When is a blockchain not a blockchain?

We’ve been flattered by all the attention Corda has received this past week. It’s just too bad the story isn’t a story.

The issue of semantics is always a challenge as new ideas, technologies and cultural phenomena work their way into mainstream consciousness and the media. Rewind a few years and who would have thought the Oxford English Dictionary’s definition of ‘meme’ would be updated to refer to a picture of a grumpy cat or a sad Michael Jordan on Instagram?

When we launched R3 in 2015, we were among a handful of companies inspired by the technology underpinning bitcoin, known as blockchain, and its potential application to wholesale financial markets. Conversations in boardrooms and the media revolved around blockchain, which at that point was the most pertinent example of distributed ledger technology in the mainstream consciousness.

Humans are creatures of habit. As time went on, the term blockchain came to be associated with any type of distributed ledger, even as the technology matured and evolved to meet the needs of different groups of users. This isn’t an issue unique to our space. The marketing team at Canon must have spent countless hours working out how to stop people referring to all copy machines as Xeroxs.

While we were almost certainly guilty of slipping into this semantics trap now and again, we’ve said from the beginning that Corda is a distributed ledger platform, not a traditional blockchain platform. It was never designed to be one.

At the outset our architecture team identified its first priority to be to decide whether to adopt, adapt or build. Put simply, if we found another platform currently in the market that was fit for purpose for regulated financial institutions, such as a traditional blockchain, we would have had no need to build our own and we would have gladly adopted it wholesale or adapted it as necessary.

Blockchains are specific pieces of software originally built to handle transactions of virtual currencies such as bitcoin and ether. Together with our bank members, we realised early on that this technology could not be applied blindly to wholesale financial markets without careful consideration: changes must be made to satisfy regulatory, privacy and scalability concerns. And that is what we have done with Corda.

Corda’s open source distributed ledger technology was designed from the ground up to address the specific needs of the financial services industry. It is heavily inspired by and captures the benefits of blockchain systems, but with design choices that make it able to meet the needs of regulated financial institutions.

Crucially, Corda restricts access to data within an agreement to only those explicitly entitled to it, rather than the entire network. And financial agreements on Corda are intended to be enforceable, linking business logic and data to associated legal prose in order to ensure that the financial agreements on the platform are rooted firmly in law.

Corda was designed from the ground up to address the specific needs of the financial services industry. There are currently very few tangible examples of distributed ledger platforms in the market – and none that were developed with over 70 global institutions from all corners of the financial services industry. It is unique and its launch was a landmark moment for the market.

When is a blockchain not a blockchain? When it’s Corda.


The Weekend Read: Feb 19

R3 in the News

Our CEO David Rutter sat down with Financial News for a very entertaining (and paywalled, sorry) interview that gives more than a few anecdotes on R3 and how we attempted to surf the blockchain hype cycle...all while trying to not get snared in the 'reef of inflated expectations' that hides just below the surface. But as Dave says, it is the hardest any of us have ever worked in our careers and yet the most fun any of us have ever had.

Credit Suisse Corda Hackathon in full flight

Credit Suisse Corda Hackathon in full flight

Over the last two weeks, we have talked about our recent work with Credit Suisse on their triple time zone Corda Hackathon, we were very pleased to announce our newest Regulatory Member: Hong Kong's Securities and Futures Commission, and to read the lessons learned from Bank of Canada's Carolyn Wilkins on the work dubbed "Project Jasper", the collaboration w BOC, Payments Canada, R3 and R3 Member Banks to experiment w a DLT wholesale payments system. I wanted to highlight her take aways for the business case below:

We’ve also gained some other important insights that will be relevant to the business case for this type of DLT application:
  1. Most cost savings appear unlikely to come in the core system itself, but rather more likely through reducing bank reconciliation efforts. The initial design is quite collateral intensive while the current system is already highly efficient.
  2. There's the potential for more savings if other applications could be built on top of a core cash payment distributed ledger system (eg financial asset clearing and settlement, trade finance).
  3. In an actual production system, trade-offs will need to be resolved between how widely data and transactions are verified by members of the system, and how widely information is shared.
  4. While DLT may aim to reduce concentration of risk, a substantial amount of centralization would still be required (eg permissioning of nodes and setting of operational standards) if applied to wholesale payments systems.

