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Executive Summary

• Ethereum marked its ten-year anniversary as a leading blockchain with increasing institutional support and regulatory clarity. Traditional finance (TradFi) views Ethereum as the most significant trade for the next ten to 15 years. We believe Ethereum is currently in a strong position, yet it must bolster its competitive edge to maintain this trajectory.
• TradFi favours a blockchain that can satisfy its needs for:
• • Operations with high security and reliability. Ethereum's robust decentralisation and ETH's substantial economic value offer strong security against potential attackers.
  • Support the launch of products compliant with core business and regulatory obligations. Ethereum fulfills this requirement through the integration of ERC-3643 (a permissioned token standard) and zero-knowledge proof (ZK) technologies, which enhance transaction privacy.
  • Robust liquidity to offer a good user experience and access untapped internet capital. Enhanced liquidity translates to reduced trading slippage and easy access to potentially untapped capital. Ethereum stands out among its rivals with its leading market share in stablecoins and real-world assets.
• To achieve its goal to be a highly scalable, secure, and decentralised global computing and settlement layer, Ethereum needs to ensure its network is anti-fragile and strengthen its moat:
• • Ethereum can achieve anti-fragility through network effects, continuous expansion of its ecosystem and the supporting resources.
  • Ethereum is building its moat through:
  • • Security Hardening: Ethereum Foundation’s new security initiative aims to boost institutional trust. Censorship resistance is enhanced by EIP-7732’s proposer-builder separation and zero-knowledge Ethereum Virtual Machine (zkEVM) integration.
    • Scalability and EVM Distribution: Ethereum’s roadmap addresses scalability challenges while accumulating network effects by attracting innovation built on EVM, which enhances the network’s resilience.
• Ethereum's adoption in TradFi faces challenges, including its unpredictable development progress, regulatory ambiguities, and scalability issues. Its long-term viability hinges on the ability to capture and promote productive work on the chain.

1. Introduction

Ethereum has achieved the ten-year anniversary of its mainnet launch, taking it from a whitepaper to one of the most widely used blockchains supporting billions of dollars in on-chain value. This comes at a time of rising institutional support and regulatory clarity. US spot ETH ETFs set an all-time high in monthly net inflows in July 2025, ETH treasury companies accumulated more than 3% of the total ETH supply, financial institutions are increasingly exploring real-world asset (RWA) tokenisation, and more. 

Fundstrat’s Tom Lee is one of the Ethereum advocators who mentioned that Ethereum is “arguably the biggest macro trade for the next ten to 15 years”, and the preferred chain for Wall Street’s tokenisation and stablecoin rails, noting that a majority of tokenised assets reside on Ethereum today. This report examines key questions regarding Ethereum:

• What’s Ethereum’s appeal to TradFi? 
• How can it strengthen its position as a favourable asset for TradFi? 

2. What’s Ethereum’s Appeal to TradFi?

In the interview, Tom Lee stated that “Wall Street is looking for a chain that can support real-world assets while complying with regulations — Ethereum is emerging as that intersection”. In our view, Ethereum occupies a strong position among other blockchains because it is arguably the most secure decentralised smart contract platform, with deep liquidity on stablecoins and RWAs.

Security and Decentralisation

In a decentralised network, the level of difficulty to impact a network needs to be investigated carefully. Within the context of a Proof of Stake (PoS) system, validators that stake ETH to secure the network play a key role.

Ethereum’s active validator set surpassed 1 million, far ahead of other major PoS chains like Solana (1,038 validators on mainnet) and Avalanche C-Chain (906 validators). The breadth of participation supports Ethereum’s decentralisation. Its economic security is reinforced by its position as the second largest crypto by market capitalisation, making 51% attacks  prohibitively expensive. To prevent the chain from finalising, an attacker would need to control at least 33% of the total stake, while controlling future block contents would need at least 51% of the total staked ETH. 

However, Ethereum is not perfectly decentralised. Top ten staking entities represent 64% of the staked ETH, with Lido alone accounting for around 24%. Although Lido’s percentage share was down from nearly 30% a year earlier, this highlights potential centralisation risks. In contrast, Solana’s Nakamoto coefficient (number of nodes needed to control one-third of voting power) was 20 in April 2025.

Additionally, the Pectra upgrade introduced EIP-7702 (account abstraction), enabling wallets to have smart contract functions. Account abstraction enables multi-signature functionality, where multiple approvals are required to execute a transaction, significantly enhancing security for shared or high-value accounts. It also facilitates social recovery mechanisms, allowing users to regain access to their wallets through a network of trusted contacts, mitigating the risk of losing funds from forgotten private keys or lost devices. 

