A leading Ethereum advocate has warned that Wall Street's growing obsession with private, permissioned blockchains is a race to the bottom that ignores the core values of blockchain technology. Raman, CEO of Etherealize and a prominent voice in the Ethereum community, said that centrally controlled, permission-only networks have a role to play in finance but need a transparent, open base to reap the benefits that blockchain technology offers.
The warning comes as major financial institutions have been increasingly building private blockchain networks for their operations. These consortium chains, as they are known, are permissioned versions of blockchain technology that restrict participation to approved members. While they offer some of the benefits of blockchain, such as immutability and transparency among participants, they lack the openness and decentralization that are fundamental to the technology's value proposition.
The Problem With Private Blockchains
Raman's critique centers on the idea that private blockchains sacrifice the most valuable aspects of blockchain technology in exchange for control. Public blockchains like Ethereum allow anyone to participate, creating a network effect that drives innovation and adoption. Private blockchains, by contrast, restrict participation to a small group of approved members, limiting the network effect and creating isolated systems that do not benefit from the broader ecosystem.
Private blockchains also lack the security guarantees of public chains. The security of a public blockchain comes from its decentralization, with thousands of independent validators ensuring the integrity of the network. Private blockchains typically have a small number of validators, making them more vulnerable to collusion and attacks. While the participants in a consortium chain may trust each other, the security model is fundamentally weaker than that of a public chain.
The Race to the Bottom
Raman warned that the proliferation of private blockchains is creating a fragmented landscape where consortium chains compete against each other rather than building on a common, open infrastructure. This is going to end up being a race to the bottom for consortium chains, Raman said, with consortium chains versus consortium chains in a competition that benefits no one.
The race to the bottom refers to the dynamic where each private blockchain tries to offer better terms to attract participants, leading to a degradation of standards and a fragmentation of liquidity. Instead of building on a shared, open infrastructure that benefits everyone, financial institutions are building competing private networks that fragment the market and reduce the overall value of the ecosystem.
The Case for Open Infrastructure
Raman's argument is not that private blockchains have no role to play. They can be useful for specific use cases where privacy and control are paramount. But the foundation should be open, public infrastructure that allows for innovation, competition, and network effects. Financial institutions should build on public chains like Ethereum, using layers and protocols that provide the privacy and control they need while benefiting from the security and openness of the underlying network.
This approach is already being demonstrated by companies like Bitwise and Superstate, which are building tokenized financial products on public blockchains. These products combine the regulatory compliance and institutional-grade infrastructure of traditional finance with the openness and security of public blockchains, creating a model that Raman argues is superior to the private blockchain approach.
The Institutional Shift
The debate over private versus public blockchains comes as traditional financial institutions are increasingly adopting blockchain technology. The long bitcoin, short the bankers era is officially over as banks move from resisting digital assets to building infrastructure. The question is whether they will build on open, public chains or retreat to the safety of private, permissioned networks.
Raman's warning is that the private blockchain approach, while comfortable for institutions, ultimately undermines the value of blockchain technology. The $11.2 billion in crypto funding in H1 2026 went to companies building on public infrastructure, not private chains. The market is signaling that the future of blockchain is open, and the institutions that build on private chains may find themselves at a competitive disadvantage.
The Ethereum Foundation's Position
Raman's comments are consistent with the Ethereum Foundation's broader position on private blockchains. Ethereum's developers have long argued that public chains offer superior security, network effects, and innovation compared to private alternatives. The foundation has been working to make Ethereum more attractive to institutional users through layer-2 solutions, privacy features, and institutional-grade infrastructure, while maintaining the openness that is central to the network's value proposition.
For Wall Street, the choice between private and public blockchains is ultimately a choice about the future of finance. Private chains offer control and privacy but sacrifice the network effects and innovation of public chains. Public chains offer openness and security but require institutions to adapt to a new paradigm. The race to the bottom that Raman warns about may be the consequence of choosing the comfortable path over the transformative one.
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