Today, transaction speed has become the industry baseline, and more rigorous tests are following: how can blockchain meet the maturity standards of financial institutions for transaction infrastructure.

Written by: a16z Crypto

Translated by: Luffy, Foresight News

Finance is the most intuitive landing scenario for blockchain, and it is also one of the most demanding scenarios. In the context of financial applications, one major advantage often cited for blockchain is that it incorporates assets, ownership records, and execution rules into a shared system not controlled by a single counterparty. However, this does not mean that blockchain is inherently capable of adapting to the business scale and constraints of the global financial market.

For many years, discussions around blockchain's landing capabilities have focused on cost and throughput, that is, the number of transactions that a single public chain can process per second—financial applications cannot achieve large-scale implementation without sufficient performance limits. However, as the throughput gap among numerous commercial systems continues to narrow, the focus of industry discussions is shifting.

As financial institutions begin to execute transactions on-chain, issue stablecoins, and tokenize assets, they need to confirm whether these networks can truly meet the business demands and expectations of the real financial market. This includes stable and reliable access capabilities, predictable transaction execution rules, and controllable permissions on when sensitive information is made public. Even under extreme circumstances, such as network congestion, service interruptions, or attacks, these safeguards must continue to function.

Blockchain developers have been working on these challenges for many years. This article will summarize the technical difficulties that have been overcome, the unresolved legacy issues, and why blockchain is now one step closer to supporting the financial market.

Predictability: Ensuring Certainty in Transaction Onboarding and Ordering

For a long time, performance limits have been the most intuitive development bottleneck. Fundamental problems such as insufficient transaction processing capacity, frequent network congestion, and high transaction fees have made it challenging for many real-world financial scenarios to be realized. Once market activity increases, routine operations like placing orders or canceling orders can become costly or lead to unreliable execution results.

In recent years, especially during the last infrastructure upgrade cycle, this constraint has improved. Looking across the entire industry, the overall throughput of blockchain has seen significant growth over the past five years, with some commercial networks now capable of processing tens of thousands of transactions per second. However, this is just the beginning; current stress tests and new architectural designs are pushing performance metrics even higher.

But new problems arise: relying solely on throughput does not determine when a transaction will ultimately be completed on-chain. The predictability of transaction execution has become a new core issue.

Transactions need to be confirmed within a predetermined time window and must follow rules that market participants can know in advance. Much of the value in financial operations exists within extremely narrow time frames. For everyday payments, a one-second execution delay may be insignificant; but for trading markets, a millisecond difference can decide whether participants trust this transaction infrastructure. For example, in an on-chain order book, if a trader's order cancellation instruction is confirmed too late, other market participants can complete transactions based on outdated prices. Market makers will factor in such risks into their pricing, widening the bid-ask spread, ultimately leading all traders to face worse transaction prices.

Simply put, predictability requires two layers of safeguards: first, transaction access guarantees, which refer to censorship resistance; second, transaction ordering guarantees.

Resilience: Stable and Reliable Transaction Execution Channels

Even with comprehensive ordering rules, if a single entity can still control transaction execution permissions, the risk persists. Imagine if every second on the New York Stock Exchange was determined by a randomly staked node for transaction access. Clearly, such nodes would have a strong capacity to manipulate the market for traders within the exchange.

The ordering mechanism determines the sequence of transactions once they are on-chain relative to other orders; meanwhile, the interference resistance needs to address preceding issues: whether participants can successfully submit orders without relying on a single gatekeeper or operator—the latter's decisions could affect pricing, transaction risk, and even the final execution results.

For this reason, blockchain developers are focused on building stronger guarantees of determinism, pursuing immediate confirmation of transactions rather than "final confirmation." The goal is that a compliant transaction arriving at the network on time can be immediately packaged on-chain. This standard is significantly stricter than "your transaction will eventually be confirmed," and this is precisely the capability required by the financial market.

Our researchers have proposed and defined the concept and measurement standard of "strong chain quality," ensuring that the execution permissions for the next round of transactions will not be monopolized by a single operator's queue. The underlying logic is that blockchain can reserve a portion of space within each block to accommodate transactions submitted by other nodes in the network, providing multiple paths to on-chain compliance transactions. This ultimately reduces the control a single operator has over the transaction packaging order.

Our goal is for block space to become a public infrastructure with multiple access channels rather than a single queue. Achieving this requires more complex underlying logic than current commercial protocols, but the benefits are sufficient to justify the investment in research and development. Even in a stressed market, participants can be assured that their transactions will be executed smoothly.

