Ethereum cofounder Vitalik Buterin’s foundation has partnered with Electric Capital and Paradigm to support the $40 million launch of Etherealize, a startup with the ambitious goal of transforming Wall Street through Ethereum technology. In a landscape where trillions of dollars circulate daily, much of the infrastructure remains outdated, hindering the efficiency of mortgage and bond trades, which can take days to settle. Intermediaries complicate transactions, adding costs and risks. As financial institutions seek more efficient systems, the choice of blockchain technology is crucial.
Despite criticisms regarding Ethereum’s speed and cost, Danny Ryan, cofounder and president of Etherealize, argues that Ethereum’s security, neutrality, and advanced cryptographic privacy uniquely position it to revamp global finance. Ryan, who has played a pivotal role in Ethereum’s evolution, including the transition to a proof-of-stake mechanism, believes Ethereum is ready to meet the demands of Wall Street.
When addressing concerns about Ethereum’s reputation for congestion and high fees, Ryan notes that “crypto-economic security is a scarce resource.” He emphasizes that Ethereum’s current network boasts over one million validators and nearly $100 billion staked, establishing a considerable barrier to potential attacks, unlike newer blockchains that may rely on a few institutional investors for security.
Research from Etherealize supports Ryan’s claims, highlighting that Ethereum secures over 70% of stablecoin value and 85% of tokenized real-world assets, underscoring its dominance in terms of security for financial institutions managing counterparty risks.
Privacy also poses a significant challenge for institutional adoption. Transparency on public ledgers can deter banks from fully engaging with blockchain due to confidentiality concerns. Ryan dismisses alternatives like Canton, which rely on the honesty of parties to manage sensitive information, describing it as “smoke-and-mirrors privacy.” He points to zero-knowledge proofs (ZKPs) as the robust solution for privacy in finance, allowing transaction details to be verified without revealing sensitive data to the open market.
Regarding Ethereum’s architecture, Ryan counters criticism about its complexity by highlighting modularity as a strength. He explains that institutions favor a Layer-2 model, which allows them to customize their infrastructure while benefiting from Ethereum’s established security and liquidity. This is exemplified by the success of Coinbase’s Base network, which generated significant revenue in its first year. Ryan sees modularity as essential for building institutional blockchain infrastructure while maintaining the advantages of a decentralized network.
Speed and throughput are other pivotal considerations. While competitors like Solana boast higher transaction speeds, Ryan stresses that the credibility of any blockchain system is vital to financial institutions. They prioritize who they can trust to ensure system integrity over sheer speed. Ethereum operates on the principle of “credible neutrality,” meaning no single entity has the power to manipulate its operations. Ryan boasts about Ethereum’s impressive track record of uptime since 2015.
Despite acknowledging that Ethereum isn’t without flaws, Ryan insists that its unique blend of security, privacy, modularity, and neutrality makes it the best choice for institutional financial systems. He cautions that while companies like Stripe and Circle may pursue proprietary blockchain solutions, they will ultimately realize that integration with Ethereum’s network is essential for security, which is a finite resource.
In a rapidly modernizing financial landscape, the pressing question for Wall Street is whether to develop isolated systems or connect to a proven, neutral global network. Although Ethereum may not yet claim the title of the fastest blockchain, its architecture is advancing rapidly, and its commitment to privacy through mathematical guarantees presents a compelling case for institutions looking for secure and efficient solutions.
