From Wallet to Chain: A Bridge of Two Worlds on an Ethereum Transaction

A Joint Whitepaper by Nethermind and Deutsche Bank

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As the digital asset ecosystem matures, the intersection of public blockchains and institutional finance becomes increasingly relevant. In collaboration with Deutsche Bank, Nethermind’s latest whitepaper explores whether Ethereum’s public infrastructure can satisfy the operational, compliance, and regulatory expectations of the traditional financial sector.

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The whitepaper proposes that Ethereum, through its evolving architecture, is capable of delivering outcomes equivalent to those achieved by centralized financial systems, without abandoning its foundational principles of decentralization, transparency, and open participation.

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This article highlights the report’s key findings on how Ethereum’s protocol design aligns with institutional-grade requirements, and what developments are critical to ensuring regulatory confidence at scale.

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→ Download the full whitepaper here

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Key Takeaways

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1. Ethereum’s Incentive Design Supports Economic Security

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Maximal Extractable Value (MEV) is a native feature of Ethereum that allows validators and builders to capture value from transaction ordering. While often framed as a risk, MEV is also a structural incentive that reinforces validator honesty and network participation.

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The whitepaper details emerging solutions such as encrypted mempools, private order flow channels, and MEV-sharing protocols that preserve fairness, enhance user protection, and maintain the integrity of Ethereum’s incentive structure.

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2. Proposer-Builder Separation Enables Role Specialization

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Proposer-Builder Separation (PBS) separates block construction from block proposal, mitigating conflicts of interest and supporting a more transparent validation process. This architectural division introduces whitelisting, builder accountability, and private transaction routing, all of which allow financial institutions to engage with public infrastructure while maintaining control over transaction inclusion and ordering.

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PBS also reduces opportunities for validator self-dealing and allows censorship filters to be applied without undermining decentralization.

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3. Single Slot Finality Aligns with Real-Time Settlement Requirements

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Institutional-grade financial systems demand timely and irreversible settlement. Ethereum currently achieves economic finality in approximately 13 minutes, but upcoming upgrades such as Orbit and Single Slot Finality (SSF) aim to reduce this to around 12 seconds.

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Orbit introduces validator capping and consolidation to preserve security while enabling fast, definitive settlement. This aligns Ethereum with the expectations of real-time systems, such as T+0 securities settlement, without introducing centralized intermediaries.

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4. Trusted Execution Environments Reduce Centralization Risk

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Block building remains one of Ethereum’s more centralized components. The adoption of Trusted Execution Environments (TEEs) allows multiple independent operators to run shared builder logic in a verifiable and tamper-resistant environment.

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BuilderNet, a collaborative effort by Flashbots, Nethermind, and BeaverBuild, is a leading example of how TEEs can decentralize block construction, preserve fairness, and protect user data, all while maintaining performance and censorship resistance.

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5. Layer 2 Networks Combine Scalability with Familiar Governance

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Layer 2 networks provide scalability and cost-efficiency, but often rely on centralized sequencers that control transaction ordering. These sequencers mirror traditional market infrastructure and can be licensed and governed under financial regulatory frameworks.

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Mechanisms such as forced inclusion help mitigate abuse and ensure user access. The whitepaper suggests that a Layer 1–Layer 2 architecture, where Ethereum acts as the trust layer and L2s handle scalability, could serve as a blueprint for tokenized financial systems.

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6. Compliance Can Be Achieved Through Functional Outcomes

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The whitepaper introduces the concept of functional equivalence: Ethereum can achieve regulatory outcomes such as auditability, transaction traceability, and market integrity through cryptographic mechanisms, validator incentives, and protocol design.

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Examples include validator slashing for misbehavior, private RPCs for transaction routing, and inclusion lists to mitigate censorship. These mechanisms provide effective compliance without replicating centralized control structures.

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Building a Public-Permissioned Infrastructure

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The whitepaper outlines a path forward through public-permissioned architectures, where open networks are layered with permissioning, identity management, and compliance controls. These structures retain the cost-efficiency and composability of public chains while addressing key institutional concerns.

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A collaborative framework between regulators, infrastructure providers, and institutional participants is essential for this convergence to succeed.

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Conclusion

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Ethereum’s public infrastructure is not at odds with financial regulation. Rather, it offers a distinct but valid path toward the same objectives—transparency, fairness, and resilience, achieved through different mechanisms.

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By focusing on outcomes rather than institutional form, the financial system can adopt public blockchain technology without compromising its foundational requirements.
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→ Download the full whitepaper here

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Convergence and Opportunity

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Nethermind and Deutsche Bank present this analysis as a milestone in converging decentralized innovation and institutional trust. The findings chart a path toward financial infrastructure that is simultaneously secure, scalable, and compliant, meeting the needs of today’s institutions while preserving blockchain’s transformative potential.

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We encourage you to explore these insights as you consider your organization’s position in the evolving financial landscape.