Blockchain is being pulled between traditional finance and its decentralized ideals as the industry shifts to serve institutional products.

Aztec Labs CEO Zac Williamson stated that the early failures of decentralized governance have diverted the trajectory of blockchain away from community coordination.

“Blockchain has the potential to become just a slightly more efficient settlement layer than Visa or Mastercard,” he told Cointelegraph. “If we lose the social coordination aspect of this technology, then the entire meaning of the technology is hollowed out.”

Williamson entered the blockchain space from an academic background. He transitioned from particle physics to software engineering and, in 2017, through a connection from his brother, was asked to help establish a startup using distributed ledger technology. This introduction led him to zero-knowledge cryptography, ultimately co-founding Aztec Labs, which focuses on privacy and operates as a Layer 2 solution on Ethereum.

At that time, blockchain was being promoted as an alternative to the existing financial system. Today, the momentum lies in institutional adoption, prompting builders like Williamson to reconsider whether this technology can still support its foundational principles.

Williamson described the split in the purpose of blockchain into two competing paradigms. One paradigm views blockchain as a monetary system aimed at creating and trading digital assets, generating profits, and integrating with traditional markets. The other sees it as a tool for collective action, where groups can organize, vote, and coordinate without intermediaries.

The latter faced its first major test in 2016 with The DAO, when thousands of users pooled funds and attempted to manage a shared treasury on-chain.

The experiment collapsed after a vulnerability attack, draining 3.6 million Ether (ETH) and triggering a crisis that ultimately split the Ethereum network. One chain chose to reverse the theft, becoming the Ethereum we use today, while the other continued without a rollback, becoming Ethereum Classic.

Williamson noted that the DAO also exposed the inadequacy of governance models for real-world coordination.

With the failures of early governance experiments, the monetary paradigm gained traction. As capital, developer attention, and regulatory frameworks coalesced around financial use cases, the public identity of blockchain also shifted.

“If blockchain ultimately becomes a tool for institutions to slightly speed up transaction settlements, then there’s no substantive change,” Williamson said.

In the real world, organizations do not publicly disclose every internal process in real-time. However, today’s public blockchains expose every payment, vote, and contributor's action, just as early decentralized autonomous organizations (DAOs) struggled to stand without a privacy layer.

“If every detail is public, you cannot pay contributors, vote, or manage internal decisions,” Williamson said. “No real organization operates that way.”

Here, privacy does not mean hiding misconduct. It means limiting visibility to those who truly need to see it while still proving that actions are valid. Zero-knowledge cryptography allows systems to confirm that votes or payments comply with rules without revealing participants or methods. This enables secret voting and private compensation, bringing blockchain governance closer to the operational realities of institutions.

Privacy also allows institutions to participate without becoming central administrators. Banks, asset management firms, and corporations cannot expose strategies or sensitive data on a public ledger.

But if they build closed systems, blockchain becomes just another private database. Williamson believes that privacy solutions at the protocol layer address this issue.

“Privacy is key to allowing blockchain to serve both individuals and institutions without being controlled by one side,” he said.

Blockchain is now at a node where it can fully lean towards institutional finance or return to its original goals, enabling users to coordinate without intermediaries.

Williamson believes it does not need to choose between these two paths. He stated that privacy technology can allow blockchain systems to meet institutional standards while still maintaining user autonomy.

So @cryptomanran has been among several high-profile voices getting behind the Zcash movement. @rkbaggs and I continue to unpack this narrative - because it has an undeniable head of steam. Why is privacy in vogue? Why has Zcash emerged as the privacy protocol of choice? 🤔👇… pic.twitter.com/7Q31RtqAsW

“If we want blockchain to adhere to its first-generation vision, we need to have some understanding of identity and belonging. Privacy technology plays an important role in this,” he said.

Without privacy, any collective operating on-chain would expose its internal decisions and strategies to the public, making meaningful coordination impossible and reducing blockchain to merely being a transactional infrastructure for banks.

Related: How India's scrutiny of VDA strengthens the protection of the crypto ecosystem

Original article: “Aztec CEO: Blockchain Struggling to Maintain Its Original Purpose”

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