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Todd McDonald

The Weekend Read: May 21

A Retirement (of sorts)

Welcome to one of the final installments of the now quite-irregular Weekend Read. I will be mothballing this blog series in the coming weeks due to the fact that I am clearly too biased to write a mostly-neutral news summary.

When this series began back almost two and a half years ago (featuring perhaps the best meme I ever found), we at R3 (with 'we' being only me, Dave and Jesse!) and many in the financial services industry were in 'explore mode'...trying to make sense of all things DLT. Fast forward to today, and those many months of exploration have clearly led us and our customers to decide that Corda is the answer for financial services, and potentially for all of commerce. That well earned bias has made it harder and harder to share and comment on the other efforts in the industry in an even-handed way.

But fret not! If you would like to be kept up to date on the news items of the day, please contact us as we are in the midst of putting together a more frequent whiz-bang newsletter for sharing useful links to our wider community.

Speaking of the R3 community, please reach out to our Partner team if you would like to join our ever-growing community of builders on Corda. We would love to have a conversation to show how you can build value and get to market with your applications (CorDapps). Or just head over to corda.net and get started! But don't just take it from us...stop by this Wednesday at Consensus for a panel called Building on Corda, where you can hear directly from partners like Cognizant and Calypso Technologies on what they are building, and the flexible models they have on how they will be going to market. (Spoiler Alert: unlike other platforms out there, we aren't requiring partners to deploy their apps on a single "Mainframe-Cloud" network...)

Lots and Lots of Links

Here is an incomplete eight week inventory of links to help clear my Pocket queue:

Reg-ish

Coining it

Old School

Builders

Opinions etc

The Weekend Read: Mar 26

When they say 'Blockchain' just close your eyes and think 'DLT DLT DLT'...

First up, some Corda love. This Australian Financial Review article (paywalled) highlights how our bank partner CBA used Corda in collaboration with their customer, Colonial First State, and a delivery partner, Hewlett Packard Enterprise, to show how it could help solve a key business problem of capital costs:

Colonial First State is re-engineering the process of buying units in the $2.2 trillion market for managed funds in a move it says will "dramatically" reduce the amount of capital banks will have to hold against wealth operations. A recent experiment with Commonwealth Bank of Australia's emerging technology team and Hewlett Packard Enterprise using the R3 consortium's Corda 'distributed ledger' allowed Colonial to eliminate arduous paper application process for managed funds and the three-day wait for the delivery of units.
Corda, which is being developed by a consortium of global banks, can remove counter-party risk for intermediaries like CFS by allowing assets to be exchanged and transactions settled instantaneously. It also provides transparency on what each counter-party holds across geographies. By removing the risk of the issuer defaulting or the investor failing to settle, banks will be able to reduce the amount of regulatory capital required to provide cover for those risks.
"If [a blockchain] was adopted locally, regionally or globally, the capital the industry would need to hold could reduce dramatically," CBA's group executive for wealth management, Annabel Spring, told the APAC blockchain conference in Sydney last week.
CBA is confident about Corda's security protocols, which have been designed with input by dozens of banks around the globe. In the CFS trial, the units were transferred cryptographically with keys in the form of PIN numbers required to access the system through mobile apps.

We also got a nice shout out by our friend Michael Dowling of IBM with this in depth post on the evolution of Corda, along with some reference to the recent blockchain-not-blockchain kerfuffle. And since we have been, ahem, a few weeks between posts, here are some 'catch up' blockchain-y links:

And finally, a big congrats to ATB Financial as our newest Canadian member!

RegTech (cont.)

R3 was happy to announce another member recently, as we welcomed the State of Illinois to our growing list of Regulator Members. Read about this here and here, along with their overall plans to leverage DLT. Our CEO David Rutter and R3 world traveller Isabelle Corbett followed up with this conversation with CoinDesk that lays out some of the concepts behind the R3 'RegNet'.

The efforts and interest of regulators extends across the US, both at the State (see Delaware is Drafting Law That Would Recognize Blockchain Records) and Federal level; Acting (and now Nominated) Chairman of the CFTC J. Christopher Giancarlo recently gave a speech on his overall agenda. Of note was the section dedicated to FinTech, both due to its substance and to the fact that the Chairman gave the topic proper airtime even with his quite package agenda. Full text is here, quick pull quote below:

[M]arket regulation by the CFTC has not kept pace. In too many ways, it remains an analog regulator of an increasingly digital marketplace, curtailing its effectiveness in overseeing the safety and soundness of markets. But it doesn’t have to be this way, especially in an industry that is synonymous with innovation. The CFTC must be a leader in adopting the “do no harm” approach to financial technology similar to the US approach to the early Internet. We must cultivate a regulatory culture of forward thinking.

