Please believe my database

I was reading Matt Levine’s Money stuff today and was struck by a thought. He writes:

“A national customs agency, for instance, might be happier approving shipments on an auditable open blockchain than in the proprietary database of a particular shipping company.”

This is interesting, but I want to take it one step further.  Blockchain or not, a record of events that have been cryptographically digitally signed, with references to previous transactions could be very useful.

If you are a company, and a regulator or agency asks you for your view on what happened, and you give the regulator an Excel spreadsheet or a normal database extract saying “Here’s what happened, I promise”, this is very weak evidence and can be tampered easily by deleting rows, or removing key words like the names of sanctioned countries, etc.

However, if you give the regulators a list of recorded events that have been digitally signed by the parties involved (with the authentication, integrity, and non-repudiation guarantees that come with digital signatures), and with timestamps that have been agreed, or validated by more than one party, then this is a stronger form of proof and the regulator or agency should be more willing to believe that that this was in fact the course of events, and the data hasn’t been “sanitised”.  And if the events link to each other, forming some sort of chain of events, then the regulator can be confident that you haven’t deleted any events, else the chain would be obviously broken.

This data doesn’t need to have been widely replicated and validated by thousands of computers like with public blockchains, it just needs a couple of ingredients:

  • Digital signatures (preferably a transaction or event is signed by all relevant parties eg both the sender and receiver, if it’s a financial transaction, rather than just the sender, which is the case in Bitcoin and Ethereum); and
  • Chains where events (transactions) refer to previous events (transactions) so that you can prove that this is the complete list of events and nothing has been removed

R3’s Corda (note: I work at R3 and I think Corda is good) meets these criteria and perhaps this is why Corda is being increasingly explored for non-financial use cases, as well as the financial use cases it was originally designed for.

So, just something to think about.  What else could this be used for?  In what other situations is it useful to be able to prove beyond a doubt that the data you are providing hasn’t been tampered?  Any what new business models or processes might this unlock?

 

MAS just released Corda for Central Banks… so what?

I’m absolutely thrilled to be able to write about the open sourcing of Project Ubin Phase II, a key project that our team has been working on for the past seven months with the Monetary Authority of Singapore (MAS), ten banks, and our partner Accenture.

UbinPhase2

Ubin Phase 2 report

What is Project Ubin?  It’s probably the most advanced starter kit out there for anyone wanting to explore blockchains for banking:

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Blockchains and central banks – what have we learnt?

This article was first posted on r3.com

Over the past couple of years, R3 has worked closely with a number of central banks to explore if distributed ledgers could support their policy goals, and I have had the privilege to participate in a number of these projects.

What have we learnt?  What is important?  What do central banks care about?  While I can’t speak directly for individual organisations, I have collated my own thoughts, and wanted to share these ahead of the Singapore FinTech Festival this year (13-17 Nov) when the results of Singapore’s “Project Ubin” experiments will be announced.

Update (post FinTech Festival): Read about the Open Sourcing of “Corda for Central Banks“!

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The hype around central banks, digital currencies, and blockchains

Central banks and blockchainThere has been a lot of hype around central banks, interbank payments, blockchains, and central bank digital currencies (CBDCs), but the narrative has become confusing and often misses the point.  What’s going on?  Actually two independent things are being actively explored:

  1. Decentralisation of interbank payment systems
  2. Wider access to digital central bank money (Central Bank Digital Currencies – CBDCs)

I aim to explain them both in this post.

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Blockchains and financial inclusion

Blockchains and financial inclusion

This short post gives an overview on how blockchains could impact financial inclusion and “banking the unbanked”.  There are two parts to this:

  1. Financial inclusion: who counts as unbanked? (it’s not just poor people)
  2. How might distributed ledger (“blockchain”) technology help?

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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.

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.

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