And a shout out to my colleague, and provider of Slack-Avatars-as-a-service, Gavin Thomas for his post on how he PM'ed the #### out of the Corda open source release: DON'T LOOK DOWN, A PROJECT MANAGER’S SHORT STORY OF OPEN-SOURCING

Industry News

CoinDesk has continued their reporting on the upcoming announcement of Enterprise Ethereum, with two articles this past week, as the group readies for an official announcement soon. We are glad to see that the enterprise blockchain space, both within Hyperledger and the new Enterprise Ethereum, has started to focus on the core requirements of scalability and confidentiality. To echo what our CEO said above, there will be no shortage of hard work involved as the new group "state channels" their inner cat herder.

In another CoinDesk article, Swift's Global Payments Initiative (GPI) Program Director Wim Raymaekers describes how the project has aimed to improve the current Swift architecture and make payments more transparent by layering on new business rules and a GUI. Raymaekers provided both hope and shade to the blockchain crowd, saying:

[B]lockchain developers will be given access directly to the GPI as part of a hackathon. "We're going to open those APIs for fintech and blockchain designers to come up with ... new ideas," Raymaekers said.
Overall, while Raymaekers is optimistic about the possibility that blockchain might improve some products, he ultimately sees the need for the tech as limited. He concluded: "We think blockchain today is not ready for wholesale cross-border payments. We are improving that with GPI, so it’s no longer a problem."

Lots of Links

Here is a quick rundown of other stories from the last few weeks, which features such FoTWR celebs as The Blockchain Beard, lil' Buterin, The Swanny, and my Snark Sensei

Credit Suisse completes global distributed ledger hackathon using R3 technology

Credit Suisse recently completed a global hackathon event to find cost savings and efficiency applications using R3’s Corda distributed ledger platform.

Teams from India, the United States, Great Britain and Poland competed to find cost savings under a 20:20 framework, meaning winning solutions needed to show the potential to reduce costs by twenty percent within twenty months.

“We see Blockchain as a disruptive technology that has real potential to reduce the bank’s operating costs and risk,” said Ray Mulligan, Chief Architect for Credit Suisse’s Global Markets division.  “The recent Credit Suisse blockchain hackathon reinforced that idea.  In just two days, we saw how quickly our developers were able to design and build blockchain-enabled applications that show the potential for this technology to drive significant efficiency and savings gains for the bank.” 

The bank’s developers began work on January 24 in India to build distributed ledger applications across a variety of business lines and back-office functions. Work transitioned from Pune, Bangalore and Mumbai to London, Wroclaw, New York and Raleigh, North Carolina over the course of the first day, and continued through January 25. Credit Suisse committed to fund the leading solutions that showed 20:20 potential for further development and implementation.

Corda was designed specifically to address the cost and efficiency issues that have plagued banks and other financial institutions for decades. We made the platform available for open source development in order to encourage collaborative thinking and innovation, and this hackathon is the perfect example of what can be achieved when open communities combine expertise to address the real-world pain points affecting the industry.

Now, with the technology maturing, firms can find ways to drive additional benefits that might be more specific to their businesses. In just two days, Credit Suisse’s developers were able to design and build distributed ledger-enabled applications that show the potential for this technology to drive significant efficiency and savings gains for banks. 

A big thanks to all involved at Credit Suisse for making this hackathon a tremendous success!