Couple the above with this post from ISDA on the 'past and future' of ISDA agreements, particularly on the role of Master Agreements in the world of smart contracts. As a reminder, our third Smart Contract Template Summit (suggestions for a new name welcome!) will be coming up this June.

MAS continues to push an aggressive fintech agenda of their own. A few weeks back, MAS announced the successful completion of the interbank payments projects that they executed with R3 and a collection of local banks. See here and here. And this past week they announced more details on their plan to roll out a national KYC utility.

Another organization at the intersection of regulation, infrastructure and fintech is CLS. This IBTimes article gives an interesting look at some of their thinking. The article also lays out the differences between ledger approaches, namely that of IBM's Fabric vs R3's Corda.

Get the Papers Get the Papers

Our Research team and amazing collaborators have been busy recently, with three new papers:

  1. R3's Survey of Confidentiality and Privacy Techniques, with an accompanying piece in American Banker
  2. R3's Report on Fedcoin with JP Koning
  3. R3's Bridging the Gap Between Investment Banking Architecture and Distributed Ledgers by my good friend Martin Walker

Others have been busy as well. BIS recently release The Quest for Speed in Payments (summary article here), while G20 Insights released The G20 Countries Should Engage with Blockchain Technologies to Build an Inclusive, Transparent, and Accountable Digital Economy for All

The Weekend Read: Mar 5

Enterprise Ethereum Alliance

The Enterprise Ethereum Alliance formally kicked off earlier this week with an all day meet up in JP Morgan's Brooklyn offices. The group consists of Ethereum-focused startups and large companies, with a focus on developing standards for private Ethereum deployments. The reaction by the press was curious, as many picked up a theme of Microsoft and IBM waging a proxy war via EEA (Microsoft) and the Hyperledger project (IBM). For example, American Banker noted "the IBM-led Linux Foundation Hyperledger Project" and their use of "a mainframe in a cloud" vs Microsoft as "more focused on openness — letting organizations choose the combinations of technology that work best for them." Coindesk followed up with an article on the decentralized nature of the new group:

Still, while the board is also designed to give members a sense of accountability, more experimental governance models are also being considered. "Everything starts as an idea, with one person," said Lubin. "That happened. But Ethereum is moving towards decentralization."

The press loves a simple narrative (see below for a fine example), but both groups are very diverse and seek to move the whole industry forward, as we ALL have a lot of work to do to make this technology real for business users. One theme that did persist at Tuesday's EEA launch was the desire to keep aligned, and in some minds perhaps eventually merged, with the public Ethereum chain (not to be confused with Ethereum Classic, or Ethereum Classic Classic!). This and Bitcoin's recent price surge are most likely what is behind the recent ramp up in the price of ether. For an older, somewhat related article on public Ethereum, I recommend this Aeon article.

Et Tu, Blockchain?

The only good thing to come out of the R3 non-story was this new Tim Swanson meme...

The only good thing to come out of the R3 non-story was this new Tim Swanson meme...

Over the last two weeks, a blockchain butterfly flapped its wings, and the next thing we knew, R3 was caught in the oddest of fake-news hurricanes. In short: a tweeted pic from a Corda meetup was coupled with the quote "GAME OVER" (perhaps an early tribute to the great Bill Paxton?) and the next thing we knew, there were all sorts of nonsense articles and blog posts. For a run down, you can read Chris Skinner's take (and yes, his is an intentional fake news headline...) and this Bank Innovation piece (Dave Birch: I would love to meet your tailor). In shorter: it was all complete BS. Which was disappointing, but not surprising. I just finished the Michael Lewis book The Undoing Project and the one thing the book taught me was that we are all "confirmation bias" machines. Or as The New Yorker put it: Why Facts Don't Change Our Minds

As David Rutter pointed out in his blog post last week:

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.

We can see this in two other thoughtful articles that were recently published. Our very own Antony Lewis has a great take on Distributed Ledger Technology for post trade published in Tabb Group...yet the title chosen by the editors was "Applying Blockchain to Post-Trade Derivatives Processing." Another from CFO magazine includes yours truly and does a great job in explaining why CFOs should pay attention to distributed ledger technology...which they term "Betting on Blockchain." 

