The integration of blockchain technology by companies has been a long-awaited development, but the initial enthusiasm has worn off for many. Early pilots of centralized corporate blockchains showed promise, but it didn’t take long to realize that the rules can be bent and power can be abused, which is hardly surprising given the track record of centralized systems.
The idea of a trustless chain architecture is attractive to companies, as it can draw in more users and liquidity, since everyone knows that the deck is not stacked. However, the convenience of a closed system often wins out, and the owner of assets may not prioritize resistance to censorship. As a result, corporate networks may follow the same trajectory as information technologies, where closed systems had their place but ultimately gave way to open systems.
Robin Hood in Reverse
Companies began exploring blockchain in the mid-2010s, with the technology promising to remedy messy multi-party recordings, ensure data consistency, and reduce latency. For example, Walmart and IBM launched the Food Trust platform to track products from farm to store, while JP Morgan operated the Onyx/Kinexys network to allow wholesale customers to move money and data around the clock. Visa also started Visa B2B Connect, a legitimate network to accelerate cross-border payments.
The attractiveness of building a private blockchain is straightforward: companies can control the complete stack and don’t have to wait for external teams to develop new products or pay for external infrastructure. However, as the story often goes, a little centralized power can go a long way, and things don’t stay clean for long.
A notable example is the Gamestop saga, where retail traders used apps like Robinhood to buy up stocks, only to find the buy button disappeared, and the app only allowed selling. This incident highlights the core risk of a “blockchain” controlled by a single provider: the rules live behind a dashboard, not in neutral code.
Opening the Gate
The development of blockchain can be described by Tim Wu’s “Cycle of Information Replacers,” where new information technologies begin open and decentralized, triggering experiments and rapid innovation. However, as they become consolidated by a few dominant companies, the system becomes closed, and the rules are defined by those in power.
Large companies building private blockchains are trying to force the industry into the concentration phase prematurely, seeking control but cutting off the very properties that made blockchain disruptive. When the story is a guide, these private chains will ultimately fail, just like closed intranets or monopolized technical ecosystems in the past.
Private networks can still play a role, but they must be linked to the wider blockchain economy. A practical hybrid approach is to use private, public, and interoperable networks as needed, providing value to users. Another approach is shared workflows, where some actions are permissible, and others remain private. This is how many RWA teams work today, setting flexible controls for compliance without losing access to DeFi.
In conclusion, corporate chains that are cut off from the broader economy are doomed to fail. As the legendary English hero Robin Hood would have fought against injustice and arbitrary authority, modern companies must open the gates and let the trade flow, gaining public interest and trust. For more information, visit https://cryptonews.com/exclusives/wall-street-walled-gardens-why-private-blockchains-will-fail/
