: Wallets interacting with Optimism or Arbitrum rely on fraud-proof mechanisms and Layer-1 enforcement to ensure correctness even if operators misbehave. There are many scaling approaches, each with different tradeoffs.

Cross Chain Activity Is a Trust Multiplier

Cross chain liquidity and modular settlement fragment execution, messaging, and finality across systems. Bridges and relayers become critical points of failure. Most major DeFi exploits have not been consensus failures. (These have been rare for top chains.) They have been trust failures at the bridge or messaging layer, which have happened with some frequency and have drained billions. Wallets today largely hide this complexity from users, even though it is one of the largest sources of risk. It’s not deception, it’s because wallets try to abstract complexity away, as they should for usability, but there’s a side effect that you can’t see trust boundaries.

Think about this, an “easy” one-click swap might actually bundle all of this: a DEX, a router, a price oracle, sometimes a bridge, sometimes an aggregator. All of this behind one swap button!

Meanwhile, there’s also a more silent reliance on “soft” trust anchors. Wallets quietly depend on: token allowlists, verified contract registries, name resolution, scam heuristics.

So Wallets must now trust: bridge contracts, relayers, oracle-style message verification. Example:
Major exploits (Ronin, Wormhole) weren’t Layer-1 failures they were bridge trust failures. For wallets, this means warning users where trust shifts, not pretending it disappears.

As DeFi moves deeper into cross-chain systems, stablecoins, and RWAs, this design choice matters more. The next generation of wallets will not just execute transactions. They will need to make trust visible without making crypto unusable. This is a product problem, not a cryptography problem.

Soft Trust Anchors Shape Behavior More Than Code

Token lists, verified contract badges, Ethereum Name Service (ENS) resolution, and UI warnings are not cryptographic roots of trust. They are socially agreed shortcuts. Wallets and users rely on them heavily because humans cannot audit bytecode or evaluate every contract interaction. These soft anchors are not enforced by math, but they strongly influence real outcomes. They are invisible until they fail.

Many of the most influential trust mechanisms in wallets are not cryptographic. Consider the following: token allowlists (Uniswap, CoinGecko), verified contract badges (Etherscan), ENS name resolution.

These are some of the soft trust anchors. Example: A wallet may show a token as “verified” because it appears on a popular list, not because the protocol enforces anything.

Stablecoins Make Trust Explicit

Stablecoins expose the trust tradeoff clearly. You are trusting that an issuer is telling the truth about off chain assets and that custodians, banks, and administrators are doing what they say they are doing. No blockchain can prove that dollars exist in a bank account. Attestations and audits reduce uncertainty but do not eliminate it. Stablecoins are not trustless. They are trust minimized interfaces to legacy finance.

With stablecoins, you are explicitly trusting that someone off-chain is telling the truth about assets you cannot see. It’s kind of like Off-Chain Truth + On-Chain Enforcement. Unlike other native crypto coins or tokens, stablecoins depend on real-world assets (cash, Treasuries, repos, bank deposits). That means they’re ironically safer. It’s ironic because there’s real dollars backing them. But there have been problems. Why? Because… No amount of cryptography can prove the dollars exist. You must trust several components; the legal structure, the issuer, the custodian, the auditor, a lot of folks actually. Fortunately, stables have become so big and visible, it should be easier for people to verify real world auditing. For example, Circle publishes monthly attestations, and Tether publishes reserve reports. They attest that reserves exist. But the blockchain cannot verify bank balances. These are claims, not proofs. And we have to trust issuers. And auditors. We’ve seen plenty of TradFi situations where auditors got it wrong.

So… Stablecoins are not trustless. They are trust-minimized interfaces to legacy finance. You’re not trusting less. Just understand what you are trusting. That’s fewer intermediaries, clearer rules, and faster consequences. There’s tons of stablecoin talk right now. It’s the flavor of the month and year. But it’s not magic.

RWAs Go Even Further

Real World Assets (RWAs) rely on legal reality, human judgment, and continuous off chain data. Ownership, priority, defaults, cashflows, and enforcement live outside the chain. Oracles do not prove reality. They attest to it. Issuers, administrators, and governed registries decide what counts as truth and when it changes. Tokenization does not remove these dependencies. It makes them programmable, visible, and faster to enforce.

Platforms like Securitize function less like DeFi primitives and more like on chain transfer agents. That is not a flaw. It is the cost of bringing regulated assets on chain.

RWA (Real-World Assets) are even more trust-dependent than stablecoins, and it’s important not to pretend otherwise. The difference is where the trust sits and how explicitly it’s handled. The legal reality of RWAs and if there’s some off chain legal structure, plus data feeds. When you buy an on-chain RWA token, you are trusting that the asset actually exists, your claim on it is legally enforceable, that the state of it is being reported accurately, and if there are cash flows, like redemption or whatever, they’ll be honored. Not one of these things is natively provable by a blockchain.

Let’s try to sum this up: RWAs do NOT make TradFi assets trustless. At all. But nor are they fake DeFi. They’re in between. They make real world trust programmable, visible and faster. But it doesn’t at all eliminate real world trust. Traditional finance already relies on trust; it just hides it behind paperwork, batch settlement, and intermediaries.