Lost in the noise was the release of an 80 page report by the Aite Group. This Coindesk review of the report gives a flavor of the market landscape that Aite explored, including this key quote:

"A growing trend, adopted by five chaintech platforms and spearheaded by R3," writes Paz, "calls for consensus taking place at the transaction level, requiring the consent of at least two counterparty nodes."

Another bit lost was our new intro video to Corda, which declares in very plain language what Corda is (and isn't):

But don't just trust our word on it. Sign up for Corda training or sign up to our Slack, and see (and debate) for yourself!

Links

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

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!

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.

The Weekend Read: Dec 11

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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.

The Weekend Read: Dec 4

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Happy Corda Day!

First things first.

Besides the cake, we were also gratified to see so much interest on release day. We had our first pull request merged within a few hours of release, thousands of unique visits and over 40 forks of our Github repo. For more coverage, see Euromoney, American Banker, WSJ and Fortune articles. From the Fortune piece:

“Our intention is to encourage other people in the community to contribute to it, to build on top of it, to drive its design and adoption,” said Richard Brown, R3’s chief technology officer. “We want a large number of people people downloading and using it,” he said.
“People will be surprised when they dig into the code of the technical white paper,” [Mike] Hearn told Fortune on a call. For one thing, he said, Corda is designed to be compatible with tools that programmers within large organizations are likely already familiar, such as relational databases for storing digital information and Microsoft SQL, a tool for accessing data contained therein.

We also heard from the wider internets on their views of Corda. The feedback and constructive challenging of the Corda design and implementation decisions is exactly what our team is looking for from the wider community. And of course we also got other, less constructive feedback, which I can break down into two broad categories: 1. suggestions for us to kindly lodge certain appendages and objects into various openings big and small, or 2. the equally helpful jokes about SQL databases (this is perhaps the most tired of all the "burns" we hear, and as someone who grew up with the last name McDonald, I know a tired burn when I hear one...).

We know there is a lot to wade thru in exploring Corda (56 pages for the white paper Mike? Dang). As a starter, check out Richard's intro blog posts and Mike's review on what lies ahead, all on our Corda blog. Even better for the TL;DR crowd, Richard has a new Corda explainer video here that wraps up in a tidy 3 minutes. Enjoy!

R3 Application Partners

There was another bit of news this week that perhaps got swept up with the Corda release. On Tuesday, we announced our partnership with Calypso Technologies to jointly develop the first post trade application on our smart contract network (a CorDapp in R3 lingo):

Calypso will be the first application partner to leverage the R3 platform, which will allow financial institutions and their technology partners to work more closely together in a safe and efficient distributed ecosystem. The platform records and manages financial agreements between counterparties, leveraging distributed ledger technology to guarantee a consistent, accurate, auditable, reportable record.
Pascal Xatart, CEO at Calypso said: "We are thrilled to be working with R3 and honored to be their first application partner. The alignment between the two firms is exceptional – our deep expertise in capital markets combined with their industry-leading distributed ledger technology will allow us to develop a range of innovative applications quickly and efficiently. Our current matching solution is only the beginning."

We have been hard at work over the past year building out the framework of our financial-grade network. This past week we have debuted two core pieces of that framework. One is obviously our distributed ledger platform, Corda. The other is captured in the above partnership announcement: our clear intention to build and support an ecosystem of partners to help drive value for all the participants in the emerging R3 network. Our friends at Calypso are a fantastic example of such a partner, one that brings deep domain expertise, understanding of their client's needs and shares the strategic view that the next generation of financial software and services will be driven via smart contract platforms. We could not be happier to have them as our first partner.

More Shout Outs

Congrats to the CME team on their collaboration with The Royal Mint on their tokenized gold trading platform dubbed Royal Mint Gold (RMG):

Vin Wijeratne, CFO of The Royal Mint said the addition of a blockchain-type system will mean tracking ownership in near real time and therefore some costly administration attached to this process can be dispensed with...Sandra Ro, digitisation lead at CME Group, said: "This is going to be a permissioned network. We will have all known actors and there will be a mechanism by which validators will validate the transactions...This is very much a digital gold offering as an investment product. And it happens to be that it is using a blockchain ledger to record transactions. This is a trading platform."

