Wall Street's private-blockchain obsession is a 'race to the bottom,' Vivek Raman warns
Centrally controlled, permission-only networks have a role in finance, but need a transparent, open base to capture the benefits blockchain technology offers.
A resurgence in private, gated blockchains that differ fundamentally from open public networks such as Ethereum and Solana is creating silos that do not talk to each other and eating away at the potential the technology was designed to achieve, according to Vivek Raman, co-founder and CEO of Etherealize.
Etherealize works to attract traditional-finance firms to Ethereum. The 10-year-old blockchain is a base layer for billions of dollars in tokenized assets and the settlement layer underpinning much of decentralized finance. The story now is about attracting institutions such as BlackRock to the permissionless ecosystem, where all transactions are visible to everyone.
Ethereum stands in contrast to permissioned systems that are becoming increasingly popular again, as shown by the rise of Digital Asset's Canton Network, Circle's stablecoin-payments project Arc and Stripe's vertically integrated Tempo blockchain. These systems, which Raman calls "consortium chains," tout their inherent privacy and reduced counterparty risk—attributes mainstream finance finds attractive.
Similar systems, however, have existed in the blockchain industry for years in one form or another. Early adopters may recall the many banks that joined R3's consortium effort in 2016, or the enterprise players that flocked to the Linux-affiliated Hyperledger ecosystem. R3 did not make it to the end of that year before major banks including Goldman Sachs, Morgan Stanley and Santander withdrew.
"It is like we are having consortium chain 2.0," Raman said in an interview. "This is going to end up being a race to the bottom for consortium chains. You are going to have consortium chains versus consortium chains."
Raman likened Ethereum's mainnet to Hypertext Transfer Protocol, or HTTP, the base layer of the internet itself. A more secure, permissioned and privacy-enabled layer, HTTPS, sits on top. An open base layer is necessary, he said, because that is the only way to have maximum interoperability and maximum liquidity in one place.
"We strongly believe, and always have done, that you need a global, open, permissionless infrastructure as the base layer," Raman said. "Then you can build all the permissioning on top of it. Whether that is at the app layer, whether that is the L2 layer, that is where you should have the customizability."
But familiarity with blockchains and distributed-ledger technology has moved on since 2016. The question now is whether the market really cares about decentralization and the aims of blockchain's originators.
The rapid adoption of gated systems with clear sponsors suggests the answer is "no," said Christian Catalini, founder of the MIT Cryptoeconomics Lab and former chief economist of Facebook's Diem stablecoin project.
"This phase is all about enterprise sales," Catalini said in an interview. "So there is this really interesting tension just now, right as the real money is about to come in, and it is not clear which way we will land. If we land on these networks that are more curated and have a clear sponsor and anchor entity shaping their rules, then some of the pro-competitive benefits of blockchains will never materialize."
Enterprise sales is where Etherealize comes in. The company was seeded by a grant from Ethereum co-founder Vitalik Buterin and the Ethereum Foundation in January 2025 and raised $40 million in Series A funding later that year.
BlackRock's new Ethereum-based funds are a sign of things moving in what Raman called the right direction. After beginning with the BUIDL token on Ethereum before regulatory clarity, the next set of BlackRock funds complies with the GENIUS Act, the U.S. regulatory framework for stablecoins.
"When we have regulatory clarity, the institutional money goes toward open networks because those are the rails that no one owns," Raman said. "If you go to consortium chains, you are kind of paying the consortium. You have to get permission or be one of the consortium members. And if you are not an early consortium member, then the incentives go away very quickly."