The integration of these sophisticated functionalities directly into the wallet experience streamlines the user journey and aligns Ethereum more closely with the intuitive interfaces of traditional financial applications.

Compliance

Ethereum has pathways to satisfy compliance requirements. ERC-3643, the standard for permissioned tokens and RWA tokenisation, incorporates identity and transfer controls to ensure compliance on the smart contract level. 

In March 2025, the Depository Trust & Clearing Corporation (DTCC) integrated ERC-3643 support to its ComposerX suite for managing digital assets. In July 2025, the US Securities and Exchange Commission (SEC) Crypto Task Force met with the ERC-3643 Association (a partnership of leading tokenisation firms, banks, and identity providers) to discuss compliant tokenised securities, signalling growing regulatory engagement. 

Meanwhile, the integration of zk-proof technologies allows transaction privacy without compromising blockchain transparency, aligning with institutions’ demands.

Liquidity on Stablecoins and RWA

Ethereum facilitated trillions of dollars in stablecoin volume through USDC ($5.17 trillion) and USDT ($2.63 trillion), maintaining a 53% share of the total stablecoin supplies.

Ethereum dominates RWA tokenisation with $8.3 billion in tokenised assets and 52% of all tokenised RWAs. The platform hosts $5.3 billion in tokenised US Treasuries, representing the largest on-chain fixed-income market. Institutions, including BlackRock’s BUIDL and Ondo Finance’s OUSG, primarily have their tokenisation initiatives on Ethereum.

3. How Can Ethereum Solidify Its Moat?

Institutions want a blockchain that can satisfy their needs for compliance, security, scalability, as well as have the presence of high liquidity across diversified assets. Ethereum already addresses much of this, particularly around security, decentralisation and its EVM network effect. To achieve its goal to be a highly scalable, secure, and decentralised global computing and settlement layer, we expect to see Ethereum further develop anti-fragility and strengthen its moat.

2.1 Anti-fragility

Ethereum should be anti-fragile because it operates as critical infrastructure for the global digital economy and faces constant threats that require the network to not just survive but grow stronger through adversity.

Anti-fragility means systems that improve under stress rather than just surviving it. Unlike resilience (resisting shocks) or robustness (staying unchanged), anti-fragile systems get stronger through adversity.

Why does Ethereum need anti-fragility?

• Critical Infrastructure: As the foundation for hundreds of billions of dollars in DeFi, any weakness creates systemic risks. Fragility could cascade throughout the entire digital finance ecosystem.
• Hidden Vulnerabilities: Research shows Ethereum's PoS faces risks like “staking runs” that could destabilise consensus. Anti-fragility turns these potential weaknesses into strengths.
• Centralisation Pressure: Large validators like Lido control significant staked ETH. Anti-fragile design helps resist capture and maintain decentralisation under pressure.

Ethereum can achieve anti-fragility through evolutionary development and network effects. Unlike centralised systems with single points of failure, Ethereum's decentralised development process means multiple independent teams work on different clients, improvements, and L2s. This diversity creates natural redundancy and makes the system harder to capture or corrupt. 

Ethereum’s anti-fragility is further reinforced by the continuous expansion of its ecosystem and the supporting resources. 

Ethereum Foundation (EF) recently formalised an Ecosystem Development (EcoDev) initiative to support multiple stakeholders using Ethereum, from startups to developers, to businesses. This includes fostering open communication, providing strategic funding, and grants. These steps under the new leadership structure aims to address earlier concerns on EF’s lack of transparency and communication. 

The foundation also outlined a vision for EVM 2.0, a minimal, zkSNARK-friendly instruction set designed to improve ETH’s execution layer while preserving EVM compatibility. By simplifying opcodes and optimising for zk-proofs, EVM 2.0 potentially reduces proving costs and improves execution efficiency. These upgrades will positively impact the broader EVM ecosystem, cementing Ethereum’s role as the hub for smart contract standards.

2.2 Strengthen Moat

Security Hardening

EF recently launched the Trillion Dollar Security initiative; one of the aims is to ensure companies, institutions, and governments would be comfortable storing more than $1 trillion of value on Ethereum. Phase 2 of this initiative focuses on setting minimum security standards for wallets and preventing users from blind signing without understanding the underlying code. This focus on baseline security and privacy is directly aligned with TradFi’s needs. 

In parallel, Ethereum is also making steps to ensure censorship resistance. EIP-7732 (Enshrined Proposer-Builder Separation or ePBS) was selected as a consensus layer feature in Glamsterdam, the upgrade following Fusaka in 2026.  ePBS separates consensus duties and transaction execution, eliminating the need for trusted middleware in block construction. 

EF also recently announced the integration of the zkEVM into Ethereum L1. This will allow near real-time verification of blocks while enabling on-chain privacy, marking its efforts to strengthen security on the main chain. 