Another congrats to the Hyperledger team, which announced surpassing 100 participants in the open source effort this week. I will be at the annual Member Summit in Bklyn on Wednesday and Thursday and look forward to catching up with everyone in person. For those who can't make it, I would suggest the excellent webinar from Digital Asset's Dan O'Prey here. But if you do make it, I promise you a freshly printed business card with our cool new logo...

16-11-02_R3_Master Logo-01.jpg

The Weekend Read: Nov 27

How do you write a summary of the weekly news when you are the news? I have been thinking about that for the last few days. I have mentioned in the past that one of the lessons that I took from my trading days is that everyone is talking their book, always, even if they don't realize it (or won't admit it). I try to guard against that in this blog, but it is inevitable to some degree. I also don't want to pull a 'Zuckerberg in China' gambit and 'erase' the news. So, for a selection of articles on R3 this week, click a few of these links.

With the Thanksgiving holiday here in the US, I was in a reflective mood on all the things that I am thankful for this year. I am thankful to be part of a wider ecosystem that is trying hard, in many diverse ways, to find the next thing. I am thankful to work with a team that has the strongest collective resolve I have ever witnessed. I am thankful for creative Tim Swanson memes. I am thankful to work with folks like Richard, James, Mike and our whole tech/product team who are focused on building things (instead of with those focused on trying to tear things down from the sidelines of life). I am thankful to be working harder than I ever have in my life and enjoying (almost) every minute of it. On to the links.

Corda Open Source

This Wednesday, November 30 is the day for Corda open source. Richard Brown weighed in with another update/preview of what is to come:

Distributed ledger technologies will have such phenomenally powerful network effects that it is unthinkable that serious institutions would deploy base-layer ledger software that is anything other than fully and wholeheartedly open. And it’s why we’ve been committed all along to releasing Corda just as soon as we were sure it was heading in the right direction. It is and so we are.
We’re really proud of Corda and its progress to date. But, that said, Corda is far from finished. Mike Hearn will soon be publishing a “warts and all” description of quite how much work we still have to do. This is true for all other platforms in this space, of course, but I feel a particular responsibility to be transparent given the ambitions we have for Corda and the uses to which it will be put.
How to get Corda on November 30: Corda’s home will be corda.net. Head over...for links to the codebase, simple sample applications and a tutorial to get started writing your own CorDapps.

Corda is still young, but to echo what Hyperledger's Brian Behlendorf states below, we feel it is better to open up early rather than late. Now is the time to invite contributions from outside. As the code matures further in the coming months and reaches a stable enough point where detailed code review makes sense, we'll be looking forward to analysis and review from the industry's leading experts. And others.

American Banker has a fantastic review of open source in DLT, highlighting both the advantages and risks to this approach. It is worth a read in full:

"Let's say someone wishes to connect a Chain network that has digital assets running on it with a Corda contract," [Adam] Ludwin said. "If those projects are open source and well documented, and that documentation is public, then whoever might be building the interfaces or connectors for these networks and services will have a much easier time doing so. That's why open source is a boon for interoperability."
[SNIP] Moreover, it is a way for engineers to give back to the engineering community.
"When external engineers can review the architecture and code, they can assess the quality of the projects companies are working on. This serves as a great recruiting tool," said Max Levchin, CEO of the digital lending startup Affirm and a co-founder of PayPal. "When you open-source, it allows third parties to build applications on top of yours, [a process] which acts as a distribution channel for your own product."

Ethereum Forks

As the article points out above, open source is hard. This week saw Ethereum initiate a planned fork on Tuesday, which lead to an unplanned fork a few days later, which the Ethereum community rushed to fix. This seems to have led to a bit of schadenfreude twitter style from the Bitcoin community. as they reposted this article in quite a few threads. Meanwhile, earlier in the week the head of strategy for Ethereum-based Consensys penned this article entitled What Venture Capitalists Got Wrong About Bitcoin:

Instead, the infrastructure built for bitcoin can increasingly be co-opted for use by new tokens. These new tokens don’t necessarily add any value for the venture capitalists who originally invested in bitcoin. To illustrate what is happening: Imagine if a railroad company in the 1800’s spent millions laying tracks, only to see a second (and third, and fourth) railroad come along and use the finished tracks for free, to ship more cargo in faster and safer cars.

Interesting to see the perspectives of the two sides, with some viewing all this activity as zero-sum, winner (chain) takes all...while others share our view that success in one 'camp' can serve as a positive multiplier across the whole space.

