With more than 100 layer 2 (L2) blockchains, you are excused to think that Ethereum is too expensive and too slow. But ask any institution to prepare to settle an exchange of interest rates of $ 500 million where they will be built, and the response is Ethereum. Reason reveals everything about how it is likely to develop institutional defi.
The metrics that are important for institutional adoption are completely different from retail sale. While retail users flee from Ethereum transaction rates for cheaper chains, institutions will gladly pay for security cousin when moving hundreds of millions. The premium that people are willing to pay for a safe infrastructure is not a problem. Ethereum’s “weaknesses” are actually their institutional pit.
A history of two markets
When examining the numbers, the difference in perspective between retail and institutional investors makes sense. If you are buying a memory for $ 50, you do not want to pay $ 10 in transaction rates. But when it comes to solving an exchange of interest rates of $ 500 million, paying $ 10 to ensure that a safe transaction is a small price for that tranquility.
You do not need to search beyond tradfi to see that this perspective is not new, and the security premium to make transactions in Ethereum is actually the product. There is a reason why institutions pay more to trade with the NYSE than in the pink leaves (values in OTC exchanges), and why they continue to make transactions through Swift, despite their costs. It is about legitimacy and a proven history of making transactions safely and in accordance with. The same will apply to Blockchains.
The idea of having hundreds of millions of dollars in funds trapped in an inoperable network is the definition of a nightmare for institutions. Many institutions value the safety of the chains tested in battle as Ethereum instead of those that focus on speed. If you remove a thing of this opinion article, understand that traditional finances always pay for infrastructure reliability.
Preparation for regulations
What investors most need is a solid -base layer block chain in the market that is widely accepted among financial institutions as a neutral settlement layer. Ethereum obtains serious institutional participation because the network is properly integrated with the existing infrastructure. It is for what was built.
A test point is the number of main banks that are based on Ethereum, which obtain regulatory comfort with the decentralization of Ethereum, as well as the set of developer talents that have concentrated, and will continue concentrated within the Ethereum ecosystem. This could be a cycle of institutional adoption self-effort.
A feature, not a fault
We need to stop seeing the high rates of Ethereum as a failure: they are a characteristic that naturally segments the market. Some chains are intentionally optimized for low -cost micro transactions, fast. Institutions will need and pay the Fort Knox digital equivalent for large ones, where liquidity is available.
Instead of observing metrics as daily active users or translation counts, institutions are adopting a more fundamental approach. They are observing where regulated entities are building their infrastructure and focus on the great institutional settlement game.
Then, the next time someone declares Ethereum dead, ask them where I would prefer to solve a transaction of $ 500 million. The response reveals why Ethereum’s disappearance reports are very exaggerated, and why the institutions that are betting on the “boring” Ethereum infrastructure will capture the real value in the institutional future of Defi.
Read more: Paul Brody – Ethereum has already won
