Omid Malekan@malekanoms
The Canton governance model described by Yuval here isn't new, it's the same model as every privately-owned payment and clearing system in TradFi. It's also why finance is stuck in the dark ages, why you can get a couch delivered faster than a wire, and how the Too Big to Fail banks just get bigger.
Giving the existing members of a platform a vote on "who else gets to join" isn't some egalitarian merit-based breakthrough: It's a mechanism that lets incumbents deter competition and prevent innovation.
That's not a theoretical concern, it's the history of payments and capital markets today.
Permissioned architecture is why Visa and Mastercard (both started as non-profit consortiums) have a higher combined market cap than any bank that founded them. It's why the NASDAQ is more powerful than any member of the National Association of Securities Dealers, and why the CME rugged all of its OG seat holders.
Think of this way: Now that Visa is a Canton super-validator, is it going to go out of its way to welcome Mastercard? It shouldn't. Is Euroclear going to welcome a FinTech that wants to reinvent European capital markets and make Euroclear obsolete? Of course not.
And since this is a permissioned database, the censorship applies to founders and app builders as well. Is the NASDAQ going to welcome a DEX? It would be foolish if it did. In fact it would be a violation of its exec team's fiduciary responsibility to shareholders.
Game recognize game.
None of this is hypothetical. I was in the room when the senior executives of one of the largest banks debated whether they should join Libra (which had a similar governance structure). Joining to block the competition was a stated motivation. Having the competition join and block them was a stated fear.
I also know the leaders of regional banks and credit unions who fear solutions like Zelle because EWS is owned by the GSIBs.
I know highly succesful FinTech founders and VCs who understand that running on bank-owned infra is an existential threat.
I know the crypto founders who spent years fighting to get access to Fed Master accounts because they didn't want to be dependent on Wall Street.
I also know the TradFi firms lining up to join corpo DLT databases while lobbying to kill stablecoins and DeFi in DC.
This is all business 101. Own the infrastructure, don't help your competition, prevent innovation that erodes your margins, make future founders dependent on you.
Yuval has been around crypto long enough to know Proof of Stake consensus is a form of Sybil Resistance, one designed to prevent incumbents from taking over the chain and killing their competition.
The ~$100k cost of becoming an Ethereum validator is trivial compared to the cost of "your competitors & incumbents conspiring to screw you."
I'm confident the various people behind Canton know all of this, they are bright people. They were there for all the previous permissioned corpo database with proof of press release GTM that ended in disaster.
That's why Canton has one unique feature none of those prior attempts had. It's quite clever in that regard.
