Etherealize CEO: Wall Street's Closed Blockchains Are a 'Race to the Bottom' and a Step Backward for the Entire Industry
A troubling trend is growing in the world of institutional finance: major Wall Street players are increasingly turning to closed, consortium blockchains. However, in my firm belief, this path leads to a dead end. Vivek Raman, CEO of Etherealize, sharply criticized such initiatives during a recent discussion of the market situation, calling them nothing less than a "race to the bottom." And it is hard to disagree with that.
The essence of the problem lies in the very architecture of such solutions. Closed networks with restricted access are typically created in isolation from one another. This leads to liquidity fragmentation and returns us to those very siloed systems that blockchain technology was created to eliminate. Instead of uniting markets and ensuring interoperability, we are witnessing the erection of new digital walls that undermine two key advantages of decentralized ledgers: interoperability and capital concentration.
Raman rightly points out that privacy and access control are tasks that should be solved at the upper layers of the stack, not at the base protocol level. The comparison to the internet is entirely apt here: Ethereum acts as HTTP — an open and universal standard — while solutions for ensuring confidentiality should be like HTTPS — an overlay operating on top of shared infrastructure. Building separate closed networks is akin to creating a parallel internet for banks, which makes no sense whatsoever.
The latest wave of such projects, including Canton Network from Digital Asset, Arc from Circle, and Tempo from Stripe, only confirms this troubling trend. We are witnessing "consortium chains 2.0," which risk repeating the fate of their predecessors — R3 and Hyperledger. These initiatives were actively promoted as far back as 2016, yet they failed to achieve meaningful adoption and remained on the periphery, while open networks continued to develop.
Etherealize's position, which I fully share, is that the global financial system requires a single, open, and permissionless foundation. Only such infrastructure can provide the trust, security, and network effects necessary for scaling. Notably, as early as June, Raman noted that traditional financial institutions are beginning to integrate Ethereum-based solutions into real business processes, indicating a gradual recognition of the advantages of open systems.
My analysis: Wall Street's fascination with closed blockchains is a defensive reaction to regulatory uncertainty and fear of the unknown. However, this is short-term thinking. In the long run, it is open networks with their unlimited liquidity and global accessibility that will become the foundation for the next generation of financial products. Closed consortia, on the other hand, will likely remain nothing more than costly experiments, unable to offer anything beyond temporary comfort at the expense of innovation.