RegTech (cont.) and LegalTech

This week saw the big finale of R3’s initial global regulatory tour, culminating in Eltville am Rhein, where our very own Charley Cooper spoke to the Deutsche Bundesbank’s Central Banking conference devoted exclusively to blockchain technology. For those curious about the participants, see this link. Here is Charley's report:

The conference lasted for four days and covered a wide range of topics, with my remarks focused on the importance of public/private collaboration as a driver of technology innovation in the highly regulated financial services industry. In the lead up to that event, Isabelle Corbett and I barnstormed through four other countries in seven days, meeting one-on-one with Swiss and Nordic regulators as part of our relentless efforts to involve government agencies and oversight bodies in our work from the outset. A huge thanks to Credit Suisse, UBS, Danske Bank, Nordea, and OP Financial for helping us navigate their home turf. R3 representatives have now met with regulators in almost all of our member jurisdictions, including central banks, securities and derivatives overseers, consumer protection agencies, law enforcement, tax authorities, NGOs, trade associations and legislators. It feels good to be home.

Risk Magazine posted a very thoughtful piece as a follow up to R3's Smart Contract Template Summit (it is even worth the pain of signing up for a free trial!). Our partners at Norton Rose Fulbright announced the publication of our joint white paper on the legality and enforcability of smart contracts. You can request a copy of the paper here or members can contact R3 directly.

Announcements

Swift announced this week that they would become more open and vocal about their exploration into DLT, which is very welcome news. They also announced some details on their latest POC.

Damien Vanderveken, head of R&D at Swift Labs, says: "Swift has been targeted in the press as a legacy incumbent that will be doomed by DLT. But we believe Swift can leverage its unique set of capabilities to deliver a distinctive DLT platform offer for the community."

Congrats to our friends at the JP Morgan Blockchain Center of Excellence for their open sourcing of Quorum, which you can access here. This is yet another example that the above American Banker article highlighted of the growing acceptance of open source within finance, and the advantages that even the world's biggest banks see in an open source approach. We look forward to exploring Quorum more during the upcoming Hyperledger events in December.

And finally, we are very happy to welcome China's Minsheng Bank to the R3 consortium, as another member in our growing network China and North East Asia.

The Weekend Read: Nov 20

Singapore Fintech Festival

MAS MD Ravi Menon announces MAS-R3 Interbank Payments project at SGFintechFest

MAS MD Ravi Menon announces MAS-R3 Interbank Payments project at SGFintechFest

I asked Antony Lewis for a field report on this week's Singapore Fintech Festival:

11,000 sweaty people couldn’t be wrong…Singapore was the hottest place for FinTech this week, as the world’s first regulator-managed FinTech event kicked off for a week-long collab confab.  Ravi Menon, the MD of the Monetary Authority of Singapore, opened the festival by announcing R3’s collaborative efforts with 10 banks and partners to put the Singapore Dollar on a distributed ledger. (see BBG article here). This garnered quite a bit of inbound interest from other parts of the globe as the week wore on, and we look forward to pursuing this piece of collaborative work in a "jurisdiction near you" soon.

Tim Grant insists that he didn’t pay off the Audio/Visual crew during his panel on Wednesday when Blythe Masters’ microphone didn’t work. The whole panel, including Oliver Bussmann (independent) and Sandra Ro (CME), generally agreed that we need to see some traction next year.  Tim’s “5 Ps” of DLT (Proof-of-Concept-->Prototype-->Pilot-->Permission-->Production) crashed Instagram as the audience became bewitched by the power of alliteration. ABC (AI, Blockchain, Cloud) grew a little more mature and became ABCD (AI, Big Data, Cloud, DLT). Our CEO, David Rutter, was also featured at the ASIFMA Annual Conference (all pics above).

The above, and the MAS’ partnership with R3 announced last week, all paves the way nicely for our Lab of Excellence in Singapore. Lattice80, the world’s largest FinTech co-working space, will be the perfect location to light up those Bunsen burners. If you would like to join us, we are hiring in Singapore.

RegTech and CBDC (cont.)

