Decoding the architecture of P2P securities transfer app on Hyperledger Fabric based app — Consensus 2018

In May 2018, the Consensus event hosted by Hyperledger. In that many of the Hyperledger member presented their products and platforms developed using different blockchain platforms.

One of member presented the P2P security exchange platform developed on Hyperledger fabric.

Before explaining the application, there is question we might have.

What is security/commercial paper?

A short term debt security issued by financial/corporate companies or large corporations against their company.

Who is investor?

A business entity that receives or transfers a commercial paper contract from the issuer or from other investor through transfer action.

End of the contract investor gets proper returns by means on interest rate or 5% profit. It is used for short term loan. Generally commercial paper is sold at discount. But while redeeming the contract they will get the full money value of the contract.

In commercial papers, there are different maturity periods.

1. Six months
2. 9 months.(max 270 days)

In finance anything less than 270 days, it is considered as money market. Money market transactions dont need SEC registrations and approvals. Commercial paper part of money market.

By avoiding SEC registration, it is less costly. A major benefit for companies. Thats why companies use securities are short term loans for the financial needs.

It avoids the cost and time for Business loand and SEC approvals.

Issues with commercial paper:

• Commercial paper is unsecured
• Buyers have no claim on the company assets if the company fails to pay up at maturity.

Because of that, with good credit can successfully sell commercial paper.

Commercial papers are sold in large denominations like,

• 10,00,000$

Mostly investment of the commercial papers are done by large corporations, wealthy individuals.

Use Case: Intermediaries on peer to peer security transfer. Automate the settlement process on Blockchain.

Current state problem:

• Traditional settlement process is slow and costly
• Intermediaries manually administering transactions
• System is not transparent
• Difficult to scale.

Solution:

In this case, three different organisations are taken to explain the scenario.

NSD: Nation security Depository — A trusted third party. Who takes care of the brining people into the system and creates consortium.

Technical responsibilities:

1. Setup the blockchain network with three organisations
2. Runs the “orderer” — equivalent to miner.
3. Creates the records of new securities issues against the company.
4. Maintains the balances of issuers and investors

Issuer: A Business entity that transfer a commercial/security paper to investors by mentioning an instruction/rules to transfer.

Investor: A Business entity that receives or transfer a commercial paper contract from issuer or other investors by initiating the transfer with specified rules.

Step1 — Network Architecture — Channels and Organisation

We will create the three organisation channel using the hyperledger fabric configuration. On top of the network business logic will be implemented by means of Chaincode/smartcontract

Participants in the network

It is a two peer network. Issuer and investor each will have two peers

Channels

1. Common Channel:

A channel used for broadcasting data for every other organisations. Channel data which is visible everyone. It is like a notice in a school, everyone can see the data what is written on it.

Used for querying what Security papers(assets) are created and available in the network

Depository Channel

1. Depositories maintenance of NSD(National Security Depository) balances.
2. Who are the participants of the channel
3. Logging of the asset transfer between the parties

Investor/Issuer to NSD

1. This channel is used for NSD → Issuer and NSD →Investor communications of data.

Issuer-NSD-Investor

This is the channel, which is used for NSD-Issuer-Investor

Chaincode/Smart contract/Business logics

Now we can see the business logics are installed on the channels

1. Book : Deployed on Depository channel

a. Maintains records of quantities of securities held by the organizations.

b. Upon receiving the matching instruction

→ Validate the balance of the transferrer

→ Transfers the instructed number of securities from transferrer balance to the receiver of the transfer.

2. Instruction chaincode: Deployed on NSD-Issuer-Investor

a. Validadate transferrers instruction

b. Transfers quantity of security and store it.

c. Upon receipt of receivers instruction

→Finding corresponding transfers, if exists

d. Upon successful matched transfer of depository instruction, change the status to executed or rejected.

3. Position chaincode: Deployed on NSD-member channels

a. Maintains rewards of queries of securities hold by each member

b. Upon receiving movement of records in Book update quantities of member.

4. Security chaincode : Deployed on common channel

a. Maintains records of securities.

b. Operator can record the lifecycle events of securities

c. Payment of coupon, maturity and redemption.

Web Interface and RestAPI

Please see the demo of the video here.

Please leave your valuable comments.