Ethereum Foundation Report: A Basic Guide to Ethereum for Governments and Financial Institutions

Author: Ethereum Foundation

Compiled by: Jiahua, ChainCatcher

Core point of the report: The key systems for finance, data, and institutional collaboration are still controlled by a few intermediaries, access can be cut off at any time, while Ethereum provides a neutral digital public infrastructure that is not controlled by any company, alliance, or country.

The report supports this judgment with a set of data: The network is protected by $76 billion in staked ETH, manipulation requires over $50.7 billion and incurs automatic penalties; it has never been interrupted since its launch in 2015, while Solana has experienced at least 7 outages during the same period; $159 billion in stablecoins and over $15.2 billion in tokenized assets choose to settle on Ethereum, with projects from BlackRock, JPMorgan, Visa, SWIFT, and governments like Bhutan and India built on it.

The report also specifically responds to permissioned chains like Canton, Tempo, and GCUL: They merely replace the old system with a new set of rulers, the rules can still be modified by a few, and for governments and institutions, "no one can change the rules" is precisely the attribute that should be valued the most.

Executive Summary

Modern society increasingly relies on digital systems to transfer value and collaborate on a large scale, but the core systems for finance, data, and institutional collaboration remain fragmented, opaque, and controlled by a few intermediaries. This concentration of power means that intermediaries can cut off access at any time or under external pressure, creating single points of failure and limiting user autonomy.

As governments and institutions face increasing pressure in areas such as geopolitics, financial infrastructure, digital identity, data integrity, and AI governance, they increasingly need a shared neutral digital public infrastructure that is not controlled by any centralized entity or single country. Ethereum was created for this purpose.

Ethereum is not controlled by any organization, individual, or country. Like the core protocols of the internet, it is open, programmable, and globally accessible. The report lists a set of system-level metrics (unless otherwise specified, data is as of March 2026, from OpenZeppelin's technical risk assessment):

Most reliable: Ethereum has never been interrupted since its launch in 2015. In contrast, major Layer 1s like Solana, Ripple, BNB Smart Chain, Canton, and TRON have experienced 1 to 7 instances of being unable to process transactions, with one Solana outage lasting about 19 hours.

Highest economic security: Attacking Ethereum is designed to be prohibitively expensive. To unilaterally manipulate consensus and have a fraudulent transaction confirmed as final, an attacker would need about $50.7 billion, while the entire network is protected by about $76 billion in staked ETH. In addition to needing to buy $50.7 billion worth of ETH, the attacker would also incur losses of billions of dollars due to automatic penalties on-chain. In comparison, the cost to attack Solana, BNB Smart Chain, and TRON is approximately $23.3 billion, $11.3 billion, and $8.7 billion, respectively, and Solana and TRON lack this additional deterrent of automatic penalties.

Most trusted by institutions: As of March 2026, Ethereum hosts $159 billion in stablecoins, while Solana has about $15 billion and BNB Smart Chain about $14 billion. Ethereum also hosts over $15.2 billion in tokenized real-world assets, three times the combined total of BNB Smart Chain ($3 billion) and Solana ($2.1 billion). Major institutions building, deploying, or trading on Ethereum include the European Investment Bank, Franklin Templeton, BlackRock, JPMorgan, Huaxia Fund, Amundi, EY, Deutsche Bank, Fidelity, Société Générale Forge, Visa, PayPal, UBS, SWIFT, DTCC, Robinhood, Ant Group, and others.

Most trusted by governments and multilateral institutions: National or city-level identity systems in Bhutan and Buenos Aires, land registration in India, and humanitarian cash distributions by UNICEF and UNHCR are all built on Ethereum or its standards.

Most robust software: Ethereum maintains over 5 independently developed clients, effectively hedging against the risk of vulnerabilities in a single implementation. In contrast, 92% of Solana validators rely on a single client (as of June 2025, Agave), and BNB Smart Chain, TRON, Canton, and Ripple have no client diversity at all.

Largest developer network: As of May 2026, the EVM tech stack has nearly 11,000 developers supporting it, while Solana has about 2,600, BNB Smart Chain 837, TRON about 359, and Ripple about 272.

Largest DeFi ecosystem: As of March 2026, Ethereum's total locked value in DeFi exceeds $56 billion, while Solana has $6.9 billion, BNB Smart Chain $6 billion, TRON $4.1 billion, and Ripple only $49 million.

Strongest interoperability: ERC-20 has become the de facto standard for tokenized assets, and EVM is the most widely adopted execution environment. Building on Ethereum means that minimal changes are needed to migrate to compatible networks. In contrast, networks using proprietary languages or non-EVM runtimes (like Solana) require custom bridges and complete rewrites to interoperate with the broader ecosystem.

Environmentally friendly: After transitioning to proof of stake, Ethereum's power consumption has decreased by 99.98%, its carbon footprint by about 99.99%, and its energy efficiency is about 53,000 times that of the Bitcoin network and 100 times that of PayPal.

Future-oriented: Ethereum is the first Layer 1 network to incorporate post-quantum security into its core protocol roadmap, including dedicated research teams, a $2 million cryptography prize pool, and a phased migration path that does not require downtime or loss of user funds.

System Overview and Basic Concepts

What is blockchain?

Blockchain is a distributed digital ledger produced collectively by a network of participants running the same set of protocols. The protocol defines how transactions are verified, how blocks are generated, and how consensus on transaction order is achieved.

The ledger itself is the result: a chain of blocks linked by cryptography, containing verified transactions. The core feature of a "public chain" is that no single entity has exclusive control over the transaction records; the integrity of the ledger is maintained through cryptographic verification and the economic incentives of participants.

Modern economies and public systems rely on collaboration between independent entities that do not fully trust each other. The traditional approach is to introduce trusted intermediaries, such as banks, land registries, clearinghouses, and licensed institutions, substituting the direct trust between parties with the authority of institutions. In this model, the integrity of the records is tied to the integrity of the institutions maintaining them.

A sufficiently decentralized blockchain provides a more reliable solution for the same collaborative needs: consensus no longer comes from institutional authority but from transparent protocol rules and cryptographic verification, with transactions validated by a distributed network of independent participants. Trust is reinforced on two levels: verifiable technical rules in the operation of the protocol and collective governance when changes are needed.

How does Ethereum work?

Ethereum is a shared digital record maintained by a global network of independent computers, serving as a foundation for building applications and organizations in a decentralized, permissionless manner. There is no single owner, which gives Ethereum censorship resistance: no one has the authority to unilaterally cut off access, intercept transactions, shut down the network, or refuse service to specific participants.

A useful analogy is the internet. The internet allows anyone to publish information and build services without the approval of a central operator. If the internet is the public infrastructure for information, Ethereum is the public infrastructure for transactions and programmable commitments.

At its core, Ethereum consists of thousands of independent computers known as nodes. As of June 1, 2026, the Ethereum network has over 11,000 active nodes. The Ethereum Virtual Machine (EVM) is the execution engine that processes transactions and runs programs deterministically across all nodes.

Each full node maintains a copy of the Ethereum state, which is the authoritative record of all account balances, contract storage, and code.

When a user broadcasts a transaction, nodes execute it through their local EVM, using the current state and transaction as input to produce a new state, and then verify that the results are consistent with each other. Validators check whether the transaction complies with the rules; valid transactions are packaged into blocks and added to the permanent record, with a new block produced approximately every 12 seconds.

Users pay transaction fees to compensate validators for the computational resources they consume and to prevent abuse of the network.

