Derivhack 2018 on Corda

Just over a week ago I had my first hackathon experience. I explained during the pitch that I was randomly selected to speak first, so the audience should go easy on me. Now I’m writing my first blog, so hopefully this audience will be similarly indulgent!

The hackathon, Derivhack 2018 was in Rise London and was thoughtfully organised by Barclays, ISDA, Thompson Reuters and Deloitte. Conor from blk.io wrote an excellent introduction to OTC derivatives and the ISDA common domain model (CDM) as part of his blog on the Derivhack, so I won’t re-explain. Instead, I will talk about the experience, CDM, Finteum and Corda.


Trying not to mess up my first hackathon pitch. Photo credit: LukeMacGregor.com

My hackathon experience

I must say I thoroughly enjoyed my first hackathon. My objectives were to be involved in building something on Corda and to meet people from the DLT community who are focused on Capital Markets. I was happy on both fronts.

In between pizza and hacking, I got chances to interact with participants, and it was clear I was surrounded by a lot of bright minds. I was fortunate to partner with software engineers from bluebank.io, which who contributed Cordite to the Corda community, and built other impressive technology. During the two days, Ramiz, Joe and Chris built a very impressive solution and user interface for our hack product, Derivite. Aimé from bluebank was amazing as our unofficial fifth team member. Congratulations to all four of them for winning prizes at an RBS API hackathon this past weekend!

Hard at work!

ISDA CDM and the evolution of markets

As I told Ledger Insights, the hackathon was valuable for participants like me from the business side as well as software engineers. My product knowledge was also useful to the developers and we benefited from my financial markets network. We got support from my connections at Bank of Ireland and Tullett (TP ICAP) who updated me on how the markets operate and settle today (I haven’t booked a trade in 7 years, and even then I was more focused on bonds than derivatives).

In my view, ISDA is tackling the important problem of standardisation with CDM, from which the industry will benefit. In our Derivite pitch, we explained that if the CDM approach could be extended beyond the current implementation to use a data provider as a common source of truth for interest rate curves, it could create further efficiency for markets and the industry. I used to get frustrated trying to transfer a trade to another counterparty (called novation), only to find that my firm’s valuation of the trade was not the same as my counterparty’s. Every firm uses proprietary curves to represent the same thing — future interest rates, creating an opportunity for efficiency.

ISDA has led projects similar to CDM in the past and they are very difficult. Organisations are reticent to agree with their counterparties and competitors on the correct approach to standardisation. Also, dealers benefit from having control on pricing and curve setting, so there is a business case trade-off between cost reduction from standardisation and revenue from pricing control. The emergence of blockchain technology has created an opportunity to reaffirm or change standards from a business perspective so that blockchain business network participants are sharing ledgers that rely on commonly agreed data formats.

Our Derivite pitch was an ambitious proposal focusing solely on standardisation. Thankfully, the judges were sufficiently impressed and gave us an honourable mention for thinking beyond the use cases given.

Celebrating our honourable mention!

I also foresee similar technology to CDM being valuable in other markets beyond derivatives. I founded Finteum and we are focusing on money markets. It would also be helpful to have a CDM-like standard data representation for the money market product and associated post-trade events.

Similarly, we at Finteum we are tackling a difficult business problem, but one worth solving. We are aiming to create a global financial market that doesn’t exist today — a market for intraday liquidity that would enable financial institutions to borrow from one another and repay on the same day with a high degree of timing certainty. The most important lesson from the hackathon for Finteum was the speed at which a solution can be built on Corda when working in a small, focussed team. It gives me great confidence as we begin planning the build phase.

Corda, Confidence and Community

Given the hackathon topic and the growing popularity of Corda, it’s no surprise that about two-thirds of London teams chose to use Corda. We were fortunate because R3 did the groundwork to integrate CDM and Corda, which was approved by organisers. In addition, there was Corda developer support on hand.

Importantly, the hackathon affirmed what I believed about the Corda ecosystem. It increased my confidence that the developer community likes using it. It didn’t matter to me that our team and the Corda teams didn’t win the top prizes. There were other protocols represented that had done more preparatory work and deserved those prizes. Corda, as a project, relies on building a broad, successful ecosystem around it and the Derivhack showed me that R3 is achieving just that.

Our team was a good example. I contacted bluebank on Corda public Slack when the hackathon was announced and asked if they would be interested in partnering. Days later, I was in a team with talented engineers who I had never met or spoken with previously. To be fair, we weren’t total strangers — I contacted them because Finteum is an R3 entrepreneur in residence company and bluebank is an R3 partner. Still, the speed of collaborative partnership and innovation with Corda is infectious and energising.

In conclusion, the Derivhack was a valuable accelerated learning experience and I would recommend participating in a hackathon to any businessperson who gets the chance. A special mention is due to Helen and Frances from Barclays London, Tony from RiseLondon, Sunil from ISDA and many others that put a lot of effort into the hackathon and the CDM.