Despite its myriad flaws, Ethereum remains the best solution available today.

Author: Omid Malekan, Adjunct Professor of Finance at Columbia Business School

Translated by: Saoirse, Foresight News

In this world filled with power and greed, humanity has tried all sorts of blockchains. No one would claim that Ethereum is perfect or without flaws. To borrow Churchill's words (in essence): Ethereum is the blockchain with the most defects — except for all other alternatives on the market.

(Note: Winston Churchill, the famous British politician and writer who led Britain against the Nazis during World War II, served as Prime Minister twice, and was awarded the Nobel Prize in Literature.)

Most of the time, I find myself debating with my peers in the crypto industry, many of whom are my close friends. Our fundamental disagreement lies in the weight of decentralization in the underlying protocol design. My peers believe that decentralization is just one of many core features, while I firmly believe it is the only irreplaceable core quality. They place scaling at a higher priority, while I think scaling is merely a derivative issue; they consider business expansion and industry collaboration necessary for project success, which I do not agree with; they feel that ample funding can boost public chain development, whereas I believe that funding excess will inevitably drag projects down; when someone in the industry touts that permissioned chains have practical value, I can only smile at that.

What people often criticize me for is saying my views are too idealistic and out of touch with reality, which is precisely the root of our disagreement. My line of thinking has never stemmed from the naïve fantasies of an idealist about a utopia.

Underlying Logic: Understanding the Inherent Nature of Enterprises and Capital from a Power Perspective

I am a realist who understands human nature; I have long studied history and analyzed the evolution of human social systems, and I have witnessed how major power institutions stop at nothing to maintain their power and seize commercial interests. My entire analysis logic leans towards Machiavellianism. Once you clearly recognize the operational rules of the real world, you will understand: those easily swayed by hollow proclamations that can be tokenized in a corporate database are the true idealists that are out of touch with reality.

To align with the mainstream narrative in the industry, one must also believe in several assumptions that contradict business laws: profitable companies will place technological innovation above their own profits; the "innovator's dilemma" will not apply to platform-level underlying technology; seasoned executives who understand existing industry rules and earn seven-figure salaries will genuinely hope for a complete overhaul of the current interest landscape. I hold a negative stance on all of these points. I firmly believe that enterprises have an inherent inertia that they cannot escape, and only a highly decentralized crypto system has the chance to break free from the constraints of capital and giants; all other compromise solutions will ultimately be co-opted, corrupted, and completely lose their original design intentions.

The foundation of all rules in the crypto industry is the power of incentives. Any blockchain that can gather millions of users and support trillions of assets will continually spawn corrosive self-interested motives. Large companies and even national governments, if they do not attempt to hijack such networks, would actually be going against the logic of business survival. Ignoring the development of blockchain could even directly threaten the survival of some traditional giants.

This is the reason why, a decade ago, major institutions uniformly classified Bitcoin as a scam, and it is also the fundamental reason they now tout that "tokenization can only follow rules set by enterprises." This operation is itself full of Machiavellian calculation: first, exhaust all efforts to suppress emerging technologies, and if suppression fails, then turn to merge and transform. Only the crypto networks that have maintained an open and neutral position since their inception stand a chance to escape this comprehensive encirclement.

Core Risk: Internal Control Power Theft is Far More Lethal Than External Attacks

When the industry discusses protocol security, everyone's focus is on external attacks like the 51% hash power fork. However, we should be more vigilant against the internal power being seized by capital. Today, the mechanisms that established public chains use to resist external attacks have matured, but the risks of internal power theft have become increasingly prominent.

Almost all existing traditional financial exchanges, clearing systems, and even mainstream social media platforms cannot escape the outcomes of internal power theft and platform degradation during their development. Visa and Mastercard are the most typical cases: originally, both were similar to today's non-profit token alliance networks but ultimately transformed into profit-driven monopolistic tools; Google publicly opposed using ads as a business model for its search services in its early years but has now grown to become the world's largest advertising service provider. This is the complete trajectory of platform degradation and the inevitable end point of the growth curve S, which was once hailed by many well-known venture capital firms.

Compared to payment clearing networks and social platforms, the risk of capital seizing control over a layer-one public chain is several orders of magnitude higher. A programmable, layer-one public chain capable of settling all types of assets has a potential market size far exceeding the sum of all traditional legacy networks. A generalized layer-one chain can cover a multitude of scenarios including payments, securities clearing, social interactions, gaming, digital collectibles, ticketing, identity verification, and more, offering immeasurable space for capital to exploit, transform, and profit.

Under this logic, those who believe in the viability of permissioned chains are too naive — such databases can be shut down or have all data altered at the push of a button by the operating party. Similarly, the so-called permissionless layer-one chains with highly centralized validation nodes, lacking zero-knowledge proof mechanisms, and only configured with a single sequencer, are equally vulnerable. Advocating for such centralized reform solutions is tantamount to assuming that all market participants will never be corrupt, that institutions will never commit wrongdoing, and that regulatory bodies and governments will always exercise self-restraint. To put it plainly, it's similar to naively thinking that Visa sincerely wants Mastercard to thrive.

