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?


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

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

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.

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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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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"

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What’s the difference between a distributed ledger and a blockchain?

A blockchain is a type of distributed ledger.  But new distributed ledgers are emerging. These are databases where control over the data’s evolution is shared between entities. Here’s a handy cheatsheet.

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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?”

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