Block production and finality are secured by the ETH staked by validators as economic collateral. To finalize a block, at least two-thirds of the active staked ETH must attest to it within a window of about 13 minutes.

If two conflicting final histories emerge, it means that at least one-third of the stakers signed both versions, which is a punishable offense, and the staked ETH of the involved validators will be automatically forfeited and they will be expelled from the validator set. The larger the scale of the attack, the greater the loss, making large-scale coordinated attacks economically self-destructive.

Ethereum also supports running programs on-chain, known as smart contracts: a set of code and data residing at a specific address. Smart contracts can define rules like ordinary contracts and additionally have the ability to automatically execute rules via code.

Any developer can create smart contracts and make them publicly available, allowing for the construction of markets, stablecoins, games, and other user-facing applications. In effect, Ethereum acts as a shared global settlement layer, just as the internet serves as a shared communication layer.

What gaps does Ethereum fill in today's internet?

The internet was originally designed as an open, permissionless public utility. Early standards like TCP/IP, HTTP, and SMTP intentionally maintained neutrality, interoperability, and freedom of implementation, with no entity able to decide who can access or what can be published. This architectural neutrality has made the internet the foundation of the modern global economy.

However, the layer of the internet that most users actually interact with today is far removed from its original design. Over thirty years, companies have built proprietary platforms on top of open protocols, which have become the actual gateways for the vast majority of digital activities.

Business, communication, identity, payment, and content distribution are mediated by a few operating entities, whose terms of service, opaque policies, and commercial motivations effectively determine the user experience. User data is captured and monetized by platforms, and access to APIs, audiences, and payment channels can be unilaterally revoked. While the underlying protocols remain public, the surface layer of everyday use has turned into a private territory built on public pipelines.

This analysis also applies to AI. Cutting-edge AI models are controlled by a handful of companies, creating single points of pressure: jurisdictions with authority over centralized operators can demand that they cut off AI capabilities for millions of users overnight.

Ethereum aims to fill this gap. It does not seek to replace the open protocols of the internet but to extend these protocols to the layer where openness has become thin, providing a neutral, auditable, programmable settlement layer.

It operates at the same level as commercial platforms but adheres to the principles of the underlying internet. Assets and data are held by their owners, applications can be composable rather than isolated from each other, the network continues to run, and no central operator can take it offline, kick participants out, or change the rules afterward.

This distinction is important for policy and institutional decision-making. Core issues of contemporary digital policy, such as data sovereignty, market concentration, financial inclusion, system resilience, and censorship resistance, are not failures of the foundational internet protocols but products of the commercialization of the experiential layer. Regulation can constrain the behavior of large platforms but cannot reconstruct the inherent structural neutrality of the protocol layer at the experiential layer.

What Ethereum provides is such a foundation: rules apply equally to all participants, no party (including its developers) can unilaterally change them, every transaction and contract is recorded on a public ledger that anyone can independently verify, applications default to sharing the same settlement layer rather than being isolated data islands, and the economic and cryptographic mechanisms that ensure their security are distributed among thousands of independent participants worldwide.

What is ETH, and what role does it play?

ETH is the native asset of the Ethereum protocol, serving as a mechanism for pricing computation, ensuring consensus security, and coordinating the economic incentives of the entire decentralized network.

The most basic use is to pay for computation fees. Each transaction and smart contract update consumes computational resources, measured in gas, and users pay with ETH at a price that dynamically adjusts according to network demand. This pricing mechanism allocates scarce block space through the market, preventing spam transactions from flooding the network, stopping infinite execution, and eliminating the need for central authorities to approve or allocate network usage.

ETH is also central to network security. Ethereum uses a proof-of-stake consensus, requiring validators to stake ETH as economic collateral to participate; those who perform their duties correctly earn rewards, while those who violate protocol rules may have part of their stake forfeited. Security comes from aligned economic incentives rather than reliance on trusted intermediaries.

Additionally, ETH coordinates the incentives of users and validators through a protocol-defined supply mechanism. New ETH is used to compensate validators who secure the network, while a portion of transaction fees is automatically burned.

Burning is algorithmic and driven by usage: as usage increases, burning increases; as usage decreases, burning decreases. During periods of sustained high demand, the amount burned may exceed the newly issued amount, resulting in a net decrease in the total supply of ETH. ETH is best understood as a protocol resource that allows Ethereum to operate as a neutral infrastructure that does not rely on any single organization.

What is staking, and how does it work?

Staking is the mechanism that secures Ethereum under the proof-of-stake model, replacing the energy-intensive "mining" of proof-of-work systems (like Bitcoin) with economic collateral.

To participate in consensus, a certain amount of ETH (currently a minimum of 32 ETH) must be locked in a staking deposit smart contract to activate a validator node. Anyone who meets the staking requirements and runs validator software can participate, and the diverse global pool of validators constitutes the network's distributed security model.

Validators are pseudo-randomly selected to propose new blocks, and all active validators periodically attest to blocks proposed by others; those who perform their duties correctly can earn transaction fees and newly issued ETH. If a validator acts maliciously (for example, by signing conflicting histories), part or all of their staked ETH will be burned, i.e., forfeited.

For non-malicious errors that threaten system stability, such as large-scale outages preventing the network from achieving finality, an emergency mechanism called "inactivity penalty" will gradually reduce the stake of inactive participants.

After Ethereum transitioned to proof of stake, its power consumption decreased by 99.98%, and its carbon footprint decreased by about 99.99%.

How does Ethereum achieve settlement and finality?

Ethereum distinguishes between settlement and finality: the former refers to transactions being executed and reflected in the system state, while the latter refers to the result becoming irreversible at the protocol level.

Settlement occurs continuously, with transactions typically being packaged into blocks and executed within 12 seconds. Finality occurs periodically, normally about every 13 minutes: when a supermajority of validators reaches consensus on a checkpoint, that checkpoint and all previous blocks are considered final by the protocol.

As of March 2026, over $76 billion in ETH is locked in the protocol, and finalizing a block requires at least two-thirds of the total staked amount to attest within a window of about 13 minutes.

In contrast, proof-of-work networks like Bitcoin do not have a concept of "finality"; once 51% of the computational power is controlled, it is theoretically possible to roll back history indefinitely. On Ethereum, creating two conflicting final histories requires at least one-third of the stakers to double-sign, triggering automatic penalties and expulsion from the validator set, with the punishment increasing with the number of involved validators, making it economically unfeasible to reverse confirmed blocks.

The practical effect is that Ethereum combines fast transaction execution with protocol-defined irreversible settlement.

How do self-custody wallets work, and why are they crucial?

Self-custody wallets are software tools that allow users to interact with the blockchain while fully controlling their private keys. Unlike bank accounts, which are managed by third parties, self-custody wallets give users exclusive authority to sign transactions.

Wallets do not "store" assets; assets exist as records on the blockchain, and wallets hold private keys, which are cryptographic proofs of ownership required to authorize transfers. Losing a private key means losing access to the assets unless the wallet has a recovery mechanism.

The key value of self-custody lies in eliminating counterparty risk: when centralized trading platforms fail (like FTX), users with self-custody wallets are unaffected because they do not rely on the platform's solvency. This is a "trustless" ownership model, where individuals directly hold digital assets, similar to holding cash or gold.

Self-custody wallets also have programmable capabilities. Multi-signature configurations require a preset number of approvals to execute transactions, distributing control among individuals, communities, or institutions, reducing single points of failure, and enabling transparent, auditable management of shared assets.

