Wall Street’s private blockchain obsession is a ‘race to the bottom,’ Ethereum advocate Raman warns

A resurgence in private, gated blockchains that differ fundamentally from open, public networks like Ethereum and Solana by creating silos that don’t talk to each other eats away at the potential the technology was designed to achieve, according to Vivek Raman, the co-founder and CEO of Etherealize.

Etherealize acts to attract traditional finance (TradFi) firms to Etheruem. 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 (DeFi). Now the story is about attracting institutions such as BlackRock (BLK) to the permissionless ecosystem where all transactions are visible to everyone.

Ethereum stands in contrast to the permissioned systems that are becoming increasingly popular again, as evidenced by the rise of Digital Asset’s Canton Network, Circle’s stablecoin payments play ARC and Stripe’s vertically integrated Tempo blockchain. These systems, which Raman calls “consortium chains,” tout their inherent privacy and reduced counterparty risk — attributes that mainstream finance finds attractive.

Similar systems, however, have been around the blockchain space for years in one form or another. Early adopters may recall the reams of banks that joined R3’s consortium effort back in 2016, for example, or the many enterprise players that flocked to the Linux-affiliated Hyperledger ecosystem. R3 didn’t make it to the end of the year before the big banks like Goldman Sachs, Morgan Stanley and Santander withdrew from the system.

“It’s like we’re having consortium chain 2.0,” said Raman in an interview. “This is going to end up being a race to the bottom for consortium chains. You’re 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, privacy-enabled layer, HTTPS, sits on top. An open base layer is necessary, Raman said, because that’s the only way you can have maximum interoperability and maximum liquidity in one place, he said.

“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’s at the app layer, whether that’s the L2 layer, that’s 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 the blockchain 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 the former chief economist of Facebook’s Diem stablecoin project.

“This phase is all about enterprise sales,” Catalini said in an interview. “So there’s this really interesting tension just now, right as the real money is about to come in, and it’s 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 the same year.

BlackRock’s new Ethereum-based funds are sign of things moving in what Raman called the right direction. After beginning with the BUIDL token on Ethereum prior to regulatory clarity, the next set of BlackRock funds is compliant with the GENIUS Act, the U.S. regulatory framework for stablecoins.

“When we have regulatory clarity the institutional money goes toward open networks because that’s the rails that no one owns,” Ramen said. “If you go to consortium chains, you’re kind of paying the consortium. You have to get permission or be one of the consortium members. And if you’re not an early consortium member, then the incentives go away very quickly.”