Scalability and EVM Distribution

Ethereum’s rollup-centric roadmap addresses the scalability challenges. Dencun upgrade’s EIP-4844 introduced blobs to scale transactions on Layer-2 (L2) and reduce fees. Pectra’s EIP-7691 further raises blob throughput to 6 to 9 per block, keeping L2 data costs low. In August, Arbitrum and Optimism’s average transaction cost was just ~1.7% and ~0.2% of that before the Dencun upgrade in March 2024, respectively. Recently, Ethereum also raised the per-block gas limit with a target of 45 million units to improve transactions per second (TPS). 

This architectural improvement effectively divides responsibilities: the Ethereum network handles transaction settlement and security, including token issuance and redemption, while L2 solutions manage high-frequency operations like token transfers and trading.

Ethereum also benefits from the network effects of the EVM, which adds to the network’s resilience. With a ten-year track record and a vast network of developers, custodians and middleware providers, the EVM stack has become the execution standard for smart contracts. EVM has the largest number of full-time developers across all ecosystems, nearly four times that of Solana’s SVM stack.

Institutions also acknowledge the network’s importance, albeit through the use of custom chains. Securitize and Deutsche Bank mentioned plans to have custom Ethereum-based or EVM-compatible L2s. Circle also announced a new EVM-compatible Layer-1 for stablecoin finance, ARC. Although these suggest the rise of various tokenisation chains, they also highlight the importance of the EVM networks and Ethereum.

Ethereum’s scalability is reinforced by PeerDAS (Peer-to-Peer Data Availability Sampling), to be introduced in the Fusaka upgrade. It allows nodes to download only a subset of the blob data in a given block, theoretically allowing Ethereum’s throughput to increase eight times (from ~64 KB/s to ~512 KB/s). Glamsterdam will continue to build on PeerDAS to ensure continuous blob throughput scaling. 

While Ethereum remains the anchor layer for institutional tokenisation, competition is intensifying with low latency blockchains emerging and institutions demanding customisations and privacy. Ethereum’s moat depends on continuous improvements on technical deliveries as well as governance standards. We should continue to track metrics, including: 

• Stablecoin and RWA share by chain: Institutions’ blockchain preference
• Fee stability and network scalability: Blob base fees and the cost of L2 transfers to ascertain Ethereum’s attractiveness for high-volume transactions
• Developer community: Ethereum’s ability to attract and retain developers 
• Decentralisation: Concentration amongst staking providers

4. Conclusion

Ethereum will remain a top contender for TradFi institutions for use cases like tokenisation and funds settlement. Its unique combination of economic security, compliance-ready standards, deep liquidity, and EVM distribution anchors its role in institutional finance. Importantly, its roadmap, focused on scaling solutions for both the L1 and L2s while boosting protocol privacy and security, fits well with TradFi’s demands. 

Ethereum Foundation’s leadership reshuffle in early 2025 signals a more open, responsive approach to the needs of enterprises and developers. Its changes represent a maturation of the organisation from an experimental research group to a focused execution engine capable of delivering complex technical upgrades while preserving the open, permissionless, and censorship-resistant nature that defines Ethereum's core mission.

However, the widespread adoption of Ethereum within TradFi also faces several significant hurdles that warrant careful consideration.

Firstly, a key concern is the perceived length and complexity of Ethereum's development roadmap. The continuous evolution and numerous planned upgrades, while essential for its long-term viability, can create uncertainty for institutional investors who typically prefer stability and predictable timelines. This lengthy roadmap might also lead to a perception of perpetual ‘work in progress’, deterring those seeking a mature and fully-realised financial instrument.

Secondly, a critical question revolves around whether Ethereum's fundamental strengths — its security mechanisms, decentralisation, and the attractive staking yields — are sufficient drivers to propel its market capitalisation and growth to a level comparable with established financial assets. While these characteristics are highly valued within the crypto native space, TradFi participants may require additional assurances regarding regulatory clarity, scalability, and integration with existing financial infrastructure before committing substantial capital. The inherent volatility of the crypto market also remains a significant barrier for risk-averse institutions.

Finally, Ethereum's demand is heavily driven by speculation, specifically anticipating Digital Asset Treasuries (DATs) purchases, leading to a front-running risk where investors inflate prices ahead of large acquisitions. The key question is whether Ethereum's momentum can be sustained by its inherent value and utility after the initial DAT buying subsides, or if a correction will occur as speculative flows diminish. Long-term growth depends on moving beyond speculation to demonstrate enduring value to a wider financial audience.

Read the full report: Institutional Adoption of Ethereum – The Next Big Trade for TradFi

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Authors

Crypto.com Research and Insights team

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