Social recovery mechanisms allow users to designate trusted guardians to collaboratively restore account access in case of lost credentials. Both are based on threshold cooperation (i.e., a preset number of participants must be involved for the operation to take effect), but multi-signature governs transaction execution, while social recovery is generally used only for regaining access without ongoing control over funds.

For financial stability, consumer protection, and market access, this shift means: eliminating counterparty risk; data autonomy, where individuals directly manage their data and identity; financial inclusion, allowing anyone with internet access to participate in the global financial system without gatekeeper approval; integrity at the design level, where transaction rules are written in open-source code and validated by a distributed network; and built-in interoperability, where the same wallet can seamlessly connect to any application on the network.

What is Layer 2?

Layer 2 is an independent execution environment that enjoys the security of the Layer 1 blockchain it is built on. Layer 2 on Ethereum uses the base layer as a security anchor and for final settlement, although the degree of security inheritance depends on the design choices of each network.

The role of Layer 2 has changed significantly as the ecosystem has matured. Initially, they were scalability solutions to address high transaction costs on the base layer, but as Ethereum's base layer efficiency has improved, the value of Layer 2 increasingly lies not in raw throughput but in differentiated functionality: customized execution environments, integrated data layers, and specialized application designs. For example, privacy-preserving execution environments, high-throughput systems for gaming or social applications, and dedicated networks optimized for specific applications. In this model, Layer 2s are distributed along a spectrum of integration with the mainnet, each making different assumptions about security, trust, functionality, and decentralization.

What core technologies does Ethereum use to protect privacy?

Privacy is not only about personal safety but also a key safeguard for decentralization. Avoiding information being controlled centrally, allowing end users to decide what data to share, and building a privacy-first Ethereum are priorities for the Ethereum ecosystem. Various cryptographic technologies have been deployed by the community.

Zero-Knowledge Proofs (ZKP) allow one to prove a statement is true without revealing the data used to prove it. For example, in identity verification: many services only need to confirm a specific attribute, such as whether someone is of legal age, has passed sanctions screening, or resides in a certain jurisdiction, but today often require showing full identification. With zero-knowledge proofs, users can provide only a cryptographic confirmation of "over 18" without disclosing any other information like name or date of birth. Various decentralized identity (DID) protocols built on Ethereum already support generating zero-knowledge proofs from verifiable credentials, achieving privacy-protecting KYC.

Multi-Party Computation (MPC) allows multiple parties to jointly compute a result without exposing their individual inputs. It is currently commonly used for institutional-grade digital asset custody: private keys are no longer stored in a single location but control is distributed among multiple parties, requiring collaboration from participants who meet a preset threshold to authorize transactions, aligning with governance models like quorum approval and separation of duties. Ethereum itself does not require MPC to operate; MPC works on wallets or custody layers built on top of the protocol. For policymakers, MPC demonstrates how cryptography can replicate familiar institutional control structures within decentralized infrastructure.

Fully Homomorphic Encryption (FHE) allows computations to be performed on encrypted data without decrypting it, keeping the data encrypted throughout the process, with only the final result being decrypted. FHE currently has significant computational overhead and has not been widely deployed, but it is an active area of research that may support confidential analysis or financial logic without exposing sensitive data on-chain in the future. FHE also illustrates that privacy and transparency are not mutually exclusive: advanced cryptographic tools are expanding the policy design space between complete opacity and complete openness.

Governance, Control, and Accountability

Who operates Ethereum?

Ethereum is not operated by any individual, company, or organization; there is no CEO, board, or central authority. Instead, it is maintained by a decentralized ecosystem of thousands of diverse contributors. The main types of participants include:

Core developers and researchers. A global community proposes, discusses, and implements improvements through an open process, with decisions made by the group rather than any individual, similar to the Internet Engineering Task Force (IETF).

Node operators and validators. Independent node operators run software to validate blocks, transactions, and the current state of the chain; some of them become validators by staking ETH and participate in block production and attestation. Thousands of validators and nodes are distributed across different jurisdictions, organizations, and infrastructures, keeping control of the network widely decentralized.

EIP authors. Ethereum Improvement Proposals (EIPs) are standards that describe new features or processes, and anyone can write an EIP, introducing a formal, public, and transparent process based on consensus.

Client developers. Clients are software implementations of the Ethereum protocol, and a node needs to run both a consensus client and an execution client, with multiple versions of both types of clients developed by different teams in various programming languages.

The Ethereum ecosystem is open to everyone. A consumer-grade computer, a network cable, and client software are all that is needed to run a node. This stands in stark contrast to Solana, where the hardware requirements for validating transactions are effectively at the data center level, making it impossible for ordinary participants to run their own nodes and forcing them to rely on a small number of specialized infrastructure service providers to interact with the chain, which inherently introduces counterparty risk. On Ethereum, the ability to independently validate the chain with ordinary hardware is open to any individual, and participation in the network does not require trusting anyone.

What role does the Ethereum Foundation (EF) play?

The Ethereum Foundation is a non-profit organization and one of many participants in the Ethereum ecosystem. Like the IETF in internet governance, the EF facilitates consensus building around protocol development within a globally distributed open-source community.

The EF defines its role in two ways: first, to ensure that Ethereum remains a decentralized, resilient tool for autonomy: identity, assets, operations, and AI agents acting on behalf of users ultimately reside in the hands of the users; second, to expand the coverage of this autonomy guarantee. The EF explicitly states that the Ethereum protocol and core application layer must possess such sustainability: even if the EF and today's core developers were to disappear entirely, the network should continue to operate and evolve reliably.

The EF focuses on work that is most difficult for other ecosystem participants to effectively undertake: long-term research, neutral multi-client specifications and testing, public goods security work, crisis coordination, preventing bottlenecks, and maintaining core development tools and documentation that are unclaimed.

Once a function can be taken over by neutral participants in the community, the EF promotes the handover, allowing capabilities and responsibilities to diffuse rather than concentrate within the ecosystem. The EF does not operate the network, does not enforce protocol changes, and does not control participation eligibility.

This design, which separates the guardianship responsibilities from operational control, is intentional. The EF's governance neutrality is also supported economically: according to its latest public disclosures, the EF holds approximately 0.26% of the total supply of ETH, far below any level that could influence network validation or protocol direction.

How are decisions made on Ethereum, and how is upgrading managed?

The evolution of the Ethereum protocol is managed through a transparent, open process known as Ethereum Improvement Proposals (EIPs). EIPs are technical specifications for proposed changes, publicly debated by the community. Ethereum does not have a central authority that decides on upgrades; upgrades follow an open, multi-party participation model, generally going through three phases:

The first step is proposal and debate. Technical discussions take place in public forums like "AllCoreDevs," where anyone can join; meetings have been live-streamed for years, and anyone can propose changes.

The second step is client implementation. Once the specifications are finalized, independent client teams (like Geth, Besu, Lighthouse, Prysm) implement the changes in their respective software and release new versions.

The third step is network adoption. Node operators and validators must actively download and install the new software to indicate agreement; after reaching a predetermined time point, the upgraded software automatically begins executing the new rules. If participants do not agree with a change, they are not obligated to adopt it.

The most frequently cited success story is the Merge in September 2022, which switched Ethereum's consensus mechanism from proof of work to proof of stake while fully preserving the existing transaction history, applications, and user balances.

This upgrade reduced Ethereum's power consumption by 99.98%, its carbon footprint by about 99.99%, and its energy efficiency is about 53,000 times that of the Bitcoin network and 100 times that of PayPal. The entire transition required collaboration among multiple stakeholders: software developers implementing the upgrade, node operators and validators adopting the new consensus rules, and users and application parties choosing to continue transacting on the upgraded network.

