Written by Adam Jones, Guest Blogger on Friday 2 December 2016
This week saw the release of the technical white paper for Corda, the technology the R3 consortium have been working on. For those who aren’t familiar, R3 are a consortium funded by major FS organisations who were established last year to look into blockchain and distributed ledger technologies. Backers have (until recently) included the likes of Goldman Sachs, Barclays, UBS, Santander, Bank of America and RBS so unsurprisingly, the consortium has been pointed at solving some of the key pain points in the day to day running of financial services organisations. Namely settlement processes, trading, reconciliations, error and break management and contract management.
Earlier this month, we were treated to a taster of their work via the non-technical white paper which aimed to clarify some key points around the purpose of Corda and some of its potential applications. It also confirmed that the code would be made available under an open source license (meaning anyone can use it) and that it would be released sooner rather than later for community engagement (meaning it isn’t ready to be used in production yet).
One of the most interesting things about Corda is that the team at R3 have developed it as a distributed ledger framework which is actually quite a long way away from the Bitcoin Blockchain from which the idea originated. Some key differences which underline this:
- It isn’t currency based. The Bitcoin Blockchain was intrinsically linked to the currency which it supported. In fact, it only existed as a technology to make Bitcoin work.
- Data is shared between parties on a need to know basis. The Bitcoin Blockchain was built on the principle that all parties involved would have a complete copy of the ledger. This gave the network strength and resilience but also challenges with making it scale.
- Updates are near instant. While the core Blockchain technology had a c. 10 minute write time for each new block of data, Corda will make this near instant.
- Multiple ways to achieve consensus. One of the principle factors of the Bitcoin Blockchain was that ‘miners’ in the network would solve complex cryptographic algorithms in competition with each other for the ability to update the ledger. This is hard and expensive. Corda aims to offer multiple ways of managing proof of work, which will give organisations flexibility and reduce the ongoing (and ever increasing) cost of managing the network.
- Supervisory nodes. While core Blockchain technologies have focused on all members being active participants, Corda allows for the fact that, in financial services, there are a number of industry participants who are in a supervisory role who would benefit from access to this data.
All interesting stuff, but so what, I hear you ask.
Well, some of the really important key principles of the Bitcoin Blockchain (around distributed power and trust) are still core to the framework. This is great but doesn’t differentiate it in its own right from the host of other Distributed Ledger Technologies. What does are two key things:
- The backing from so many established industry participants.
- The positioning of Corda as and open source framework on which to develop a range of proprietary technology solutions.
For anyone interested in infrastructural technology in financial services (rock and roll, I know) then Corda should definitely be of interest. It may represent the biggest shift in industry standards and cooperation in a very long time and ultimately could lead to a complete realignment of the value chain. This said, some key players announced this week that they would be leaving the consortium at the next funding round.
And for anyone who is still unsure about what Bitcoin and Blockchain is, drop me an email. Michael James and I can do you a great live demo, complete with plastic miners helmets and 80’s computer game references.
Adam Jones, Head of Innovation