A new wave of corporate blockchain networks is on the horizon, promising faster stablecoin payments and smoother adoption. The long-awaited vision of companies embracing blockchain technology seems to be finally coming to fruition, though not in the way many in the crypto community had anticipated.
Stripe, with backing from crypto VC firm Paradigm, is in the process of building its own Layer 1 chain, Tempo, for global payments. Instead of opting for another Layer 2 solution on Ethereum, Stripe has decided to create a network from the ground up.
Similarly, Circle, a major stablecoin issuer, is also working on its own Layer 1 solution for its stablecoin, while Google is developing its own chain with a focus on enterprise use cases rather than retail users.
Despite the involvement of prominent companies in these initiatives, there has been significant criticism from some within the crypto community. Critics argue that corporate chains diverge from the decentralized vision originally outlined by Bitcoin’s creator, Satoshi Nakamoto.
The L1 vs L2 Debate
One standout feature of Stripe and Paradigm’s Tempo is their emphasis on presenting the protocol as a more open, public-focused network compared to product-specific chains like Circle’s Arc or Google’s GCUL. Tempo is positioning itself as a “neutral platform with respect to stablecoins,” enabling users to transact and pay gas fees in any stablecoin.
Matt Huang, co-founder of Paradigm, highlighted in a recent post that Tempo aims to offer “permissionless validation and permissionless smart contract deployment,” drawing parallels with established networks like Bitcoin, Ethereum, and Solana.
Anurag Arjun, co-founder of Avail and Polygon, noted that Tempo should not be viewed solely through the lens of the traditional L1 versus L2 debate.
Arjun explained, “Tempo is both positive and controversial. Positive because it facilitates real transaction flow and potentially billions in payments within the crypto ecosystem. Controversial because it represents a very corporate approach, with a purpose-built chain supported by major institutions, raising questions about decentralization and neutrality. However, it is still early to pass judgment, and more operational details are needed as they emerge.”
Arjun further emphasized that while there is a public emphasis on being “permissionless,” Tempo’s initial focus will be on serving enterprise customers and backend infrastructure, distinguishing it from many native crypto projects.
In a statement to The Defiant, Arjun stated:
“Of course, there’s public emphasis on being ‘permissionless,’ but in practice, this will initially cater to an enterprise’s own customers and backend requirements. This sets it apart from most crypto-native projects. It’s less about chasing token economies or DeFi ecosystems and more about integrating compliance and speed into payment infrastructure.”
Challenges to the Crypto Community
While Huang acknowledged that Tempo will begin with a permissioned validator set, he assured that the network will gradually decentralize, acting as a bridge between corporate adoption and open crypto networks.
However, critics of this approach remain vocal. Michael Nadeau of The DeFi Report criticized the move as “antithetical to crypto,” cautioning that Stripe’s goal is to “dominate the network” and potentially displace traditional payment giants like Mastercard and Visa who are also exploring the crypto space.
Omid Malekan, an adjunct professor at Columbia Business School specializing in crypto, echoed similar sentiments, highlighting the accountability and control that validators on corporate chains possess, which differs from the decentralized nature of public networks like Bitcoin and Ethereum.
Malekan elaborated:
“In a permissioned chain, the protocol is more of a ‘best practice set of recommendations’ rather than an inviolable system. This poses a problem as it brings us back to the bureaucratic challenges that Satoshi envisioned. Both the participating validators and the gatekeepers can be held liable because they have the authority to compromise network integrity whenever deemed necessary.”
He further pointed out that gatekeepers on corporate chains have the ability to modify the protocol, reverse transactions, or suspend the chain under regulatory pressure, a scenario that is unfeasible on permissionless networks.
Eneko Knörr, co-founder of Stabolut, a yield-bearing stablecoin project, expressed concerns over Stripe’s intent to exert total control over a blockchain tailored for their payment needs.
Knörr stated, “Stripe’s clear objective was to establish complete control over a blockchain designed specifically for their payment operations. While their entry signifies a significant validation for the crypto industry, the ‘walled garden’ approach raises apprehensions.”
While this move validates the crypto industry, Knörr argued that the centralized nature of the approach contradicts the principles of decentralization. By choosing to develop a new Layer 1 solution instead of utilizing an existing Layer 2 solution on a public blockchain, Stripe’s decision could be interpreted as a lack of confidence in Ethereum’s current scaling solutions.
Historical Precedents
The history of corporate Layer 1 endeavors is marked by failures. Christian Catalini, co-creator of Meta’s Libra, drew parallels to this current trend, suggesting that these initiatives could inadvertently grant fintech giants unprecedented control over global payment systems.
Catalini remarked, “If corporate chains like Tempo and Arc succeed, it will signify that the crypto experiment was not a revolution but a failed attempt to seize control. While the underlying technology may differ, the market structure would remain eerily familiar.”
Despite acknowledging that some of Tempo’s features could be implemented on a Layer 2 solution, Huang emphasized that the complexities, implementation challenges, and external dependencies associated with such an approach led them to pursue a Layer 1 solution.
Huang emphasized, “We are not advocates for Bitcoin, Ethereum, or Tempo exclusively. Our allegiance lies with permissionless crypto. We aim for Ethereum Layer 1 to scale effectively, while also supporting the growth of Layer 2 solutions.”
The Future of Blockchain Infrastructure
Addressing the legal rationale behind corporations venturing into Layer 1 development, Jake Chervinsky, former counsel for Compound, noted that regulators have not mandated permissioned validators.
Chervinsky stated, “If there is a compelling commercial justification for creating or utilizing a product-specific Layer 1 solution, companies should proceed. However, for those concerned about compliance issues without a specific need, decentralized public blockchains remain the standard.”
This tension between corporate utility and crypto values defines the ongoing discourse. Sandeep Nailwal, co-founder and CEO of Polygon Labs, proposed integrating corporate chains into multichain frameworks to enable companies to maintain autonomy while fostering interoperability.
Nailwal pointed out, “Stripe claims that Tempo is open to all, and PayPal could potentially utilize it if they desired. However, in reality, PayPal may opt to launch its own chain instead.”
Advocates for Tempo argue that initial centralization is necessary to drive adoption. Huang stressed the importance of building a network that real-world partners can trust for validation and finality. Critics, however, argue that introducing gatekeepers compromises the neutrality and censorship resistance that define the crypto ecosystem.
In response to The Defiant’s request for comment, a spokesperson for Paradigm redirected inquiries to Huang’s aforementioned post. Stripe did not respond to The Defiant’s request for comment at the time of publication.
This controversy underscores a recurring pattern. Whenever corporations seek to control blockchain infrastructure, the community reacts. While companies like Stripe, Paradigm, Circle, Google, and others anticipate that structured infrastructure will drive scalability, the crypto community is wary of potential regulatory implications and increased liability.
Malekan of Columbia Business School cautioned that corporate chains are prone to stringent control, suggesting that due to their cautious governance by professionals and legal advisors, they may engage in censorship, transaction reversals, or chain halts under government pressure.