Can Ethereum be shut down or controlled by a single entity?

Ethereum is currently the most secure, resilient, and decentralized blockchain network in operation, structurally immune to single points of failure and unilateral influence. Unlike conventional digital systems such as centralized banking platforms, cloud hosting services, and traditional payment networks, Ethereum cannot be unilaterally shut down or controlled by any individual, company, country, or institution, and its resilience extends to physical interruptions such as natural disasters.

The massive power outage in Spain and Portugal in April 2025 could paralyze the digital infrastructure of the entire region, while Ethereum has continuously operated since its launch in 2015, enduring extreme market volatility, attack attempts, major protocol upgrades, physical interruptions, and drastic changes in the global regulatory environment.

The design of protocol governance is the most direct framework for assessing whether a chain can be controlled or shut down. Networks optimized for transaction speed often concentrate validators for performance, increasing the risk of collusion and capture; permissioned or consortium chains retain familiar governance models but reintroduce legal and administrative control points that can be regulated or judicially intervened; newer Layer 1s typically have limited operational histories combined with highly concentrated token holdings, leading to greater governance uncertainty.

Ethereum's governance and consensus are based on weighted participation of staked validators rather than control by operators or committees, and it has been tested in a public environment for over a decade. Most other mainstream protocols have critical dependencies on single entities for development: XRPL relies on Ripple, TRON relies on the TRON Foundation, BNB Smart Chain relies on Binance and the BNB Chain Foundation, and Canton relies on Digital Asset.

When the cross-chain bridge was attacked in 2022, the CEO of Binance publicly instructed to pause on-chain transactions, and BNB Smart Chain was deliberately shut down for about 8 hours, demonstrating that a single individual could influence the transaction processing of that network. No similar intervention channels exist on Ethereum; no single team can unilaterally push changes, and protocol modifications require consensus across multiple independent organizations.

The concentration of genesis tokens is another key factor shaping long-term governance patterns.

Approximately 17% of Ethereum's supply is allocated to insiders; BNB Smart Chain retains 50% for founding teams and angel investors, with the remainder publicly sold; Solana reportedly allocates over 90% to insiders; TRON allocates 60% to founding teams and angel investors; and the entire initial supply of XRPL belongs to the company and founders.

As of March 2026, Ethereum has over 900,000 validators, leading by an order of magnitude among mainstream networks: Solana has over 800 validators, while BNB Smart Chain, XRPL, and TRON each have only dozens to around 100.

One fundamental reason for the large number of validators is the low barrier to entry; consumer-grade hardware can effectively participate in the network. Censorship resistance thus comes from the dispersion of voting power among validators, not just the number of nodes.

In terms of voting power and consensus, Ethereum's proof-of-stake mechanism allocates voting power based on the amount staked, requiring at least two-thirds of the active staked amount to agree for finality, following Byzantine fault tolerance principles: even if up to one-third of participants are offline, compromised, or acting maliciously, the network can still operate correctly.

Validators have collectively staked about $76 billion in ETH, and this capital is clearly at risk: failing to perform duties incurs ongoing small penalties, while manipulating consensus triggers forfeiture. Penalties are automatically enforced by protocol rules and apply consistently across any jurisdiction without the need for administrative intervention.

Most other mainstream protocols, including Solana, lack such an automatic penalty mechanism critical to security, and their economic staking scales are also significantly lower: Solana, TRON, and BNB Smart Chain are protected by $35 billion, $13 billion, and $17 billion, respectively. The "inactivity penalty" ensures that even if a large number of validators disappear, the network can still achieve finality.

The distribution of network operation further enhances resilience. Validators are spread across continents, multiple jurisdictions, different energy systems, cloud service providers, and client teams, with about 35% of validators hosted across multiple cloud service providers to avoid single points of failure, and no centralized registry concentrates control in a single entity or jurisdiction.

Even if a major country bans participation in Ethereum, the network will continue to operate uninterrupted through validators in other jurisdictions. This redundancy is a structural attribute of the system, not a policy that can be revoked.

Ethereum's resilience also has a dimension of what is called credible neutrality. The protocol applies the same rules to every participant, regardless of identity, nationality, or political stance. There are no management interfaces available for privileged parties to freeze accounts, roll back transactions, or refuse service; there are no built-in admin keys, emergency stop switches, or protocol-level override functions.

Neutrality also requires that the operation itself be visible: Ethereum's protocols, states, and operational behaviors are verifiable by any participant, and any attempt to introduce opaque rules has nowhere to hide. Protocol upgrades only take effect when validators and node operators voluntarily run the new software; changes lacking broad community support will not activate at all.

For institutional users and governments, this means that settlements, contractual obligations, and record states on Ethereum are not subject to unilateral discretionary intervention by any operator, providing finality and predictability for cross-border settlements, registration services, identity verification, and financial instrument tokenization that traditional systems struggle to achieve.

The report also cites three typical attack vectors summarized by OpenZeppelin and analyzes why they fail on Ethereum.

First, acquiring sufficient economic stake: attackers need to control over $50.7 billion in ETH, the highest threshold among mainstream networks; such a scale of acquisition would be conspicuous in the public market and would drive up the price of ETH, further increasing the cost of the attack, and once the attack is launched, the stake would also be automatically forfeited. Ethereum would forfeit the attacker’s entire stake at most, which is unique among competitors; Solana lacks an automatic penalty mechanism, and TRON has no economic penalties at all.

Second, launching supply chain attacks on validator client software: this risk is most acute when a single codebase dominates the network; Ethereum has at least 5 independent teams maintaining open-source clients at both the execution and consensus layers, while BNB Smart Chain and TRON rely on a single codebase, where a serious vulnerability could affect 100% of validators simultaneously.

Third, colluding with a sufficient number of validators: to hijack consensus requires collusion among validators controlling at least one-third of the staked amount (or two-thirds to manipulate finality); Ethereum's validators span individuals, institutional custodians, staking services, trading platforms, and decentralized staking pools, with differing legal obligations, risk appetites, commercial motivations, and political environments, making large-scale sustained collusion difficult to organize and hide, and any discovered collusion would also trigger catastrophic automatic forfeiture.

Comparative Analysis of Different Blockchains

What are the key differences between permissioned and permissionless chains?

Permissioned and permissionless chains are often viewed as binary opposites, which is an oversimplification. They should be understood as two ends of a spectrum, with each chain positioned somewhere along that spectrum based on its specific characteristics.

Chains closer to the permissionless end are by default open: anyone can read data, send transactions, become a validator or node operator without needing to apply to a company, government, or committee, and there is no whitelist.

The system operates because a large number of independent participants are incentivized to adhere to shared rules, and malfeasance is automatically punished, rather than because a central authority grants access. Chains closer to the permissioned end are inherently limited by design: only approved participants can validate transactions, access may require identity verification or organizational membership, and governance decisions are made by a defined group. With control concentrated in known entities, transaction filtering or rule changes are easier to coordinate.

An intuitive analogy is the internet versus an intranet. The internet is open, allowing anyone to access, publish content, and build applications, similar to a permissionless chain; an intranet is private, limited to members within an organization, access is controlled, and administrators decide who can participate, akin to a permissioned chain.

When governments and institutions evaluate blockchains, they should assess "where this chain lies on the spectrum" in relation to specific deployment goals, rather than treating it as an abstract attribute.