The Weekend Read: Feb 5

R3 in the News

The R3 team enjoyed a few days this week to 'geek out' at the Construct 2017 conference in SF. We were glad to share the insights of our very own Clemens Wan with the wider blockchain world:

In remarks yesterday at CoinDesk’s developer conference, Construct 2017, R3 associate director and former Credit Suisse blockchain architect, Clemens Wan, predicted that 2017 will be defined by DLT pilots, while 2018 will see the technology migrate to production.
The comments come just months after the open-source release of its custom distributed ledger technology (DLT), Corda, became a part of the Linux Foundation-led Hyperledger blockchain project’s collection of enterprise technologies.
Corda (and Intel's Sawtooth) via penchain

Corda (and Intel's Sawtooth) via penchain

Since then, R3 said it has attracted more than 600 users to its slack channel, and more than 19,000 visitors to its website, Corda.net, as it seeks to reach its next milestone, the release of a test version of its DLT system in the first or second quarter.
In this light, Wan framed R3’s technology as one that requires broader buy-in from enterprises and corporates to achieve a strong network effect and top-level applications. Wan said: "Corda is the Xbox Live, it’s the ecosystem, it’s the connectivity. We want to focus on the platform and services."

As Clemens points out, R3 will be very focused on building an ecosystem of partners in 2017 and beyond, which follows on from a few of our 2016 announcements of partnerships with the likes of Microsoft and Calypso Technologies. Our goal is to bring both the value of our network and our foundational technology to that partner application ecosystem, so that all participants benefit. If anyone has interest to learn more about our partnership approach, please contact partner@r3.com

We are very pleased to announce the addition of Africa's largest bank to the R3 family: welcome aboard Standard Bank!

“Collaboration will be critical to unlocking value and we want to be actively involved in exploring and testing how technology like blockchain can be adopted by financial institutions. Being a partner member of the R3 network will provide us with an excellent opportunity to accelerate and enhance our adoption of this new technology,” says Peter Schlebusch, Standard Bank’s Chief Executive for Personal & Business Banking.

And if anyone happens to be attending the FIA-SIFMA Asset Management Derivatives Forum this week, please feel free to stop by and say hello.

Member Spotlight: ING

We are very fortunate to have the chance to work closely with ING across many of our DLT efforts. This article is a very nice overview of not only the hard work being done, but it also gives some well deserved attention to Mariana Gomes de la Villa and the Blockchain Innovation team:

“For us, 2016 was about experimentation and getting to know the technology: how it works, how we can use it and what the pitfalls and limitations are. This technology wasn’t built for the financial industry so there are constraints and it doesn’t always cover our requirements,” Gomes de la Villa explained.
In trade finance, too, where processes are largely paper-based, labour intensive and open to fraud, a proof-of-concept was completed in August. It demonstrated that shared ledger technology could reduce operational and compliance costs of trade financing by 10 to 15 percent and increase bank revenues by as much as 15 percent.
Mariana Gomes de la Villa and the Blockchain Innovation team

Mariana Gomes de la Villa and the Blockchain Innovation team

Blockchain has the potential to profoundly change the financial services structure", said Ivar Wiersma, head of Innovation at Wholesale Banking. He compares blockchain to that other ‘foundational technology’ that changed the world; the internet. It all started with the birth of email in the 70s, but it took decades before the internet became the basis for many of today’s business models. 
“Blockchain started eight years ago with bitcoin. Now we need new developments like smart contracts and digital identity so blockchain can become the technology standard for the next generation.” Wiersma added: “Collaboration is a given. It’s a network, so working on your own is useless. It’s like being the only one with a mobile phone.”

We look forward to highlighting more of our member stories throughout 2017

The Week (or two) in Links

...and completely unsolicited advice for the Big Game: guac over salsa, pilsner over IPA, and never bet against Brady and Belichick (unless the Giants are involved). Go Pats!

Chain Interoperability

One of the common requests we have received from our members over the past year has been: in an environment in which there are multiple different blockchains and distributed ledgers in use by various organizations, how can they interoperate?

We took this question and commissioned a paper with Vitalik Buterin who provided a survey of several current and proposed interop solutions.  We also asked Nigel King and Ross Nicoll from the R3 London office to put together a short view point and summary of Buterin's survey.

Below are the finished documents originally sent to our members this past September.  Distributed got a first look of it a couple weeks ago and put together a short article on the paper as well.

