Author: Omid Malekan, former Citi crypto expert and professor at Columbia Business School
Compiled by: Jiahuan, ChainCatcher
In a world filled with power and greed, people have tried all kinds of blockchains. No one considers Ethereum perfect or all-powerful. In fact, Ethereum might be the worst blockchain—except that all the others are worse.
I've spent a lot of time debating with people in the crypto industry, some of whom are friends. Our biggest disagreement has been about how important decentralization is in core protocol design.
They see it as just one of many important features, but I believe it’s the only truly important one. They think scaling is more critical, but I see that as a distraction. They believe success requires business development and partnerships, but I don’t agree. They think more money helps the protocol succeed, but I believe too much money is destined to cause failure. They think permissioned networks can work—I just smile.
The most critical point is that they think my perspective is too idealistic and unrealistic—that’s where our real disagreement lies. I’m not some naive person daydreaming about a perfectly harmonious future.
On the contrary, I'm a cynic. I've spent a lot of time studying history and how various human institutions have evolved. I've also witnessed firsthand how powerful organizations will go to great lengths to protect their power and profits.
My view is actually closer to Machiavelli (here referring to not relying on institutions to act voluntarily, but instead starting from the real dynamics of power and interest). If you truly understand how the real world works, you’ll realize that true idealists are precisely those fooled by hollow press releases like “tokenization on the company’s database.”
To believe their claims, you’d also have to believe that for-profit companies care more about innovation than their own profits; that the innovator’s dilemma doesn’t apply to platform technologies; and that executives who are well-paid seven-figure salaries for mastering the status quo are all eager to see it dismantled.
I don’t believe it. I believe in the power of corporate inertia, and I believe only the most decentralized crypto systems can achieve “escape velocity.”Everything else will be co-opted and corrupted until it becomes useless.
A large enough network is always incentivized to corrode itself.
Believing in crypto is essentially believing in the power of incentives. Any blockchain that has attracted millions of users and settled trillions in value will forever incentivize people to corrupt it. For the largest corporations—and even governments—it would be foolish not to try to hijack it. For some, ignoring it could even be a matter of life and death.
Ten years ago, they claimed Bitcoin was a scam; today, they tell you that tokenization only counts if it follows their rules—it’s the same logic. It’s pure Machiavellian: first try to stop it; if you can’t, co-opt it. The only crypto systems that have a chance of surviving this threat are those deliberately designed to be open and neutral from day one.
When we discuss protocol security, we often focus only on external attacks, such as 51% reorganization attacks. However, internal takeovers are equally concerning—and potentially even more so—especially today, as the most established protocols have become quite robust.
Almost every major traditional financial exchange, settlement system, or even social media platform still in operation today has a history of internal takeover. Visa and Mastercard are just like that: they began as nonprofit consortium networks, similar to today’s tokenized consortium blockchains, but gradually turned into money-printing machines. Google followed the same path, evolving from an initial opposition to advertising as a search business model into the most powerful advertising company in history.
This is the trajectory of "platform decay," the inevitable outcome of the famous S-curve that these prominent venture capitalists once believed in.
For a Layer-1 blockchain, the risk of takeover is greater than that of any card network, clearinghouse, or social platform. This is because a programmable settlement system capable of hosting all types of assets has a potential market size larger than the combined market sizes of most existing networks.
A general-purpose L1 can handle payments, securities settlement, social media, gaming, art, ticketing, identity, and more. There are simply too many things available to be corrupted.
Who is truly naive?
From this perspective, the truly naive are those who believe in permissioned networks—networks that are essentially databases that can be shut down with the press of a button.
Similarly naive are those who believe in "Layer-1s that claim to be permissionless but have highly centralized validators," as well as those who believe in "Layer-2s that claim to be open but have no proof and only a single sequencer." Believing in such systems is like believing individuals cannot be corrupted, institutions never act maliciously, and governments always exercise self-restraint.
More specifically, it means believing that Visa wants Mastercard to succeed.
And today, the takeover scenarios I’m describing are not hypothetical. Take the market leader in the field of “databases you can control with the press of a button”—their CEO is ambitiously aiming to “make the existing giants and intermediaries great again.”