For example, if the primary goal is to eliminate single points of failure, one should assess how many independent validators protect the network, how the stakes are distributed among them, whether they are geographically and jurisdictionally dispersed, and whether there is any single entity (company, government, or alliance) that can unilaterally shut down or pause the network, as well as whether client software is diverse enough that a bug in a single implementation won't bring down the entire system. Permissioned chains are designed to concentrate validation within a known and limited group of operators; once this group is compromised, coerced, or ceases operations, the network will fail.

How does the Ethereum blockchain differ from the Bitcoin blockchain?

Both Bitcoin and Ethereum are decentralized blockchain networks, but they have different design purposes. Bitcoin was created for peer-to-peer value transfer and is widely understood today as a digital currency asset or store of value, designed for simplicity, stability, and resistance to change. Ethereum, on the other hand, was designed as a general-purpose programmable digital public infrastructure, similar to how the internet provides a shared foundation for information exchange.

Specific differences manifest in three aspects.

Functionally, Bitcoin focuses on the transfer of digital value between participants and supports only limited scripting capabilities; Ethereum was designed from the outset for general programmability, with a Turing-complete virtual machine that allows any rules and logic to be directly embedded in financial or non-financial arrangements, supporting applications like stablecoins, payment systems, social protocols, and identity schemes, making it a shared platform rather than a single-purpose value exchange system.

In system design, Bitcoin uses the UTXO model to track discrete units of value as they flow between users; Ethereum uses an account model to maintain balances and application states, making it more suitable for complex programmable logic.

In terms of energy and security models, Bitcoin relies on proof of work for security, requiring continuous consumption of computational energy; Ethereum has transitioned to proof of stake, replacing ongoing energy consumption with locked economic collateral, resulting in a 99.98% reduction in power consumption and a 99.99% reduction in carbon footprint while maintaining network security.

How does Ethereum compare to other public chains?

Ethereum is widely used as digital public infrastructure because it prioritizes security, neutrality, and long-term reliability, with this neutrality supported by decentralization at every layer: validator participation, protocol governance, open-source development, and client diversity. No company, alliance, or country controls transaction ordering, system upgrades, or network access.

In terms of resilience, it is unmatched. Ethereum has continuously operated since its launch in 2015 without interruption, a record that no smart contract platform can match.

Since its launch in 2020, Solana has experienced at least 7 significant outages, with the longest lasting about 19 hours; the most recent outage occurred in February 2024 and lasted nearly 5 hours; similarly, BNB Smart Chain, launched in 2020, was "paused" for at least 5 hours in 2022; the XRP Ledger, launched in 2012, has also experienced similar incidents, including an outage of over 1 hour in 2025.

The decentralization of validators is by design. Ethereum's validators are geographically distributed across continents and jurisdictions, partly due to the low barrier to entry: a regular consumer-grade computer, client software, and 32 ETH are all that is needed.

In contrast, Solana and BNB Smart Chain require enterprise-grade infrastructure far beyond the capabilities of ordinary participants, as well as deep Linux operational skills and near-perfect uptime, concentrating validation work in the hands of capital-rich corporate operators.

Infrastructure and client diversity are also leading. Ethereum nodes and validators use cloud service providers and physical servers that are highly decentralized, with the community maintaining at least 5 teams developing open-source clients in different programming languages.

Solana has two major validator client implementations, but 92% of validators run on Agave, indicating high concentration; BNB Smart Chain, TRON, and the XRP Ledger rely entirely on a single client.

Economic security has reached a scale level. As of March 2026, the Ethereum network has staked $76 billion in ETH, and manipulating consensus requires controlling over $50.7 billion.

In the same period, the staking scales of Solana, TRON, and BNB Smart Chain were $35 billion, $13 billion, and $17 billion, respectively, with corresponding attack costs of $23.3 billion, $8.7 billion, and $11.3 billion. Additionally, Solana, XRP Ledger, and TRON lack automatic forfeiture mechanisms, meaning malicious validators do not face the immediate consequence of their stake being automatically destroyed; penalties rely on social coordination or even network restarts, significantly reducing deterrent effects.

For policymakers and institutions, the key is to avoid introducing additional counterparty risks. There are no operators on Ethereum that can change rules, restrict access, adjust monetary policy, reorder priorities for commercial interests, or unilaterally shut down the network; the integrity of the system does not depend on the solvency, goodwill, or strategic interests of any single entity.

This represents a structural difference from many other Layer 1s: the Solana Foundation directly shapes the validator ecosystem through staking matching, voting cost subsidies, and other delegation programs, making it a key counterparty within that ecosystem; Binance's substantial control over BNB Smart Chain has faced criticism; Ripple controls about 42% of the total supply of XRP, extending its control to validator selection and node lists.

The disparities in genesis allocations are also evident: Ethereum allocates about 17% to insiders, BNB Smart Chain 50%, TRON 60%, Solana over 90%, and XRPL 100%.

Ethereum also enjoys self-reinforcing network effects that other Layer 1s have yet to replicate. It is the most documented and tool-rich public chain, with ERC-20 being the most supported token standard, and various ERC-based standards can be implemented by any developer, custodian, or institution without permission or licensing fees.

Building on Ethereum means directly adopting standards already used by thousands of institutions rather than negotiating custom integrations from scratch with each counterparty. As of May 2026, the EVM tech stack has about 11,000 developers supporting it, far exceeding Solana (about 2,600), BNB Smart Chain (about 837), TRON (about 359), and Ripple (about 272). The scale of developers directly translates into the depth of open-source tools, audited codebases, security research, and documentation.

The EVM itself is a computing engine, fundamentally no different from Microsoft's .NET virtual machine or Java interpreter, and has become the de facto standard for smart contract execution across multiple chains.

Institutional adoption is also leading. This adoption is no longer limited to isolated pilots but covers launched products, regulated funds, settlement infrastructures, and multi-year institutional projects:

Global banks like JPMorgan, Société Générale, UBS, Deutsche Bank, and Standard Chartered are using Ethereum-based infrastructure for tokenized bonds, deposits, funds, and regulated settlement pilots.

Asset management firms like BlackRock, Fidelity, Franklin Templeton, and Amundi are directly issuing tokenized money market funds, government securities, and investment products on Ethereum.

Custodians and market infrastructure providers like BNY Mellon and SWIFT support Ethereum-native assets and explore interoperability between traditional financial facilities and public chain settlements.

Payment networks like Visa, Mastercard, and PayPal are running stablecoin settlements, vouchers, and programmable payment infrastructure on Ethereum.

Regulated trading and fintech platforms like Robinhood and Coinbase are building Ethereum Layer 2s aimed at tokenizing real assets, stablecoins, and on-chain capital markets.

The dominant position of stablecoin and tokenized asset settlements is also clear. As of March 2026, Ethereum hosts $159 billion in stablecoins, while Solana has $15 billion and BNB Smart Chain $14 billion; tokenized real-world assets exceed $15.2 billion, three times the combined total of BNB Smart Chain and Solana; total locked value in DeFi exceeds $56 billion, which is 8.1 times that of Solana, 9.3 times that of BNB Smart Chain, 13 times that of TRON, and 1,142 times that of Ripple. Coupled with a 99.98% reduction in energy consumption after transitioning to proof of stake, Ethereum also meets the evaluation requirements of the public sector in terms of environmental impact.

How does Ethereum compare to permissioned chains?

The core argument supporting non-permissioned public chains like Ethereum is that they provide functionalities that traditional solutions lack: they are the only systems that allow multiple parties to complete transactions without relying on control from any one party (or third party).

Cross-border trade and settlement have historically required some form of shared infrastructure, previously provided by correspondent banks, clearinghouses, messaging networks, custodians, and other institutions. These systems operate well under the premise that participants share a legal framework, generally trust the relevant institutions, and have stable relationships; once these conditions are not met, they become unreliable.