Chain Interoperability: R3 Viewpoint

Nigel King and Ross Nicoll


Chain Interoperability: Vitalik Buterin

Vitalik Buterin


The Weekend Read: Jan 22

In the words of the ancient philosopher D.L. Roth, "I heard you missed us. We're back!" Actually, I haven't really heard that, but we are back anyway. A few programming notes before we start: it has been a while since the last post, but if you read the fine print of the title carefully, it is called "Weekend" and not "Weekly" read...so our only promise to the reader is to delivery a few interesting links stitched together with snarky learned prose and random jpegs during any weekend hours, and not necessarily every weekend...with that, onto the links.

News in the Spotlight: DTCC Trade Information Warehouse

We were very excited to announce earlier this month our collaboration with DTCC, IBM and Axoni, along with a large subset of our member banks, in implementing a distributed ledger solution as a piece of market infrastructure (in this case, DTCC's Trade Information Warehouse). This project encapsulates a lot of the themes that have driven R3's approach over the last few years, such as collaboration, focusing on the problem and a desire to move to a shared truth across the industry. The last phrase "across the industry" is important. If we are lucky enough to be successful with this implementation, we must ensure that this new piece of market infrastructure fits in and interoperates across the new "financial market operating system" that we and other firms are working hard to implement. Over the coming weeks, R3 will be speaking more about our efforts in this space and will walk through our Platform and Services strategy in more detail.

A few other related notes. A belated congratulations to the Axoni team for closing their latest round of funding. And I may be most proud of being part of an effort that got mentioned in the column of the king of informed snark, Matt Levine: "But as I often say when I read these stories: You could just have a list." I would kindly point Mr. Levine to Richard Brown's recent post for the answer: On distributed databases and distributed ledgers

R3 Updates

Our team just completed a very successful week in Asia, which started with our first Members Conference based in Asia, hosted in Hong Kong by our friends at AIA. R3's Tim Grant then had the chance to inform the crowd at Next Money Fintech HK that 2017 is "The Year of the Pilot" (pic below) as everyone runs hard and fast at production implementations. We also hosted successful Corda meet ups in Seoul, Tokyo and Singapore (pic below) to round out the week.

For those who would like to stay up to date with our Corda meetup schedule, please visit our Meetup page. Our next R3 hosted event will be in NYC on Friday, February 10 at the NYC HQ of our friends at Rise (sign up here). And we are pleased to see other meetups pop up that are led by the wider community, like this one in Vancouver. For those attending the upcoming Construct event, make sure to reach out to R3's Michael Dowling and Clemens Wan (aka Clembot).

Also a belated welcome to our friends at Credicorp to R3 as our first Spanish-speaking Latin American member! We have other announcements in the hopper, including new regulatory members, that we will be sharing in the coming weeks.

A Bunch of Links

One last thing. As we (hopefully!) mature as an industry, the weekly news items of "imagine if!" and "blockchain explained!" articles should get less relevant and definitely less interesting. So back at Blog HQ (my attic), we are thinking about how we could change our (somewhat) weekly(ish) updates so that they keep pace with people's interest and focus. So please let us know (on LinkedIn or Twitter or directly) your views, we want to hear them. Cheers.

2016 Year in Review

2016 has been a tremendous year for our industry. To say there has been a whirlwind of achievement would be an understatement. As an organization we pride ourselves on what we have accomplished in such a short timeframe. We look towards 2017 with excitement to further deliver on the promise of this technology. Below we look back on the most memorable moments.


Institutional Investor places David Rutter in 2016 Tech 50

R3’s CEO debuts at No. 18 on Institutional Investor’s annual ranking of the most influential figures in financial technology

FI Future of Fintech 

The Financial Times names R3 as one of the top 10 financial technology companies to watch in 2017

R3: A Year in Review 


Industry Year in Review


New Members

  • First China-based company and first insurance company – Ping An
  • First Northern American Insurer - MetLife
  • First exchange - BM&FBOVESPA
  • First tech company – Thomson Reuters
  • First Automotive - Toyota
  • Primer Banco Hispano – Credicorp
  • First African Bank – Absa Bank
  • First Credit Card – Synchrony
  • First Payments Services – Qiwi
  • First Title Insurance – First American


Some 2016 Snaps

One of our NY employees was able to surprise his family abroad for the holidays!

