Etherealize CEO: Wall Street's Closed Blockchains Are a 'Race to the Bottom'
Recently, a troubling trend has emerged on Wall Street: major financial institutions are increasingly turning to closed blockchain networks with restricted access. However, in my deep conviction, this path leads to a dead end. Such consortium initiatives not only fragment liquidity but also effectively replicate the very isolated systems that distributed ledger technology was created to eliminate. This is not evolution, but degradation.
A Return to Isolation
The crux of the problem is that closed circuits are unable to interact with one another. They undermine two fundamental advantages of blockchain: interoperability and liquidity pooling. Instead of a unified global space, we get fragmented "digital oases." I call this race to build private infrastructures a "race to the bottom," because it inevitably leads to reduced efficiency and a return to the old intermediary models.
The key thesis I advocate is that privacy and access control should be implemented at the upper layers of the stack—in applications or through L2 solutions—rather than by creating separate closed networks. A public blockchain, such as Ethereum, should serve as the base layer, much like HTTP serves as the foundation for HTTPS. Additional layers of encryption and authorization should not replace the infrastructure itself.
"Consortium Chains 2.0"
The new wave of projects, including Canton Network from Digital Asset, Arc from Circle, and Tempo from Stripe, only confirms my concern. These are "consortium chains 2.0"—successors to failed initiatives like R3 and Hyperledger, which were actively promoted since 2016 but never achieved mass adoption. History is repeating itself, and we risk stepping on the same rake.
My position remains unchanged: to build a truly sustainable and scalable financial system, a global, permissionless infrastructure is necessary. Only it can provide the required level of trust and network effect. Notably, as early as June of this year, I noted that traditional financial organizations are beginning to move from experiments with Ethereum to real-world use in business processes. This is an encouraging signal, indicating that open systems ultimately prevail.
My analysis: The fascination with closed networks is an attempt to preserve control at the expense of innovation. The market has already shown that isolated solutions are not viable in the long term. Institutions should consider whether they want to build on sand or on the solid foundation of open source.