Wall Street's Private Blockchain Revival Faces Interoperability Hurdles

Vivek Raman, co-founder and CEO of Etherealize, warns that Wall Street's private blockchain revival could backfire. He argues that permissioned blockchain networks are recreating the silos and inefficiencies that blockchain technology was designed to eliminate.

Raman compares the current enthusiasm for consortium chains to a failed experiment from 2016 when banks including Goldman Sachs, Morgan Stanley, and Santander joined R3, a blockchain consortium. The initiative unraveled before the year was out, with major lenders withdrawing from the system.

A consortium chain is a blockchain that restricts participation to approved members rather than being open to anyone. Proponents pitch these gated networks on privacy and reduced counterparty risk, qualities that appeal to regulated financial firms wary of exposing trading activity on a public ledger.

Raman's critique centers on interoperability, arguing that a fragmented landscape of competing consortium chains would undermine the liquidity and connectivity that open networks provide. He points to BlackRock's recent moves as evidence that regulatory clarity pushes institutional money toward open networks.