Driving Distributed Ledger Innovation Through Collaboration

In the long history of humankind, those who learned to collaborate and improvise most effectively have prevailed.

Darwin’s point holds true. Critical mass, momentum and co-operation are absolutely essential if we are to transform financial services and the communications and transactional framework we rely on.

This was our rationale for bringing banks together to jointly develop distributed ledger technology for the financial services industry from day one.

In R3 we have created a fast moving financial technology product company with an ownership structure which provides a balanced governance, combined with the leadership and stewardship of the best technologists in their respective fields.

The spaghetti junction of shared legacy infrastructure as well as individual front, middle and back office systems is testament to the resulting mess when banks disappear into development silos.

The overall cost of maintaining this legacy infrastructure is incalculable and there is risk around every corner, embedded into the old Cobol and Fortran code under the layers of many of those systems.

That is why we came together with an initial group of nine banks in September 2015 to create R3. A highly experienced and effective technology team was assembled and ready for action two months later.

Fast forward a year and there are now over 75 members of the R3 group – with two additions in the last week alone – working together on a diverse array of projects and developing technology to address some of the most serious pain points affecting the industry. 

There is no secret. We hired the best, assembled and activated a powerful and engaged membership base and connected them together to leverage the network effect distributed ledger technology delivers.

Together, we have designed, built and launched Corda, the open-source release distributed ledger platform which will set the standard for this technology in global financial markets.

This is the only platform designed by and for its users and represents the world’s largest collaborative distributed ledger effort in financial services. It is unique and it is a landmark moment for the market.

Distributed ledger technology will have such phenomenally powerful network effects that it is hard to imagine serious institutions deploying base-layer ledger software that is anything other than fully and wholeheartedly open.

The response and engagement with Corda has been exceptional and only a few weeks after open sourcing the platform we have already had a vast number of contributions from the public developer community.

Amidst the excitement of the Corda roll-out, it’s hard to ignore the running commentary on the progress of our fundraising programme.

The motivation and accuracy behind some of the noise has sometimes been questionable, but such is the nature of working on such high-profile projects. It’s a complement to be discussed and we are very happy with constructive criticism, but better when the discussion is informed and accurate.

We have always expected the make-up of the consortium to change over time – our member base is so large and so diverse, it would be unrealistic not to expect some institutions’ priorities, resources and focus to travel in different directions.

We have new members joining the project all the time and some banks may choose to change the way in which they engage with us as we move forward, but the critical mass we have built over the last year means members can be confident they are investing in developing industry standard solutions that will be the building blocks of the new financial services infrastructure.

The financial institutions that have shown the vision to join R3 are by that very action ensuring the technology we adopt is built using common code and protocols, ensuring seamless interoperability and integration.

This is a direct hedge against the risk of replicating the disjointed infrastructure financial markets are forced to operate on today.

We remain focused on perfecting Corda and looking ahead to our objectives and deliverables for 2017 working together with our members.

We are on the cusp of a new era in financial technology, and over the next year banks will begin to reap the benefits that have been promised to them since the financial services industry recognized this technology’s potential to deliver efficiency, lower risk, security and cost reductions.

Let’s be clear: the power of distributed ledger technology lies in its network effect – and that goes for the build as much as the usage. The past few years were characterized by blockchain hype. Leveraging the combined power and expertise of our diverse and growing group of members, R3 will make 2017 the year of blockchain delivery.




The Weekend Read: Dec 11


R3 at TechCrunch Disrupt

Our CEO David Rutter hit the stage during TechCrunch Disrupt in London earlier this week for an extended interview. Among the highlights was his call that we will see substantial activity on a distributed ledger in 3-5 years, and that R3 will have a DLT-based product in the market by the end of 2017, much the delight and cheer of our product department. (Side note: Dave called me and asked for any background on this event. I pointed him to this clip...not sure it was helpful). In a DLT world, he noted, the idea of hiding a ticket or manipulating a trade will be a thing of the past, which could bring much needed trust back to Wall Street. On trust, he also pointed out the irony of many libertarians and bank antagonists: We all trust our banks, though we like to say we don't. If we get a chunk of money, we put it in a bank. And for the quantitative participants in the audience, he noted R3 and others in the space addressing a $3.6tn opportunity to re-work the global payments infrastructure, cited from a recent McKinsey report.

