Wall Street’s appetite for cryptocurrencies is stronger than ever. BlackRock’s Bitcoin ETF has broken inflow records. Fidelity and VanEck followed suit with new spot products. Even Nasdaq has hinted at expanding its digital asset trading infrastructure. Yet despite all this momentum, almost none of this actually happens on-chain.
Institutions now treat crypto as a legitimate asset class, but not as a place to exploit. The majority of trading, settlement, and market making still takes place on private servers and traditional rails.
The reason is simple: blockchains, in their current form, do not yet meet institutional performance standards. Until they can deliver predictable speed, reliable data access, and operational resilience comparable to Wall Street systems, the largest players will continue to trade off-chain, limiting the transparency, liquidity, and very innovation that made crypto compelling in the first place.
Why order flow remains off-chain
Institutions avoid trading on-chain because most blockchains do not meet their standards. Institutions demand both speed and reliability, and blockchains tend to struggle with the latter.
Many blockchains become congested under maximum stress, causing transactions to fail unpredictably. Gas charges can change erratically as network activity fluctuates, introducing additional chaos. Institutions refuse to operate in such an unpredictable environment.
Institutions must also guarantee, without doubt, that transactions will be settled correctly, even when multiple events occur at the same time. Some blockchains such as Layer 2 or rollups rely on optimistic settlement techniques that work most of the time, but sometimes require transactions to be rolled back, thus voiding settled transactions.
Given these constraints, institutions must ensure that they are able to trade as quickly as possible. In traditional markets, institutions have paid millions to shorten the length of fiber optic cable between them and Nasdaq, allowing them to settle their trades a nano second ahead of their competitors. The blockchain latency is still in the order of a few seconds, or even a few minutes, which is not at all competitive.
Importantly, modern institutions have access to crypto ETFs, allowing them to purchase crypto exposure in traditional markets using the optimized fiber optic cables they are familiar with. This means that to attract institutional on-chain trading, a blockchain must exceed the speed of traditional markets (why would institutions move to a slower trading platform?).
Bring blockchains to institutional standards
Institutions won’t just create a Metamask wallet and start trading on Ethereum. They require custom blockchains designed to meet the same standards of performance, reliability and accountability as traditional markets.
A key optimization is instruction-level parallelism with deterministic conflict resolution. In simple terms, this means that a blockchain can process multiple transactions at once (like multiple cashiers calling customers in parallel) while ensuring that everyone’s receipt is correct and in the right order every time. This avoids the “traffic jams” that cause blockchains to slow down when activity increases.
Blockchains designed for institutions should also eliminate I/O bottlenecks, ensuring that the system does not waste time waiting for storage or network delays. Facilities must be able to perform many simultaneous operations without creating storage conflicts or network congestion.
To make integration more seamless, blockchains should support VM-agnostic plug-in connectivity, allowing institutions to connect existing trading software without rewriting code or rebuilding entire systems.
Before engaging in on-chain trading, institutions require proof that blockchain systems operate under real-world conditions. Blockchains can alleviate these concerns by publishing performance data measured on real hardware, using realistic workloads related to payments, DeFi, and high-volume trading, for institutions to verify.
Together, these upgrades can raise the reliability of blockchains to Wall Street standards and incentivize them to trade on-chain. Once a company realizes it can trade faster via blockchain rails (getting a head start on competitors) without sacrificing reliability, institutions will flood the chain.
The True Cost of Off-Chain Institutional Trading
Keeping most activity off-chain concentrates liquidity on private systems and limits transparency on price formation. This keeps the industry dependent on a handful of trading platforms and weakens one of crypto’s biggest advantages: the ability for applications to connect and rely on each other out in the open.
The cap is even more obvious with real-world token assets. Without reliable on-chain performance, these assets risk becoming static wrappers that rarely trade, rather than real instruments in active markets.
The good news is that change is already happening. Robinhood’s decision to launch its own blockchain shows that institutions aren’t just waiting for crypto to catch up: they’re taking the initiative themselves. Once a few companies prove that they can trade faster and more transparently online than offline, the rest of the market will follow.
In the long term, crypto won’t just be an asset that institutions invest in, it will be the technology they use to move global markets.