Wallets Cannot Avoid Root of Trust Decisions

Every verifier needs a starting point. Browsers ship with trusted certificate authority stores. Wallets ship with trusted chains, RPC defaults, standards, and verification logic. Compliance aware wallets must also recognize identity and attestation frameworks. The question is not whether wallets trust something. The question is how narrowly, transparently, and replaceably that trust is defined. It might even be valid to think of a wallet as a trust router of a sort. This topic is really worth an extensive discussions of its own. Maybe not so much the wallets as general Root of Trust and what that means here.

Bottom Line

DeFi does not remove trust. It just restructures it. A lot of it can be programmatic and by math alone. At least for pure chain based operations. But anything that touches the real world at all? There’s just going to be some friction. The real innovation is not pretending there’s some magical new trust wand. Nor do have to be cynical and say better trust does not exist. It is making trust explicit, scoped, auditable, and enforceable by code once human judgment has occurred. That’s still a great and valuable thing.

Wallets sit at the center of this shift. The ones that win will not hide trust behind slogans. They will surface it clearly and let users see exactly what they are relying on and why. It’ll take awhile because it’s going to take both better interfaces and experience as well as user education and experience. Those just take more time. The same as the internet, and browsers, and everything else.

What More Do We Need?

This part is largely more opinion, but here you go…

We need root of trust authorities. And it’s just fine if some or most are centralized or regulated.

Because if we’re being candid with ourselves, the answer is ideally not “more code.” And it’s not “better cryptography,” at least not by itself. What we increasingly need is explicit, legitimate governance, especially once these systems touch the real world in any meaningful way.

Industry consortia can help. They always have. UPC codes, shipping standards, accounting rules, even large parts of the internet itself were coordinated this way. But decentralized finance, stablecoins, and RWAs are not just interoperability problems. They are questions of legitimacy, enforcement, and accountability. At some point, someone has to decide which claims are valid, which entities are authorized, and what happens when things go wrong. It’s fine that the rails themselves and transactions may be cryptographically secure. But people, (and for that matter machines), live and operate in the real world and with various other entities. Even digitally native transactions, perhaps done by AI agents on our behalf, will still need these assurances.

That means we need recognized and useful roots of trust.

Not necessarily gatekeepers deciding who is allowed to transact, but authorities that can be referenced when truth, identity, ownership, or compliance must be anchored to reality. This is already how the world works. Courts resolve disputes. Regulators license entities. Governments define legal persons and property rights. Crypto does not replace this. It routes around parts of it, until it can’t. There may be some general areas of de facto trust, such as some protocols themselves or a few top oracles.

There are some supposed solutions that are nascent. What we still need is something like a globally recognized certificate authority system. Maybe a standardized legal identity root and an interoperable, regulator-legible trust framework. Verified Legal Entity Identifiers, (vLEIs), are one idea, where issuers start with accreditation by the Global Legal Entity Identifier Foundation (GLEIF). And The Sovrin Foundation has tried to build a global trust governance foundation framework, but it seems like they’re shutting down their mainnet this spring. The ideas for governance may be durable, but this implementation apparently was not. The internet already runs on trust frameworks that outlive specific technologies, like DNS, certificate authorities, payments networks, and identity registries all prove that governance can survive infrastructure. Blockchain really doesn’t have this sorted out just yet. Web3 is not trustless by accident. It’s intentionally trust-minimized, and still actively negotiating where trust should live. This isn’t failure. (Or at least I don’t believe so.) We can just call it immaturity. The internet went through similar issues before global standards stabilized.

The real opportunity here, (again, my opinion anyway), is not to eliminate authority, but to make it explicit, scoped, and auditable. To move trust decisions out of back rooms, PDFs, and private emails, and into transparent registries, attestations, and enforceable rules. Ideally, those rules are narrow, replaceable, and visible to users rather than hidden behind UX abstractions. It may be desirable and fine to have some aspects wholly private and use things like zero knowledge proofs to complete transactions. There are philosophical arguments around this; e.g., tracking everything from cash payments to a babysitter, loaning a few dollars to a friend, to whether you’re legally buying cannabis or a firearm, or other items may be private issues. However, we would still need confidence that the entities we’re transacting with are legitimate.

Whether this all ultimately looks like national regulators, international bodies, treaty-backed frameworks, or something new entirely is still an open question. But pretending that global financial systems can function at scale without any recognized root of trust is wishful thinking. Even the internet eventually needed certificate authorities.

If DeFi is going to mature, it won’t be by clinging to slogans about trustlessness. It will be by acknowledging where trust is unavoidable, deciding who or what should hold it, and designing systems that make those decisions legible, contestable, and hard to abuse. Without this, we’ll end up with a scattered collection of wallets that can only interoperate within walled trust environments of some sort, and likely also struggle mightily with fallout from irrecoverable wallet assets. That is, we also don’t want to end with with digital assets, (financial, identity, or otherwise), that are so cryptographically secure, we make it so we’ve lost them forever. The same issues we’ve always had will remain. Whom and what do you choose to trust? We’ll still need to answer that for ourselves.