Smart Contract Debate

The Chamber of Digital Commerce put out a doc this week entitled Smart Contracts: 12 Use Cases for Business & Beyond that features a forward by Nick Szabo. Luckily for your lazy author, R3's Ian Grigg has written a very concise response to some of the points in the paper on his Financial Cryptography blog:

The finance end of town is only interested in smart contracts within the fully contractually-informed framework. That's because accidents happen and the go-to place to sort out disasters is the courts, with their facility for dealing with the unexpected or unusual. This notion goes back to the Magna Carta, which was ultimately a brawl over the right to a fair day in court.
If you want a pithy principled statement, it is like this: people who trade in large values want someone to mind their backs. These people believe that smart contracts will always break, and we need a way to get predictability back into the contract.
Which brings us to the DAO - that $150 million lesson in how not to build a smart contracts platform. [SNIP] To interpret a short, pithy principle, the investors in the DAO found that nobody's minding their backs. And when that happens, the brawl starts. Magna Chaina?

I know that some folks can't stomach it, but for the rest that have an interest in what legal and financial professionals have to say about smart contracts, please see this excellent summary of R3's recent Smart Contract Templates summit by Burges Salmon.

RegTech (cont.)

The Federal Reserve released a paper this week called Distributed ledger technology in payments, clearing, and settlement:

In the context of payments, DLT has the potential to provide new ways to transfer and record the ownership of digital assets; immutably and securely store information; provide for identity management; and other evolving operations through peer-to-peer networking, access to a distributed but common ledger among participants, and cryptography.

I asked Tim Swanson for his views on the paper: "The new paper provides a good objective overview on what distributed ledger technology is and what it is being used for., as well as a number of interesting data points. For instance, "In the aggregate, U.S. PCS systems process approximately 600 million transactions per day, valued at over $12.6 trillion."  I actually ended up citing this number several times this past week at an event in Korea. The paper also makes a distinction between the settlement finality that permissioned ledgers can provide versus the probabilistic finality that un-permissioned / public blockchains provide."

The Fed also provides a comment to add to the Smart Contract debate above:

DLT has also raised the possibility of writing terms and conditions between parties into computer code to be executed automatically. In order for these “smart contracts” to be enforceable, they must have a sound legal basis. Contract law is an established set of rules that govern the basic principles of contracting, including formation, amendment, termination, and dispute resolution.

Open Development and Other News Across the Industry

I had the pleasure of attending the Hyperledger Annual Member Summit this past week. It was a great opportunity to connect with folks from across the globe and to hear more about the projects underway underneath the Hyperledger umbrella. Chris Ferris, head of the Hyperledger Technical Steering Committee, put together his reflections in this blog post.

One highlight for me was to watch our CTO Richard Brown keep the audience in rapt attention with his overview of Corda and some of its unique design decisions. The R3 tech team has continued to post to the corda.net blog with more updates on their thinking behind the code. ICYMI, click here for James Carlyle on distributed ledgers as a 'truth layer' and click here for Mike Hearn on 'why UTXO?' We also had the chance to catch up with our friends at Digital Asset, who released their non-technical white paper earlier this week, which I believe Richard will share some thoughts on in the coming weeks.

The folks at Circle made a splash with their announcement this week of their open source platform Spark and their intention to focus exclusively on "global social payments" that happen to use blockchain(s) as rails. Or, if you are r/bitcoin, totally betraying the Bitcoin community...And for those with a penchant for oral histories of 'cryptographic ceremonies', be sure to check out this article on the launch of Zcash. Or if you like Bloomberg articles with all the snark of Matt Levine yet with none of his wit or deep understanding of financial markets, click here (but I wouldn't recommend it).

...and finally, many thanks to my colleague Tim Grant for letting me crash his set for the debut of Project dR3am, and to the thousands dozens of folks who turned out to support us. Rock on.