Continuing the MAS RegTech focus elsewhere, there continues to be a steady drumbeat of news stories concerning the regulator's role in fintech and DLT. First up is the U.S. SEC and CoinDesk's profile of the SEC DLT lead Valerie Szczepanik. The article reviews the SEC working group's focus to date, as well as raising the topic of regulation and ICOs:

Since an ethereum startup called The DAO raised over $100m by selling digital tokens without an exchange, a rush of companies have followed suit. So-called initial coin offerings can be launched from anywhere in the world and cross borders as easily as the Internet itself. With millions of dollars worth of capital raised so far and dozens of ICOs in the works, how the SEC will handle the technology is one of the biggest areas of regulatory uncertainty in the industry. Regardless of whether Gemini and SolidX ever win approval or if ICOs might displace traditional fundraising, the SEC will likely play a role.

Speaking of The DAO, the team behind the dream/nightmare, Slock.it, are back with another project, pushing the "fail fast, fail upwards" concept to its limits. I happened to see this being compared to the advent of flight and aviation inventors, yet the comparison falls flat (like many early aviators (groan)) as these innovators fail the "skin in the game" test popularized by Nassim Taleb. As far as I can tell, there was no repercussion from the absolute failure that was The DAO, whereas those early aviators had the ultimate skin in the game! (For more on that story, check out David McCullough's excellent book on The Wright Brothers).

Sweden's Riksbank made headlines this week with talk of issuing digital currency:

The so-called e-krona may be introduced within two years. “The less those of us living in Sweden use bank notes and coins, the clearer it becomes that the Riksbank needs to investigate whether we should issue electronic money as a complement to the money we have today,” Riksbank Deputy Governor Cecilia Skingsley told the Financial Times.
Sweden's Riksbank is the world’s oldest central bank, and was the first to issue paper banknotes in the 1660s.

Central Bank Digital Currency (CBDC) remains an area of focus for R3 and our Research team. For R3 members, please reach out to us if you have seen our recently published private reports on this topic.

India has also made headlines with their recent demonetization scheme. Once again, many armchair economists/sociologists on the Twitter have been giving their "two paise" on the subject, but since I at least admit total ignorance to all the nuance, here instead is what looks to be a great run down of the issue at hand by The Diplomat.

Bonus link: no idea where to put this but here is CoinDesk's summary of their recently released State of Blockchain.

R3's Second Smart Contract Templates Summit & RGB on Corda

We were very pleased to host the second summit dedicated to all things smart contract, with participants in person in Barclays London and New York, with many more across the globe dialed in (Ed. note: need to clarify how time is measured by organizers of upcoming event billing itself as "The Industry's First Event Exclusively Dedicated to Smart Contracts"...). Dr. Lee Braine of Barclays once again set a high standard for the proposed agenda, and all the contributors managed to outdo themselves. IB Times has a great rundown of the event, and we have provided all of the presentation materials via this link. Allow myself to quote...myself:

The summit featured presentations by Barclays, CIBC, Nordea Markets, ISDA, FIA, Norton Rose Fulbright, Thomson Reuters, University College London, Cardozo Law School, and R3. Todd McDonald, co-founder of R3, said: "We wanted to hold this second summit to keep up the cadence and to continue what we at R3 and all the participants feel is important: progressing this in the open and it being industry led, rather than by just one organisation or one company."

Our CTO Richard Gendal Brown was featured on two 11FS podcasts this week. First up, RGB was joined by Richard Crook (Head of Innovation Engineering, RBS) and Ajit Tripathy (Fintech and Digital Director, PWC) for a more wide ranging chat. The second is a video link to a 1-on-1 chat with Richard Brown. Both pieces were moderated by our old friend Simon Taylor, aka The Blockchain Beard (who evidently put his size smedium t shirts on a high-heat drying cycle in order to show of his Blockchain Biceps in the attached video...). Richard as always delivers an extremely lucid explanation of not only the functionality but more importantly the benefit of DLT, and specifically Corda, to financial institutions:

On why anyone should care about blockchain and DLT: It just becomes self-evident that there’s a massive opportunity in finance, wherever firms record the same data that their counterparts do, and then have to manage it, that this blockchain technology…can be used to massively simplify and reduce that cost and complexity by just doing it once and knowing for sure that what you see is what your counterpart sees.
On how is Corda different from traditional blockchains: The short answer to your question…it is designed by and for financial institutions, its focus is not on crypto-currency or virtual machines; its focus is managing legal agreements between regulated institutions, is designed to integrate and inter-operate with existing systems in banks, and is designed to integrate well with the legal system…. So this isn’t the idea of computers running amok and controlling the world. This is computer code. This is computer data that, in the event of dispute, is grounded firmly in legal reality.