Global trade in 2026 is under pressure from supply chain restructuring, tightening regulations in various countries, and a more complex and fragmented international environment, leading parties that previously relied on shared institutions for settlement to increasingly question whether these institutions can provide a truly neutral venue for all participants.

Any system with a clear governance structure will reflect the interests and constraints of its governors to some extent, which is an inherent property of controlled infrastructure.

Whether counterparties are willing to rely on a shared settlement facility depends on whether they believe the rules will be applied consistently, access will not be revoked for reasons unrelated to the transaction, and no participant in the governance structure can unilaterally change the operating terms for others.

These requirements are difficult to meet solely through institutional design; historical experience shows that the gap between designed neutrality and operational neutrality widens as interests deepen and the range of participants expands.

Ethereum lacks a governance body that can be pressured; rules can only be changed through a decentralized process where no party has decisive control, and access cannot be revoked by any operator because there are fundamentally no operators.

The result is a new layer for settlement and collaboration: even parties with no prior relationship, subject to different laws, and mutually distrustful, can transact on it without a common trusted intermediary. In contrast, permissioned and consortium chains trade off neutral governance, cross-network interoperability, and long-term operational continuity for control and restricted access. So far, no permissioned chain has achieved success close to that of public chains.

Permissioned chains do not constitute neutral infrastructure. Taking Canton as an example, it is one of the most discussed permissioned platforms, backed by large institutions, aiming to create a "network of networks" that allows previously isolated systems in financial markets to interoperate under compliance, privacy, permission, and control frameworks.

However, Canton is neither decentralized nor neutral: a small group of stakeholders controls access and sets rules; the Canton Foundation is jointly governed by DTCC and Euroclear, and protocol changes require a two-thirds majority vote from super validators, with current requirements for sponsorship to become a validator. This is alliance governance, not decentralized governance; if these entities are pressured, they can change the network rules.

Tempo, incubated by Stripe and Paradigm, claims to facilitate various high-throughput, low-cost global transactions, including machine payments, but its active validator set is currently managed by the Tempo team under permission, meaning that at least at this stage, one party trading on Tempo trusts Stripe and Paradigm rather than cryptographic guarantees.

Google Cloud's Universal Ledger (GCUL) is also a permissioned system, meaning that using it effectively means that a single commercial entity controls the underlying infrastructure for financial settlements. The risk of these permissioned chains is that they replace the old system with a new set of rulers, pushing tech giants into stronger positions of dominance.

Permissioned chains require trust in the alliance. In permissioned ledgers, users ultimately must trust that the alliance operators will keep honest accounts, make fair judgments, and enforce rules.

Canton adopts a delegated trust model, relying on trusted synchronous domain operators to order and confirm transactions, and its white paper acknowledges that in scenarios with highly trusted operators, synchronous domains can be achieved in a centralized manner, meaning participants are effectively trusting that the super validator alliance will act honestly.

Tempo and GCUL are similar. Ethereum replaces institutional trust with cryptographic verification and decentralized consensus, reducing reliance on intermediaries and single points of failure. Its credible neutrality and open audit are particularly important in cross-border scenarios, where power, regulation, and enforcement are already dispersed across multiple jurisdictions.

Permissioned chains do not support substantive interoperability and composability. Assets, identities, and contracts issued on Ethereum can be used directly across wallets, platforms, and jurisdictions without custom integration; permissioned chains tend to become isolated systems, requiring bilateral agreements and custom bridges for interaction with external networks.

Canton's applications only interoperate within their respective permission models, and institutions can effectively restrict who can access or combine their applications.

Tempo has also released an open standard MPP for AI Agents payments, claiming compatibility with various payment methods including stablecoins, bank cards, Affirm, and Klarna, but this interoperability relies at least in part on partnerships with private companies, essentially involving a few companies sitting down to agree on standards, which is not much different from the current situation, and the inclusion of a defined set of large institutions also means the exclusion of outsiders: any payment network, financial institution, or market participant not invited into the cooperative structure must first obtain permission, which replicates the gatekeeping mechanisms that non-permissioned infrastructure aims to eliminate.

GCUL, as a permissioned ledger, is likely to face similar issues.

Technical portability and exit costs are also important considerations. Public chain infrastructure is built on open technical standards, making it easier to migrate applications and assets to compatible environments, which is beneficial for long-term exit flexibility and procurement resilience.

Systems built on proprietary technology stacks may require extensive redevelopment to migrate. Canton requires the use of Digital Asset's smart contract language Daml, which cannot run on public EVM chains; migrating away from Canton requires a complete rewrite rather than a port, creating conversion costs at every level of tools, talent, and institutional knowledge.

In summary, neutrality, minimal trust, interoperability, and global participation are recognized key characteristics of shared infrastructure across institutions and jurisdictions over long periods.

Canton, Tempo, and GCUL may be suitable for connecting institutions that already share legal frameworks and established standards, but this definition excludes the vast majority of economic participants in the world.

Ethereum, on the other hand, is a shared, ownerless space where parties without existing trust, institutional membership, or common standards can transact on equal terms. In today's accelerating geopolitical fragmentation, neutral digital infrastructure that is not controlled by any centralized gatekeepers or alliances is no longer a theoretical concept but an urgent reality.

Economic and Financial System Impact

How should central banks assess the issuance and settlement of stablecoins on Ethereum and other networks?

When evaluating stablecoin issuance and settlement infrastructure, discussions typically revolve around currency stability, legal finality of settlements, system resilience, and cross-border interoperability, all of which are long-standing concerns for central banks regarding private currencies, payment system design, and financial infrastructure governance.

The report argues that conducting a structured assessment along these dimensions will clearly point to Ethereum as the most suitable settlement layer for systemically important stablecoins.

First, consider market adoption and the explicit preferences of issuers.

As of March 2026, Ethereum hosts over $159 billion in stablecoins, while TRON, Solana, and BNB Smart Chain host $89.1 billion, $15 billion, and $14 billion, respectively; in terms of tokenized real-world assets, Ethereum exceeds $15.2 billion, while Solana and BNB Smart Chain host $2.1 billion and $3 billion, respectively; total locked value in DeFi exceeds $56 billion on Ethereum, while all other chains are below $7 billion.

For central banks, this distribution is not just market statistics; it reflects the collective risk judgments of issuers operating under regulatory, legal, and reputational constraints: these issuers, already under regulatory scrutiny, have effectively conducted cross-platform due diligence and converged on Ethereum because it best meets their operational, legal, and reputational scaling requirements.

Second, consider the design of the settlement layer.

Ethereum's settlement layer is protected by the largest staked capital among smart contract platforms (over $76 billion), with a highly diverse pool of validators and nodes distributed globally, not relying solely on cloud service providers, supporting local hardware operation, and having multiple teams maintaining production-grade clients in different languages.

These designs reduce reliance on any single party, enhance resilience in crisis scenarios, and compress the space for unilateral intervention. From the perspective of central banks and systemic risk, distributed validation serves as a risk mitigation mechanism for settlement layer operations: infrastructure reliant on a few validators, operators, or legal systems may be highly efficient under normal conditions but will expose governance and intervention vulnerabilities during market pressures or geopolitical tensions.

In recent years, outages from major service providers like AWS, Crowdstrike, Cloudflare, and Microsoft Azure have repeatedly impacted critical infrastructure, while Ethereum's structure disperses operational and political dependencies.

