Intro

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This report is a joint publication by Nethermind, L2BEAT, and Etherealize. Together, the teams outline how Ethereum and its Layer 2 networks are evolving into core infrastructure for institutional finance. The analysis examines scalability, security, data availability, and compliance, and provides a clear view of why L2s are becoming the preferred foundation for modern financial systems.

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As blockchain adoption accelerates, financial institutions are assessing whether public infrastructure can meet operational and regulatory expectations. Findings show that Ethereum’s architecture and its expanding L2 ecosystem now support the performance, control, and auditability required for institutional use.

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This article outlines the report’s key insights on scalability, security, compliance, and the operating models institutions are adopting.

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→ Access the full report here

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Key Takeaways

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1. Institutions Are Moving Into Production

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Stablecoins settled more than 27 trillion dollars last year, exceeding Visa’s annual volume. Firms such as JPMorgan, BlackRock, Société Générale, and Franklin Templeton are already using Ethereum-based infrastructure for payments, settlement, and tokenized assets. The shift from pilots to production systems is now visible across the ecosystem.

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2. Layer 2 Networks Deliver Scalability and Control

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L2s extend Ethereum’s security with higher throughput, lower fees, and customizable execution environments. Institutions deploy L2s to manage governance rules, permissions, privacy settings, and compliance requirements, while still anchoring settlement to Ethereum.

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Benefits include:

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• Significant cost reductions through batching
• Customizable execution environments
• Privacy through zero knowledge proofs
• Compliance enforcement via onchain identity frameworks

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3. Public and Private L2 Models Support Different Operating Requirements

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Public L2s give institutions immediate reach. They provide access to existing users, liquidity, and shared infrastructure, which makes them suitable for products that benefit from open participation. Private L2s offer a different value.

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They allow institutions to control who participates, how data is handled, and how governance is applied. Both models settle to Ethereum, which means institutions can choose the environment that fits their needs without losing interoperability.  

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4. Rollups Remain the Strongest Security Model‍

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Optimistic and zero knowledge rollups offer the highest security guarantees among L2 architectures. Both inherit Ethereum’s validation and data availability, which limits new trust assumptions and keeps settlement verifiable.

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Sidechains and alternative L1s do not provide the same level of assurance. This is why rollups remain the preferred option for regulated or high value workflows.

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5. Compliance Is Strengthened, Not Compromised‍

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Compliance on Ethereum is becoming more robust as the technology matures. Onchain identity, rule based transfers, and zero knowledge proofs allow institutions to enforce requirements before settlement, while protecting sensitive information. This aligns blockchain activity with regulatory expectations and reduces reliance on manual, off chain processes.

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6. Case Studies Highlight Practical Adoption

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The report includes early production examples:

• J.P. Morgan testing deposit tokens on Base
• Société Générale issuing euro and dollar stablecoins
• Visa experimenting with ZK proofs for private tokenized payments
  
  
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Building Institutional-Grade Infrastructure

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The report outlines how organizations evaluate L2 options, implement operating models, and integrate compliance controls. It also highlights when the Ethereum mainnet should remain the settlement anchor for high-value transactions, canonical asset registries, or audit requirements.

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Ethereum and its Layer 2 networks provide a unified architecture for financial institutions. They combine the neutrality and security of a public ledger with the performance, control, and compliance features required for regulated markets. Institutions that engage now will help shape emerging standards and secure early advantages as blockchain becomes core financial infrastructure.

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→ Read the full report here