Can permissionless blockchains provide the base layer for the next generation of financial services? In a digital era marked by growing distrust in centralized authorities and increasing complexity in global finance, a debate over the foundational infrastructure of tomorrow’s financial markets is gaining new momentum. At the center of this conversation is a question once relegated to blockchain enthusiasts and DeFi pioneers: Can permissionless blockchains provide the base layer for the next generation of financial services?
A recent podcast episode of Bitcoin, Fiat & Rock’n’Roll delved deeply into this topic with Professor Fabian Schär of the University of Basel, a leading academic in the field of distributed ledger technology (DLT). Joined by co-hosts Alexander Bechtel and Stefan Grasmann, the discussion was grounded in Schär’s latest report for the European Commission, Enhancing Financial Services with Permissionless Blockchains—a document that challenges traditional financial infrastructure models and makes a compelling, if cautious, case for radical change.
Permissionless blockchains: The Architecture of Trust?
The current financial system is a fragmented patchwork of proprietary databases, permissioned networks, and closed infrastructures, largely maintained by a few major institutions. This structure, Schär argues, may have functioned reasonably well in the past, but is increasingly ill-suited for a digitized, global economy demanding transparency, composability, and neutrality.
“At its core, a blockchain is an innovation in governance,” Schär said. “It’s not about fractionalization or programmability—those are achievable in traditional systems. What’s new is the ability to run financial applications on a neutral platform that no single actor can control.”
Schär’s research, commissioned but not endorsed by the European Commission, stresses the importance of distinguishing between permissionless and permissioned blockchains. While the former allows anyone to participate in validating transactions without prior approval, the latter restricts these rights to selected entities—raising concerns about gatekeeping, monopolization, and long-term resilience.
Lessons from Libra
To illustrate his concerns, Schär pointed to Facebook’s now-defunct Diem project (formerly Libra). While the media and regulators focused on its proposed stablecoin, Schär was more alarmed by the infrastructure layer that would have granted Facebook and its partners disproportionate control over the ecosystem. “It would have created a platform for tokenization under the rule of a small consortium,” he said, “which in platform economics is a recipe for rent extraction and exclusion.”
Instead, Schär advocates for a public base layer—akin to how anyone can set up an email server using the protocols of the open internet. “Banks don’t need to know who is transporting their emails,” said Grasmann, reinforcing the metaphor. “They just trust that the system works.”
A Question of Composability
One of the most consequential technical advantages of permissionless blockchains, according to Schär, is their support for atomicity—the ability to combine multiple steps into a single, indivisible transaction. This goes beyond delivery-versus-payment (DvP) to encompass complex, multi-protocol interactions that execute simultaneously and either succeed or fail as a whole.
“You can’t replicate this in a system with multiple, incompatible ledgers,” Schär explained. “Atomicity depends on composability, and composability thrives only when assets and protocols are co-located on a single, neutral base layer.”
That vision brings with it a tension: While a unified platform offers economic and technical efficiency, it also concentrates power, making the governance model a critical issue. As Schär warned, “The nightmare isn’t just centralized control from the start. It’s a system that starts open and becomes captured over time.”
Scaling the Public Ledger
Of course, no vision is complete without grappling with feasibility. When asked whether permissionless chains are ready to support the transactional load of the global financial system, Schär was candid: “Not yet.”
He emphasized the scalability trilemma—security, decentralization, and throughput—and expressed skepticism of high-performance chains that compromise decentralization in the name of speed. “If only data centers can validate the chain, it’s no longer a public chain,” he said. Instead, he favored layer-2 solutions like rollups, which outsource computation while using the base chain as a cryptographic court of last resort.
These secondary layers could also provide tailored environments—customizable and even permissioned—for specific applications without compromising the neutrality of the underlying infrastructure.
The Privacy Paradox
Another unresolved challenge is privacy. Public blockchains are transparent by design, which regulators sometimes praise for its anti-money laundering potential—but which also creates risks for users and institutions alike.
“We’re operating on a system where everything you’ve ever done is visible to anyone,” Schär warned. “This is not an ideal setup for financial markets.”
Solutions range from zero-knowledge proofs to homomorphic encryption, but they remain in early stages of deployment. Even more troubling are proposals to enforce blacklists or validator whitelists through smart contracts—measures that could, ironically, reinforce the very gatekeeping permissionless systems are designed to avoid.
Governance at the Crossroads
Schär’s deepest concern is governance—specifically, the potential for dominant actors to subvert decentralized systems through economic pressure. His paper warns of “reverse dependencies,” where widely used tokens (like stablecoins) can exert de facto control over platform upgrades by threatening to exit chains that don’t align with their interests.
“This undermines the rough consensus model that has made open source work for decades,” he said.
As the conversation drew to a close, Schär emphasized that his goal is not evangelism but critical inquiry. “My call is not to blindly adopt public blockchains,” he said. “It’s to take them seriously as an option. Because if we don’t, we might build a system even more closed, more fragile, and more dangerous than what we have today.”
The Verdict
As Europe and other regions consider regulatory frameworks for digital assets and tokenized finance, Schär’s argument resonates as both a caution and a call to action. Permissionless blockchains may not be ready to host the financial system today—but the debate over whether they should play a foundational role tomorrow is no longer theoretical.
In a time of rapid technological change and shifting geopolitical landscapes, the case for open infrastructure is not simply technical. It is philosophical, political, and urgent.
This article is based on a recent episode of the “Bitcoin, Fiat & Rock’n’Roll” podcast featuring Professor Fabian Schär, Alexander Bechtel, and Stefan Grasmann.
Fabian’s paper “Enhancing financial services with permissionless blockchains”
Coinbase Paper on permissionless blockchains
Episode 175 with Fabian on DeFi
Bitcoin, Fiat & Rock’n’Roll Website
Bitcoin, Fiat & Rock’n’Roll Telegram Channel
Relai*: Buy Bitcoin with Relai – you can do a one-time purchase or savings plan: Click here. Use the referral code „ROCK“ to reduce transaction fees by 0.1% while supporting Bitcoin, Fiat & Rock’n’Roll.
Value4Value Podcast Streaming: Support our podcast by listening to our episodes on the Fountain Podcast App. This way, if you wish, you can support us „Value4Value“ while listening to the podcast. You can find us on the Fountain Podcast App here: Click here
Digital Euro Conference Partnership: BFRR partners with the Digital Euro Conference 2025 taking place on March 27 in Frankfurt. DEC25 brings together leading voices shaping the financial landscape, covering topics around retail and wholesale CBDCs, stablecoins, and tokenized money in general. As an official event partner, BFRR gives away one free ticket for physical participation in Frankfurt. If you are interested, please write us an email to info@bfrr.de by January 31st. If you are not the “lucky winner”, you get 20% off the ticket prices with the code “BFRR20”. To buy your ticket go to the official website Click here and insert the code “BFRR20”.
Disclaimer: The content of this podcast reflects the private opinions of the hosts, serves exclusively for general information purposes and does not constitute investment advice. Always remember: Do your own research – inform yourself before making any investment decisions, such as buying Bitcoin. First try to understand what Bitcoin is and how to store it. This podcast does not provide financial advice. Note that the co-hosts might be invested in crypto assets. Read more on our website: Click here
All links marked with „*“ are affiliate links. If you use these links for purchase, the podcast receives a small share of the revenue without any additional costs to you. On the contrary, affiliate links often include discount promotions, so you can even save money. We would appreciate it if you use these links to support us. Thank you very much!