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 firm belief, this path leads to a dead end. Vivek Raman, co-founder and CEO of Etherealize, aptly described this process as a "race to the bottom" in a recent interview, and I fully agree with him.
The consortium networks currently being actively promoted represent a step backward. They not only fragment liquidity but also return us to the isolated systems that blockchain was supposed to free us from. The technology's main advantages—interoperability and a unified liquidity pool—are completely negated when we create closed loops incapable of interacting with one another.
My position, like Etherealize's, remains unchanged: privacy and access control should be implemented at the application or L2 solution level, not by creating separate closed infrastructures. A public blockchain, such as Ethereum, should serve as the base layer. Drawing an analogy with the internet, Ethereum is HTTP, and additional privacy layers are HTTPS. We don't create a separate "closed internet" for banks; we use open infrastructure, adding the necessary layers of protection.
Consortium Chains 2.0: Repeating Past Mistakes
The current wave of "closed" solutions, including Canton Network from Digital Asset, Circle's Arc project, and Stripe's Tempo, is nothing more than "consortium chains 2.0." We already went through this in 2016 with the R3 and Hyperledger initiatives, which never gained proper traction. History is repeating itself, and this raises serious concerns.
"We firmly believe and have always held this position that a global, open permissionless infrastructure is needed as the base layer," Raman emphasizes. And this is the key point. Without an open base layer, we risk building a new system that will be just as fragmented as the old one, but with a distributed ledger inside each individual organization.
Let me remind you that as early as June of this year, Raman noted that traditional financial organizations had begun implementing Ethereum-based solutions into real business processes. This is the right direction. Instead of proliferating new isolated systems, we need to focus on integrating with the existing, open, and liquid infrastructure. Only then can we realize the true potential of blockchain technology in the financial sector.
My conclusion: closed networks are a tactical solution for short-term tasks, but strategically they lose to open systems. Institutional players currently choosing the path of isolation risk finding themselves trapped in their own infrastructure, devoid of network effects and access to global liquidity.