Moreover, Ethereum's architecture separates settlement validation from operations and access control: the base layer remains neutral, transparent, and auditable, while higher-level applications can implement access restrictions, compliance requirements, and jurisdiction-specific controls without concentrating settlement power in a single entity.

In terms of finality, central banks look at legal and economic concepts rather than purely technical attributes; Ethereum provides economic finality under proof of stake, where reversing confirmed blocks requires controlling significant stakes and incurring automatic forfeiture, with its economic finality resembling existing payment systems: theoretically reversible, but practically excluded due to governance, cost, and reputational constraints.

Third, consider interoperability and composability.

Stablecoins hold the most value when they serve as universal settlement assets rather than isolated tools. Ethereum has the largest and most mature blockchain ecosystem, with ERC-20 being the most widely supported token standard, and it can still be whitelisted, configured, and compliant on a case-by-case basis as needed.

The thickness of the ecosystem is reflected in several dimensions:

In terms of wallets, MetaMask alone has accumulated 143 million created accounts and about 30 million monthly active users, with almost all DeFi, NFT, or DAO projects integrated by default; institutional-grade smart contract wallets like Safe manage over $100 billion in assets for corporate treasuries and funds, while hardware wallets like Ledger and Trezor natively support Ethereum and ERC-20.

In terms of custody, providers like Coinbase Custody, BitGo, Fidelity Digital Assets, and Copper offer regulated, insured Ethereum custody around the same address format and token standard, allowing an ERC-20 asset to immediately access all these services, while assets on new or proprietary chains require individual custom integrations with each custodian (if they are willing to do so).

In terms of auditing and security infrastructure, OpenZeppelin's open-source contract library is an industry-standard component, and professional auditing firms like Trail of Bits, Consensys Diligence, and Certik have reviewed thousands of Ethereum contracts.

This depth of security infrastructure accumulated over a decade significantly reduces the risks of any new deployments.

Permissioned or consortium ledgers may offer stronger local control but will limit interoperability and increase concentration risks, potentially reconstructing a fragmented settlement system rather than a unified digital currency layer. For stablecoins, especially in the context of geopolitical uncertainty, networks that can be unilaterally restricted undermine their core functionality.

Can Ethereum interoperate with existing financial institution infrastructures?

Ethereum's design reflects a "separation of concerns" that resonates with existing financial market infrastructures: a neutral public settlement layer provides immutable finality and verifiability, while compliance, access control, data privacy, and eligibility verification are executed at higher layers (applications, intermediaries, or Layer 2). Institutions retain compliance, operational control, and data protection while accessing Ethereum's settlement, liquidity, and programmability.

Tokenization of real-world assets (RWAs) is a pathway connecting traditional finance with Ethereum, representing assets like bonds, funds, deposits, and collateral as digital assets on Ethereum. Tokenization allows these assets to be settled in near real-time, transferred cross-border at lower costs without intermediary steps, and embedded with programmatic rules for lifecycle events, compliance, and cash flows. Ethereum does not replace existing systems here but operates as a shared settlement and collaboration layer alongside traditional bookkeeping and custodial frameworks.

Regulatory bodies sometimes access Ethereum through modular integration models, including Layer 2 networks, permissioned execution environments, and hybrid architectures, placing compliance, disclosure, and operational control at appropriate layers while anchoring settlement in Ethereum's public base layer.

These models can enforce rules at the application or access layer, incorporating privacy while retaining compliance and audit capabilities, limiting data visibility while still anchoring transactions in a publicly auditable settlement layer, and achieving scalability and cost efficiency without fragmenting liquidity.

An ecosystem composed of custodians, banks, middleware providers, and market infrastructure companies is connecting Ethereum with existing core banking, funding, and post-trade systems. These intermediaries abstract away private key management, reporting, and reconciliation, enabling institutions to interact with Ethereum-based assets and protocols.

From an institutional perspective, accessing Ethereum increasingly resembles connecting to a new settlement track rather than a retail crypto system; it extends existing infrastructure rather than replacing it entirely, similar to how the internet integrated into financial services through APIs, messaging layers, and standardized protocols.

Institutions' motivations for accessing Ethereum typically do not involve replicating old systems but rather reducing concentration risks in cross-border settlements, liquidity scheduling, and collaboration, especially under geopolitical pressures.

In this framework, Ethereum does not replace sovereign currencies, regulated intermediaries, or regulatory powers but allows institutions and regulators to rely on a common public settlement layer, reducing dependence on any single operator, jurisdiction, or proprietary network while leaving policy, compliance, and risk control at the institutional and application layers.

What is DeFi, and how does it differ from centralized financial institutions?

Traditional finance relies on institutions to underwrite transactions, concentrating the power of capital flows in a small group of intermediaries. Because transactions, risk exposures, and internal processes are mostly opaque, trust must be maintained through regulation, consumer protection, and traditional security frameworks rather than through transparency itself.

This concentration creates systemic fragility: the failure of a single institution can trigger chain reactions throughout the financial system, as seen with Lehman Brothers in 2008 and FTX in 2022. Centralized gatekeeping mechanisms also exclude large portions of the global population from basic financial services.

Decentralized finance (DeFi) replaces intermediaries with smart contracts: automatically executing programs deployed on the blockchain, where code is the rule and publicly verifiable, allowing anyone to inspect, audit, and verify.

DeFi markets can therefore operate continuously without a centralized authority that can intercept payments or restrict participation; users directly control their assets and can access global financial services with just an internet connection, transforming previously slow, opaque, and error-prone processes into automated, verifiable open code.

The report uses Morpho as an example. This is a decentralized lending protocol built on Ethereum, designed with modularity and minimalism: its core is a streamlined and immutable smart contract serving as the foundational layer for the lending market.

Morpho does not bundle risk management, collateral decision-making, and interest rate logic into an opaque whole but separates these concerns, allowing users to create independent lending markets for any asset without permission, choosing collateral and risk parameters.

This architecture significantly reduces the attack surface of the core protocol while allowing professional participants the flexibility to continue building on it. As of March 15, 2026, the protocol's total locked value exceeds $7.3 billion.

What are some representative cases of institutions and governments using Ethereum?

Ethereum has been used by large financial institutions and the public sector as a settlement and collaboration infrastructure, especially in scenarios requiring cross-border interoperability, neutrality, and programmability. Adoption is concentrated in several identifiable directions.

In terms of tokenized assets, Ethereum hosts over $15.2 billion in real-world assets (as of March 2026).

Franklin Templeton operates a tokenized money market fund that records ownership shares on Ethereum, combining blockchain settlement with regulated fund management.

BlackRock launched the BUIDL tokenized fund on Ethereum, explicitly citing liquidity, interoperability, and institutional infrastructure maturity as reasons for its choice; JPMorgan launched its first on-chain money market fund on Ethereum, currently managing over $100 million in assets.

Europe's largest asset management company, Amundi, issued tokenized shares of its euro money market fund on the Ethereum mainnet.

The U.S. Commodity Futures Trading Commission (CFTC) has also announced a pilot program for digital assets, allowing certain digital assets, including ETH, to be used as collateral in the derivatives market.

In these cases, Ethereum is not mimicking traditional capital market infrastructure but serves as a shared settlement and recording layer that multiple intermediaries can rely on simultaneously.

In terms of stablecoins, Ethereum's scale of $159 billion in stablecoins is over 10 times that of Solana ($15 billion) and BNB Smart Chain ($14 billion).

Circle issues USDC on Ethereum, which is used by financial institutions, payment service providers, and governments for fund operations and cross-border transfers.

Fidelity launched its own stablecoin on Ethereum; Société Générale Forge issued the stablecoin CoinVertible on Ethereum.

