Blockchains and laws: are they compatible?

At conferences and events I often get asked a variation of “Is blockchain regulated?”.  The short answer is no: technology is rarely regulated.  It’s entities who are regulated (especially in finance).

blockchains_and_laws
Blockchains and Laws: are they compatible? A paper I coauthored at R3 with Baker Mckenzie.

Banks need their technology to conform to certain standards – resilience, security, and so on.  The banks (not the technology!) get penalised if they can’t demonstrate high standards with the technology they choose to deploy.  A common rulebook that is adapted for each jurisdiction is called Principles for Financial Market Infrastructures.

But blockchains and distributed ledgers share data, and often business is conducted across borders.  And many countries have data protection laws specifying that certain types of data (eg personally identifying data) need to remain stored on computers within the borders of the country itself.  How do we reconcile data sharing with data protection laws?

Well, instead of thinking about blockchains and distributed ledgers as a mechanism for sharing data (we know data sharing is a solved problem), think of them as “business to business glue” that can make business processes between entities much more efficient.

So, some data absolutely needs to be shared.  In finance that may be some trade details: prices, amounts, delivery dates, etc.  We do this today anyway, bilaterally and via intermediaries.  But we only really want to share this kind of data with the other party (and not the entire network of participants!).  Other data needs to be kept completely internal: customer details and instructions, valuations and profit margins, etc.

Can blockchains and distributed ledger platforms deal with these kinds of requirements?  Absolutely – R3’s Corda was built specifically for this.

In my role as Director of Research at R3, I recently coauthored Blockchains and Laws: are they compatible? with Baker Mckenzie, the world’s leading cross border law firm.  If you’re into that kind of thing, it’s well worth a read.

R3’s cutting edge research and thought leadership is also now available as a separate offering to consortium membership – here’s a selection of papers that R3 has produced.

Avoiding blockchain for blockchain’s sake: Three real use case criteria

Blockchain use case funnel 2016-17

2016 was the year of creating frameworks and filters to determine if a business problem was worthy of a blockchain-based solution.  Often, the frameworks would declare inappropriate potential use cases as ripe for blockchaining, as the frameworks were often designed by blockchain vendors or consultants to let as much through as possible.  However, many of the proofs of concepts built in 2016-17 have not become industrial solutions.  Why?

Two main reasons are:

  1. The technology didn’t meet the requirements of the use case
  2. The use cases themselves were selected badly

This post discusses what went wrong with use case selection, and presents two new and better questions for use case selection.

Continue reading “Avoiding blockchain for blockchain’s sake: Three real use case criteria”

Blockchains and cyberwar: Why the next wave of interbank settlement systems will be decentralised

Currently a number of central banks around the world are exploring two things:

  1. A decentralised interbank payment system
  2. A central bank digital currency

Though often conflated, these are slightly different concepts.  You can decentralise your interbank payment systems without allowing the public to have digital access to the central bank’s balance sheet, and vice versa.

This short post is about the first set of experiments: decentralising the interbank payment systems.

Continue reading “Blockchains and cyberwar: Why the next wave of interbank settlement systems will be decentralised”

Three common misconceptions about smart contracts

There is a lot of misleading commentary about smart contracts, leading to confusion about what they are and what they can do. Here are three of the most common myths that I have noticed. This builds on a previous piece, a gentle introduction to smart contracts.

Myth: Smart contracts are self-executing bits of code

Continue reading “Three common misconceptions about smart contracts”

Distributed ledgers: “Confirm-as-you-go”

Following on from the “Blockchain is a solution looking for a problem” narrative of 2016, distributed ledger technology has evolved.

Distributed ledgers – databases with shared control over what and how data is added – can be seen a strategic solution to the “reconciliation” workaround that we have had to put up with until now. This strategic solution is applicable to all industries, not just financial services.

Distributed ledgers: "Confirm-as-you-go"

Continue reading “Distributed ledgers: “Confirm-as-you-go””

Yes, but what’s new with distributed ledgers?

This short post is inspired by a conversation I had recently with a couple of finance professors from top business schools who had some questions about blockchains.

Prof A explained that he had heard all the fuss about blockchains but was unsure whether it was revolutionary or evolutionary (I think the word disruptive was also used). I have written about disruption in Fintech and the Evolutionary vs Revolutionary aspects of distributed ledgers before (hint: it depends, it’s both, and yes, perhaps).

Then he asked, “Yes, but is there anything new?”

Continue reading “Yes, but what’s new with distributed ledgers?”

Distributed Ledgers: Shared control, not shared data

In the context of distributed ledgers, I have noticed that many commentators and consultants confuse shared control of data with the sharing of data itself. The difference is crucial, and this common simplification misses the most important aspect of distributed ledgers.

In this post I discuss three ideas:

  1. Sharing of data vs shared control of data
  2. Control of data by rules vs by power
  3. Enforcement of rules by participants

Continue reading “Distributed Ledgers: Shared control, not shared data”

A gentle introduction to The Hyperledger Project

I have noticed a great deal of confusion when people talk about “Hyperledger”.  I recently gave a talk about this at a meetup hosted in Paypal’s offices in Singapore.  This article summarises the talk.

Hyperledger is a project, not a technology, and you don’t build stuff on Hyperledger.

When people ask, “What is Hyperledger?”, the answer I give is usually “Do you mean the project called Hyperledger run by The Linux Foundation, or do you mean one of the ledger technologies incubated by that project which used to be confusingly called Hyperledger Fabric?”. The first is a group of people, the second other is a bunch of code.

Continue reading “A gentle introduction to The Hyperledger Project”

In a nutshell: Ian Grigg’s Ricardian contracts and digital assets prehistory

I enjoyed listening to Episode 151 of the podcast “Epicenter” (previously “Epicenter Bitcoin”) featuring Ian Grigg, inventor of Ricardian Contracts and blogger at Financial Cryptography. Here are my notes – part transcription, with some edits. This one is a goldmine and covers many topics: bonds, contracts, cash, Chaumian e-cash, DigiCash, financial cryptography, Ricardian contracts, digital signatures, smart contracts, dispute resolution, Ethereum, triple entry book-keeping, oh my!

Misunderstandings and paraphrasing errors are entirely mine.

This gets fairly technical; if this is hard to follow, it may be helpful to read my introduction to smart contracts first.  Hmm, if it’s still hard to follow, also read about blockchains and bitcoin and Ethereum, and digital tokens.

Continue reading “In a nutshell: Ian Grigg’s Ricardian contracts and digital assets prehistory”