Ordering: Clear Rules Understood by Market Participants

Predictability also depends on how the trading platform determines the order of transactions. When multiple transactions are ready for execution, the market requires a set of clear ordering rules.

The vast majority of blockchains do not complete final confirmation of transactions one by one; instead, they package transactions into "blocks," which are written into the ledger by block builders or proposers. In many current systems, these entities have significant autonomy in deciding the list of selected transactions and their order. This design was intended to simplify protocol logic and may be acceptable in some application scenarios. However, in the financial market, transaction ordering directly determines execution priority, final transaction price, and the fairness of the entire transaction process.

Moreover, if a single entity controls the packing rights for the next block, it may see transaction information beforehand, gaining a market advantage. In the crypto space, this phenomenon is often referred to as Maximum Extractable Value (MEV): operators extract additional profits beyond base block rewards by selecting, excluding, or rearranging transactions within blocks. A sandwich attack is a classic example, where a trader monitors transactions waiting to be packed, places an order to pull prices ahead of time, and then completes a reverse transaction for profit. In institutional trading scenarios, the logic extends more straightforwardly; the party controlling the flow of transactions may make trading decisions based on order information before everyone else.

This mechanism flaw resembles existing issues in traditional financial markets, where centralized intermediaries profit from privileged information regarding order flow and trading intentions. If on-chain markets cannot provide robust guarantees on transaction ordering and execution rules, it will ultimately replicate the same information asymmetry problems.

Blockchain protocol designers are developing clearer ordering mechanisms, mainly involving deterministic rules based on priority fees, as well as business rules customized by trading platforms. The exact implementation solutions are still in the academic research phase, but their core logic aligns with traditional finance: market participants have clear expectations regarding transaction ordering and execution, analogous to the price-time priority execution mechanism used by traditional exchanges.

Transaction access guarantees and ordering mechanisms must work in synergy. If bidding orders and clearing commands can be artificially delayed before the ordering rules take effect, then even the fairest ordering logic becomes meaningless. Similarly, if users cannot predict the processing rules after transactions are on-chain, the value of immediate confirmation will be significantly reduced.

High throughput is merely a foundational condition for the on-chain financial landing; only combined with predictable transaction access mechanisms and clear ordering rules can on-chain finance be put to use in time-sensitive, real-market pressures.

Privacy: Locking Transaction Intent Before Execution

Trader order information exposes their trading judgments and operational intentions. For example, order size and transaction direction can reflect whether a fund is building a position or exiting. If orders are made public before they are fully executed, other traders have the opportunity to manipulate prices for profit.

This is particularly pronounced in on-chain scenarios. Many blockchains directly publish data on pending transaction pools before final confirmation of transactions. For financial operations, even if privacy protection cannot be achieved after transactions are completed, pre-execution privacy protection is a necessity.

The market can remain transparent and open but does not need to allow all participants to view others’ pending orders in real-time.

Current protocol designers aim to protect data privacy during the window when transaction information can still be exploited while supporting diverse privacy disclosure models after execution. After a transaction is concluded, disclosure rules can be flexibly adjusted: public markets can present complete transaction records openly; interbank transactions only open permissions to counterparties and regulators. Third parties without full detail visibility can still verify that the entire transaction conforms to business rules.

To achieve this, protocol designers are exploring various cryptographic solutions, such as fully homomorphic encryption and encrypted transaction pools. These solutions can hide transaction details until the deadline arrives or the committee confirms the final sorted position of the transaction within a block. By the time the market sees this transaction, the window for front-running arbitrage has closed.

The market can balance transparency without having to open up pending orders to everyone in real-time. On-chain finance also needs to implement this differentiated logic—supporting audit verification after transactions while strictly protecting transaction confidentiality before completion.

If blockchain wants to become a core infrastructure of the financial market, it must establish a trading system that market participants can trust sufficiently.

Throughput is just the first test. When performance is inadequate, on-chain financial applications can only remain within niche scenarios. Today, transaction speed has become the industry baseline, and more rigorous tests are on the way: how can blockchain meet the maturity standards that financial institutions have for transaction infrastructure? These standards include predictable execution mechanisms, unambiguous transaction priority rules, interference-resistant transaction access channels, and privacy protection before execution, while retaining audit transparency after transactions are completed.