The Weekend Read: Oct 30

Our regular posting schedule was slightly waylaid by sweat tea and a bit of SEC football, as your author was busy "Grovin'" this weekend.

ICYMI: Richard Gendal Brown on Corda: What Makes it Different

Our CTO has returned to the public blog domain with this post that goes into more detail on the origins and differences of Corda (speaking of blogging, rumor has it that Richard will be posting ~twice a month, so please watch this space for more updates):

Early results were promising: the reductive, bottom-up approach we took to architecture and design, which is explored in our introductory whitepaper and on which we’ll elaborate in the coming weeks, was solid: we could model a diverse range of instruments; the design would allow for significant parallel processing; we did not need to send all data to all participants in all scenarios; the use of a mainstream virtual machine and its libraries led to high developer productivity; we were able to support multiple consensus providers on a single network; the use of a flat, point-to-point queue-based, peer-to-peer network mapped well to real business scenarios; and more.
We worked with our members to test the maturing codebase in a variety of contexts: interfacing Ricardian Contracts and Smart Contracts in the context of an Interest Rate Swap with Barclays and others; managing trade finance flows; and more.
And this focus on validated client requirements and a willingness to question some hitherto sacred beliefs (we have no blocks! we have no miners! we don’t put ephemeral data in the consensus layer! we allow per-transaction specification of consensus providers!) led to a unique design.
Had Corda ended up being a minor variation on an existing platform or a me-too copy of something else, what would have been the point in pursuing the work? But that isn’t what happened: we ended up with something quite distinct, something we believe is singularly well-suited to a wider variety of financial-services use-cases and something adapted to the practical reality that the industry is regulated and some rules simply aren’t going to change overnight.

Straight Zcash Homie

I asked newest R3 Asia team member Antony Lewis for his perspective on the launch of Zcash this week. If you like the below, please check out his personal blog Bits on Blocks:

Zcash launched on October 28 with much fanfare and considerably more user-driven hype than other cryptocurrencies. While many cryptos are little changed from their parent (usually Bitcoin or Ethereum), Zcash promises to add an important privacy-preserving feature missing from bitcoin: the ability to hide transaction details on its blockchain and still have transaction validators validate transactions without knowing the financial details of the transaction in question!

Zcash is in implementation of the Zerocash protocol and uses “zk-SNARKS”, or zero knowledge proofs: Rather than submitting a transaction containing clear-text details of your account, the specific coins you’re sending, and the receivers account, you instead submit mathematical proofs that you have control of a certain number of funds. Unlike Bitcoin, where knowing someone’s address/account allows you to see all transactions in and out of that address, this data is obfuscated in Zcash, and can only be viewed with a viewing key.

BitMEX listed ZEC futures since September 16 - over a month before the cryptocurrency existed.  Since launch (and the necessary destruction of the cryptographic toxic waste), ZEC futures have traded as high as 10 BTC per ZEC before falling to 0.25 BTC per ZEC within a few hours.  The price action on Poloniex has been even more nuts printing a high of almost 3300 BTC per ZEC (yep, that’s $2.3m per ZEC).  Cryptos, eh?

Cottoning to the Blockchain

Excuse the dad-humor in the title, couldn't help myself. This week's announcement of CBA and Wells Fargo using blockchain tech to track the shipment of a specific bale of cotton got quite a few media hits (see here, here and here). The attention to this story shows how the concept of DLT-enabled trade finance has struck a chord with market participants, and more work continues at R3 and elsewhere to make this promise a reality.

Standard and Poor's talks our book by highlighting the impact that DLT can have on banking:

S&P Global Ratings says it believes the rising investment in this technology suggests that a transformation of the global financial industry could be underway. 
We believe that, at the very least, blockchain presents an opportunity for  financial institutions to cut costs by streamlining back-office operations; to shorten clearing and settlement times; facilitate payments; and even generate new revenue streams. As with any innovation, however, companies also need to be aware of the risks and implications for their operations. Over the next two years, we expect blockchain will gain momentum and that larger financial institutions may start using it, albeit in a narrow context.

...and finally, a big R3 welcome to Synchrony Financial, our first member from the credit card space. We are excited to have you on board!