In a recent interview, he (referring to the Digital Asset CEO) argued that a closed enterprise network running Proof of Authority (PoA) is fairer than an open network running Proof of Stake (PoS). What’s his reasoning? Joining Ethereum’s consensus requires spending money (approximately $60,000 at today’s prices), whereas joining his network only requires potential participants to “demonstrate their value” to existing members.
Interestingly, Visa is already a participant in this network, while Mastercard is not. How can one company prove its value to its biggest competitor? Or even further: What if Visa and Mastercard colluded, both joined the network, and then blocked any other competitors from entering, permanently cementing their duopoly at the top of Western payments?
How can a fintech company determined to completely revolutionize payments prove its value to this trillion-dollar giant?
Will you get there by politely asking?
If you were the CEO, what would you do?
If you think I’m being too harsh, it only means you haven’t seriously studied the history of payment and clearing systems. But you don’t have to take my word for it—ask small and medium-sized banks and credit unions in the U.S. how they view The Clearing House, a clearing institution controlled by large commercial banks; or ask banks that don’t hold equity in EWS how they feel about Zelle, the instant payment network operated by EWS.
Ask Robinhood how they viewed the National Securities Clearing Corporation (NSCC) during the meme stock frenzy; ask Custodia, the digital asset bank that took legal action after being denied a Federal Reserve account, how they view the Federal Reserve; ask fintech companies how they view the Federal Reserve’s new instant payment system, FedNow.
Now, imagine you're the CEO of a highly profitable payment company with high transaction fees and high gross margins. You've gotten this far because you understand the importance of controlling the network—it's practically ingrained in your DNA.
Before cryptocurrency, all settlement systems were either operated by existing giants or by governments (which in turn were influenced by these giants). Today, a new thing called a "public permissionless blockchain" has emerged, and some brilliant minds tell you: this is a settlement system that no one can control, yet everyone can use. And by "everyone," they mean your biggest competitors, as well as any startup that sees your profit margins as an opportunity.
Test your wit, smart one—what would you do? Would you open your arms and embrace it?
Or are you looking for some kind of "hybrid" alternative—a solution that claims to offer some of the benefits of blockchain while allowing you to retain control and pricing power—and then instruct your PR team to craft convincing narratives about regulation, accountability, and misuse?
The answer is obvious. From this perspective, the takeover scenarios I’ve described aren’t particularly “Machiavellian”—they’re simply standard practice. Competitive companies seize every advantage they can, and “owning” (or at least “controlling”) the settlement mechanism is that ultimate advantage.
They will naturally attempt to take over any network that allows them to do so, and then use fabricated allegations and legal pressure to undermine those that do not.
But this strategy isn't sustainable in the long term.
However, it’s important to clarify that, in the long run, none of these approaches will succeed. The reason isn’t that these companies are bad at playing the game, but that "pseudo-decentralization" is objectively inferior to the current system—it’s less efficient than today’s traditional financial systems and less secure than true decentralization.
On corporate networks, cryptography is a burden, and consensus is a farce. Fake decentralization only works on venture capital pitch decks and conference roundtables—it fails in the real world.
From my Machiavellian perspective, I can’t help but wonder: Are the banks and brokerages playing this game already aware of this? If they are, then their embrace of "fake crypto" is a brilliant smokescreen designed to slow progress and influence lawmakers.
From a human perspective, this strategy is understandable. These companies are run by older individuals who are closer to the end of their careers than the beginning. They have reputations to protect and lavish lifestyles in Hampton to maintain.
But their delaying tactics can only buy them a little time. The world will ultimately find the most decentralized system, just as water inevitably flows to the lowest point. Much of the profit in the centralized world comes from the delays and friction of old methods—and those very profits are someone else’s opportunity.
This is equally Machiavellian. A fully decentralized settlement system is a powerful tool against competitors, especially when you don’t carry the historical burdens of their technology and business models. Coupled with declining trust in existing institutions, this process will only accelerate.
Water will always flow to the lowest point, and assets will always flow to the most secure infrastructure. This is the Nash equilibrium of our world. So it’s best to be a realist, like me.
Decentralized systems like Ethereum have many flaws, and resisting capture is both expensive and cumbersome. But they are still better than the corporate and company-based solutions being touted today. Many idealists will learn this lesson at a painful cost.