Visa has begun supporting issuing and acquiring banks to complete settlements through stablecoin transactions on Ethereum; PayPal's stablecoin is also issued on Ethereum.

Large banks are increasingly adopting hybrid architectures, operating proprietary or permissioned ledgers internally while using Ethereum as an external settlement anchor, leveraging it as a neutral reference layer to reduce the burden of bilateral infrastructure coordination and reconciliation.

JPMorgan is explicitly exploring interoperability between its internal tokenization system and public chains, including Ethereum; BNY Mellon offers digital asset custody services supporting Ethereum-native assets, allowing institutional clients to hold and settle Ethereum assets within a regulated framework.

Institutions are also using Layer 2s on Ethereum. Layer 2s are secondary protocols built on Ethereum, suitable for achieving differentiated functionality through customized execution environments, integrated data layers, or specialized application designs.

EY's Nightfall and Deutsche Bank's DAMA-2 are both institutionally built Layer 2s, while mature Layer 2s in the ecosystem include Arbitrum, Aztec, ZKsync, Optimism, Base, Ink, Scroll, Unichain, and Linea.

Public sector projects often keep sensitive data off-chain while using Ethereum to provide verifiable settlement or audit benchmarks.

The Indian government uses Ethereum-based technology to manage land records and caste verification, combating fraud and ensuring public records are immutable.

Bhutan anchors its National Digital Identity (NDI) system on Ethereum, allowing citizens to control their credentials without relying on a potentially compromised central database.

The Buenos Aires city government launched a decentralized digital identity system, allowing users to own their identities and choose what data to share.

The European Investment Bank has repeatedly issued digital bonds using Ethereum as a settlement and recording layer, with issuances following traditional legal documents and regulated intermediaries, using Ethereum to coordinate issuance and settlement rather than replacing existing capital market laws.

UNICEF's CryptoFund uses Ethereum and its assets to receive, hold, and distribute funds, enhancing the transparency and auditability of grants while keeping beneficiary data off-chain.

Environmental and Social Considerations

How much energy does Ethereum consume?

After the Merge in September 2022, transitioning to proof of stake, Ethereum's network power consumption decreased by 99.98%, and its carbon footprint decreased by about 99.99%.

Currently, the total annual electricity consumption of the entire Ethereum global network is estimated to be about 0.0026 terawatt-hours (approximately 2,601 megawatt-hours), with an annual carbon footprint of about 870 tons of CO2 equivalent. Before the Merge, Ethereum's annual power consumption under proof of work was about 21 terawatt-hours; this transformation represents a structural change in the logic of network security: from computational energy consumption for security to economic security through staked capital (ETH).

A set of comparisons can illustrate the current scale of energy consumption: global data centers consume about 190 terawatt-hours, approximately 73,000 times that of Ethereum; the Bitcoin network consumes about 149 terawatt-hours, about 53,000 times; Google consumes about 19 terawatt-hours, about 7,300 times; Netflix about 0.457 terawatt-hours, about 176 times; PayPal about 0.26 terawatt-hours, about 100 times; and Airbnb about 0.02 terawatt-hours, about 8 times. Ethereum's energy consumption is several orders of magnitude lower than that of traditional digital infrastructure and proof-of-work systems.

How does Ethereum address the challenges posed by AI?

As AI systems develop, three foundational governance challenges emerge.

First, today's cutting-edge AI infrastructure replicates the centralization seen in the rest of the internet: controlled by a few operators, each setting their own rules and subject to pressures from their jurisdictions, the AI access of millions could be cut off overnight without warning.

Second, as AI agents can generate realistic media and act autonomously, institutions must address identity verification issues.

Third, policymakers need to consider how to verify the authenticity and integrity of digital content and machine-generated products. Ethereum can serve as a neutral verification layer, providing identity assurance, source traceability, and accountability support for these three issues.

In terms of AI collaborative infrastructure, autonomous AI agents currently lack standardized ways to identify themselves, prove their histories, pay for services, or allow independent third parties to verify their outputs without existing relationships.

Ethereum fills this gap with open standards that any developer or institution can implement without permission or licensing fees: ERC-8004 provides portable, censorship-resistant identifiers, standardized reputation interfaces, and hooks for independent verification of outputs for AI agents; x402 provides payment standards for commercial transactions between machines. Both standards are anchored on Ethereum, inheriting its core attributes: no single operator controls them, access cannot be revoked, and rules are verifiable and auditable by anyone.

In terms of identity verification, the proliferation of AI-generated content (deepfakes) and AI agents has created a need to distinguish between human and machine actors.

Ethereum provides a solid foundation for anchoring digital identities and content sources, reusing open standards developed outside the blockchain ecosystem: W3C's Verifiable Credentials (VC) and Decentralized Identifiers (DID) provide a framework for making and verifying identity claims, with Ethereum's role serving as a public censorship-resistant registry for these identifiers and their issued credentials, such as the did:ethr method. Bhutan's national digital identity project anchors its identity system on Ethereum-based infrastructure.

In terms of content authenticity, creators can cryptographically sign content and timestamp it on an immutable ledger to prove the source and integrity of the media.

Ethereum can anchor the cryptographic hash of digital content at specific points in time; if the content is altered afterward, the hash will not match, allowing for the detection of tampering while the content itself does not need to be on-chain. This constitutes an auditable integrity record layer, helping to combat misinformation and AI forgery.

In terms of governance for AI agents, when AI agents begin to trade and execute economically meaningful tasks, a corresponding governance framework is needed.

ERC-8004 proposes a standardized framework for the identity, reputation, and verification of AI agents, introducing a globally unique agent identifier registry, portable reputation signals, and independent verification of high-risk outputs; these registries settle on Ethereum, inheriting the network's credible neutrality and economic security from proof of stake.

Additionally, Ethereum can become an important complement to the AI technology stack, such as using zero-knowledge proofs to help users protect data or identity privacy, or using smart contract commitments to enforce compliance policies. AI is a powerful computational tool, while Ethereum provides a verification layer: a neutral, tamper-proof foundation for registering identities, certifying the authenticity of digital assets and information in the digital economy of the AI era.

What is post-quantum security, and how does Ethereum respond?

Post-quantum security refers to cryptographic systems that remain secure even if large-scale quantum computers are capable of breaking current public key cryptography. Modern digital systems, including public chains, online banking, and secure internet communications, largely rely on cryptographic schemes that could theoretically be weakened by sufficiently advanced quantum computers.

Such large-scale quantum computers do not currently exist, but this risk is recognized as a long-term infrastructure issue.

Quantum resilience is not a problem unique to blockchains but is a cross-industry issue for digital infrastructure. Many institutions choose to postpone addressing it until it becomes urgent, while the Ethereum community's stance is that critical infrastructure should be reinforced before threats materialize, not afterward.

The potential threat of quantum computing to blockchains centers on the security of digital signatures: sufficiently advanced quantum computers could break the elliptic curve cryptography currently used to authenticate user transactions and validator attestations.

Ethereum's response path involves proactive upgrades at the protocol layer and a dedicated post-quantum Ethereum initiative: by separating signature verification logic from settlement rules, the network can complete a phased migration as post-quantum cryptographic standards mature.

Ethereum's open governance model provides a channel for this adaptability; once post-quantum signature schemes become necessary, they can be introduced through the EIP process and coordinated for adoption by network participants. Currently, no practical quantum systems exist that can break elliptic curve cryptography, and the risk is forward-looking, but the Ethereum community chooses to plan and build for it now rather than waiting for a crisis to arise.