•Blockchain alleviates distrust issues only partially.•Upstream player opts for blockchain if it enables higher quality products•Downstream player opts for blockchain if it increases sales.•Blockchain’s downstream damages deter both players from its adoption.•Only future eco-friendly blockchain technology can lead to its diffusion. This research proposes a game theory model in a supply chain (SC) involving one manufacturer and one retailer. The SC works in a global market in which consumers are located worldwide and subject to traceability issues that can create distrust of the product quality. This issue can be resolved by implementing blockchain technology which provides benefits in terms of high traceability along with low transaction costs. However, blockchain negatively impacts the environment because of their high energy consumption. Therefore, in this study, we capture the trade-offs between traceability and sustainability for blockchain adoption by characterizing a game theory model. Our findings show that high levels of distrust pushes firms to avoid the implementation of blockchain. In such circumstances, blockchain is not sufficient to make consumers recognize the product quality and trust the firms’ practices. In contrast, low levels of distrust can make blockchain an economically suitable technology conditioned to minimal environmental damages; otherwise, firms need to carefully evaluate the trade-offs between distrust and sustainability. Since the adoption of blockchain leads to an increase in prices and decrease of distrust, two factors determine whether to pursue this technology or not: low consumer sensitivity to price and high sensitivity to quality. In this study, we develop three specific cases where we model: 1) the direct impact of blockchain on distrust, 2) a stochastic distrust term, and 3) a Stackelberg game. Each case confirms our results and strengthens the robustness of our findings.