THE WEEKEND READ: FEB 19
R3 in the News
Our CEO David E. Rutter sat down with Financial News for a very entertaining (and paywalled, sorry) interviewthat 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.
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
CoinDesk has continued their reporting on the upcoming announcement of Enterprise Ethereum, with twoarticles 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
- Why blockchain could be a new ‘operating system for the planet’ indirectly from Jeremy Wilson, Vice Chairman of Barclays Corporate Banking. I would give Mr. Wilson multiple “keepin’ it 100” emojis if I met him in person. This is a sentiment that we have been discussing quite a bit lately.
- 11 THINGS YOUR CIO NEEDS TO KNOW ABOUT BLOCKCHAIN TODAY from 11:FS/Simon Taylor
- Chainwashing by Tim Swanson
- Dole Food Had Too Many Shares by Matt Levine (notable for his almost endorsement of DLT: “That system has worked pretty well for 40 years. But it is starting to show its age. There are little cracks that give us brief glimpses of the abyss below. Why not cover them up with a fresh, cool coat of blockchain?)
- Corda and the Distributed Ledger Technology by The Piachu
- Corporate boards are on board with blockchain, survey finds from American Banker
- The Meaning of Decentralization by Vitalik Buterin. Another well written piece by Vitalik where he goes into the challenges of decentralization faced by many communities. Gold star for this passage: “If any one actor gets more than 1/3 of the mining power in a proof of work system, they can gain outsized profits by selfish-mining. However, can we really say that the uncoordinated choice model is realistic when 90% of the Bitcoin network’s mining power is well-coordinated enough to show up together at the same conference?”