Real-World Evidence: Enterprise Alliance Chains Naturally Foster Industry Oligopoly

The network power theft I describe is not a baseless deduction; there are already complete examples in the real industry. A company that focuses on a one-button control alliance database has its CEO openly declaring that its mission is to revive the industry status of traditional financial intermediaries. In a recent interview, he confidently stated that closed enterprise alliance chains using authoritative proof mechanisms are fairer than open public chains that use proof of stake.

His logic is that participating in Ethereum consensus nodes requires a fixed investment (approximately $60,000 at current market prices), whereas joining his alliance network only requires new participants to "prove their business value" to the existing members to gain admission.

But the reality is that Visa has long since joined this alliance network, while Mastercard has been kept out for a long time. How can a company prove its value to its biggest competitor? Going a step further: if Visa and Mastercard secretly form an alliance to join this network while jointly blocking entry for all other payment peers, permanently solidifying their duopolistic status in the European and American payment landscape, who can counterbalance that? How are fintech startups that aim to completely reshape the payment industry supposed to "prove their value" to this trillion-dollar industry giant? Simply through meek pleas?

If you think my judgment is too harsh, it only indicates that you have not fully sorted out the history of the payment clearing industry. You do not have to take my word for it; consider asking small banks and credit unions across the United States how they view clearinghouses; ask banks that are not EWS shareholders what their true opinions of the Zelle platform are; inquire about Robinhood's situation when it encountered trading restrictions from NSCC during the meme stock craze; or ask about the conflicts between Custodia Bank and the Federal Reserve, or the various discontent fintech companies have regarding the FedNow instant payment system.

Consider the perspective of a CEO from a high-fee, high-margin payment giant. You might occupy a top position, and your core understanding is that controlling the network equals controlling everything in the industry; this truth has long been ingrained. Before the advent of crypto technology, all global settlement systems were either operated by traditional industry giants or controlled by governments heavily influenced by lobbying from those giants. Now, with the emergence of public permissionless blockchains, many smart people in the industry present this settlement system to you, claiming it is not controlled by any single entity and that all market participants can use it equally — your core competitors, along with all startups seeking to tap into your hefty profits, can access it without barriers.

Ask yourself what choice you would make. Would you honestly embrace this new technology that would completely dismantle your industry's advantages? Or would you introduce a compromise hybrid solution that superficially retains some of the surface characteristics of blockchain while actually maintaining grip on network control and pricing power, and then arrange for a PR team to craft a narrative around regulatory compliance and preventing illegal transactions to polish it up?

The answer is self-evident. From this perspective, the power theft scenario I depict is not extreme Machiavellian speculation but rather a routine operation in the industry day after day. Business enterprises will spare no effort to capture competitive advantage, with controlling the settlement channel being the ultimate trump card. As long as there are loopholes in the network that capital can manipulate, enterprises will inevitably attempt to merge; for decentralized public chains that cannot be controlled, they will spread negative misinformation, initiate endless lawsuits, and exert comprehensive suppression.

The True Motive of the Giants: Pseudo-Decentralization is Just a Short-Term Delay Tactic

But from a long-term perspective, this set of gamesmanship will ultimately not succeed. It is not that enterprises are not adept at such commercial calculations, but that the pseudo-decentralization schemes themselves have insurmountable inherent flaws: their operational efficiency cannot match that of existing mature traditional financial systems, and their security baseline is far inferior to truly open and neutral public chains. The internal encryption modules of enterprise alliance chains are merely redundant fixtures, and the so-called consensus mechanism is just a show for the outside world. Such enterprise blockchains are only suitable for venture capital roadshows and industry forums to tell stories, but when faced with real commercial environments, they will inevitably collapse.

From a Machiavellian perspective, banks and brokerages that deeply invest in alliance chains actually know in their hearts that this technology lacks long-term developmelft value. If this is indeed the case, their promotion of various pseudo-encryption solutions is nothing more than a meticulously designed delay tactic, aimed at slowing the spread of decentralization technology and lobbying legislative bodies to set industry entry barriers. From a human nature perspective, it is easy to understand: executives of these traditional institutions are often older, nearing the end of their careers, needing to maintain their accumulated industry reputation and sustain their comfortable living expenses.

Such delaying tactics can only be effective in the short term. Just as water ultimately flows to the lowest point, the market will eventually embrace the infrastructure with the highest degree of decentralization. The high profits of centralized systems largely stem from the friction, inefficiencies, and delays inherent in traditional business processes, and all these industry pain points are the breakthroughs for emerging decentralized technologies. This is also a real game theory logic: a completely decentralized settlement system is the strongest weapon for emerging players, unencumbered by traditional technologies and outdated business models, to combat established industry giants. Coupled with the ongoing decline in global public trust towards traditional finance and authoritative institutions, the overall process of democratizing decentralized technology will only accelerate.

Final Conclusion: Despite Its Flaws, Ethereum Remains the Best Solution Today

Water naturally flows downwards, and assets in the market will continue to spontaneously gravitate towards the infrastructure with the highest security. This is the Nash equilibrium formed after multiple parties have played their hand. I always insist on being a realist. Decentralized systems like Ethereum certainly have many flaws, the operational costs to resist capital capture are high, and the underlying mechanism design is complex, but compared to the various enterprise alliance chains on the market today, it remains the most comprehensive optimal solution. Many practitioners with idealized visions will ultimately pay a painful price in the harsh reality of the industry.