Wall Street's closed blockchains are a "race to the bottom": Etherealize CEO exposes the core problem with institutional tokenization.
In recent months, we have been observing a troubling trend: the largest financial institutions, instead of building on open infrastructure, are increasingly retreating into the sandboxes of their own private blockchains. Vivek Raman, co-founder and CEO of Etherealize, in his recent analysis called this trend nothing less than a "race to the bottom." And it is hard to disagree when looking at the actual state of affairs.
The essence of Raman's criticism of consortium networks boils down to a fundamental contradiction: closed circuits are not just isolated from each other—they destroy two key advantages of distributed ledger technology: system interoperability and liquidity concentration. Instead of a single global liquidity pool, we get fragmented "lakes" that do not communicate with one another. This is a step back toward the isolated systems that blockchain was supposed to free us from.
An architectural mistake or a deliberate choice?
Raman's key thesis is that privacy and access control are not properties of the base layer, but functions of the application layer. He draws an elegant analogy: Ethereum should be to the financial system what HTTP became to the internet, and restricted-access solutions are a kind of HTTPS—an overlay that ensures security and confidentiality. Building separate private networks is like creating a parallel internet for each corporation.
Notably, as examples of "consortium chains 2.0," he cites Canton Network from Digital Asset, Circle's Arc project, and Stripe's Tempo. The sad fate of previous similar initiatives—the interbank platform R3 and the corporate ecosystem Hyperledger, which were actively promoted since 2016—serves as a clear warning. They never achieved widespread adoption, and there is no reason to believe that new projects will fare any differently.
"We have always held the position that a global, open permissionless infrastructure is necessary as the base layer," emphasizes the head of Etherealize. It is noteworthy that back in June, he noted that traditional financiers had begun integrating Ethereum-based solutions into real business processes. However, as recent events show, the temptation of control and "security" in the form of isolation is still too strong for Wall Street.
My comment: Raman's criticism is absolutely justified from an architectural standpoint. Private blockchains solve the trust problem through isolation but create a liquidity and interoperability problem that will ultimately prove more costly. The market will inevitably converge on open networks as the standard, but this path will cost the industry several failed and expensive experiments.