What’s ahead for Corda Enterprise Blockchain in 2020?

CordaCon is an event that never disappoints! This year it was held in late October in London. For all of you who are Corda enthusiasts but did not attend, I have put together the latest update on Corda’s future development and some very cool projects going LIVE in 2020. — I think that you will be amazed at how quickly the platform is advancing and maturing!

‘Omne trium perfectum’ or everything that comes in threes is perfect!

Yes, that’s the rule of three that makes things more memorable. In 2020, Corda will work on the following three:

1. Simplifying Corda — that is, improving UX for both existing and new users.
2. Enabling more connections — This is equally important! — Corda will identify and remove any barriers to interoperability between CorDapps to ensure seamless interaction between them.
3. Enabling more transactions — Corda Settler will be enabled to support more transactions as well as the settlement of native tokens issued on Corda Network. — That’s a logical step forward that will speed up adoption of digital assets for transferring value and making payments!

Great achievements begin with a grand vision: It’s time to optimise entire markets!

Richard Brown, Corda’s CTO, sees the optimisation of entire markets as a new opportunity for enterprise blockchain. In the same way companies optimised their internal processes in the past, Richard suggests that now entire decentralised markets can be optimised with Corda Enterprise blockchain since all participants are able to use shared market-level applications, thereby dramatically reducing deviations and errors.

Corda Enterprise, as decentralised software, has been used in various industries mainly because it enables different companies to automate and facilitate interactions between themselves by orchestrating information and systems. Corda Float Framework is a feature, which other DLTs do not have, that allows businesses to write down the flow of all activities and info between all participants — so Corda can automate them. It facilitates many successful projects, including the ones I will be talking about today.

Looking further into the future, once market-level business processes are set up, tokenisation will completely change the way assets are transacted and managed throughout their life cycle. Taken together, this will entirely transform the structure of the market. — This is the power of integrated platforms that can support multiple applications on the same network!

Redefining the concept of liquidity: HQLAx & Ivno

HQLAx went LIVE just last week. It is a securities lending platform/marketplace that uses Corda to facilitate efficient and high-speed trading of High-Quality Liquid Assets (HQLA) by enabling tokenised baskets of securities to be instantaneously exchanged through atomic delivery-versus-delivery transactions.

Both trade execution and post-trade processing are supported by Deutsche Börse. It plays a leading role in the custody and post-trade processing layer, which is designed to interoperate with multiple collateral agents and custodians.

Unlike in traditional settlements, there is no actual movement of securities between custody accounts. Instead, the ownership of securities is transferred via the token transfer, while the underlying securities are kept off DLT and remain in the custody location of the collateral giver. This results in more efficient collateral management across siloed collateral systems and locations by significantly reducing the settlement cycle and avoiding resource-intensive collateral movements. The shorter securities settlement cycle and reduced risk of ‘failures-to-deliver’, in turn, offer significant cost savings.

For regulators, the platform provides the ledger of the entire digital history of the transaction, from where it originated to its ownership and attributes.

Commerzbank, Credit Suisse and UBS executed the first transactions. Currently, more than 15 other institutions are at various stages of onboarding to the platform. They include CIBC, Citi, Goldman Sachs and ING.

HQLAx is planning to develop other features in the future, such as instant delivery-versus-payment (intraday trades), digital collateral record re-use and support for various types of pledges.

Ivno will be going to production in Q1 2020. The fintech startup creates Ivno Collateral Tokens backed by the highest-rated collateral for use in settlement and balance sheet management. The tokens will be available for use in Ivno Instant Settlement CorDapp and any other Corda Network CorDapp. This will enable collateral interoperability across the Corda Network and reduce the risk of siloed liquidity and inefficiency. At the same time, it will maximise the commercial opportunity from the Corda ecosystem.

Ivno works with banks, exchanges, CCPs, buy side and corporates. Via collateral-backed tokens and associated applications, the value is transferred directly on the blockchain. For example, during the Ivno Global Tokenised Collateral Trial in October this year, Invo instantly moved Corda-based collateral tokens between 28 organisations, including 18 banks and 3 securities exchanges, The participating organisations created $18bn of Trial Tokens and transferred them through the Ivno network in order to test the following three use cases: instant settlement, real-time collateral management and instant effective cash transfers.

Since there is no delay, counterparty risk gets eliminated, and there is no need for an intermediary. The most significant potential benefits will be delivered to treasurers due to intraday liquidity.

Projects like HQLAx & Ivno will offer new revenue opportunities to all far-sighted financial institutions capable of taking advantage of real-time, 24/7, direct value transfer between legal entities. They will seek to adopt new ways of settlement, balance sheet and trade lifecycle management, as well as quickly adapt to new market structures.

Integration between distributed ledger solutions & conventional systems is crucial: Spunta Project

The Italian Banking Association (ABI) has recently announced that major Italian banks could be ready to use DLT to run their interbank processes by March 2020 thanks to a very successful Spunta Project, which has been managed by ABI Lab, the association’s research and innovation arm.

A total of 18 banks (or 78% of the Italian banking sector) are involved in the project that uses technology from NTT Data, SIA and R3.

ABI expects that the DLT move will result in full visibility of the transactions between banks, daily reconciliations, and more effective communication between counterparties in the event of an exception.

I would also like to draw your attention to two other outstanding projects working on DLT integration, which will not go live but will continue their development in 2020: the first one is a real-time gross settlement token-based system being built by Accenture and SAP. It will enable faster, more efficient, reliable and secure payments between banks and customers. SAP’s Payment Engine will underlie the payment initiation and processing, while Corda will allow interaction between the DLT platform and conventional systems. (The tokens serve as a proxy for standard central bank fiat currency.) The project also paves the way to linking to tokenised-assets, e.g. equities, and creating an integrated and seamless financial services ecosystem.

The second project is Mastercard’s B2B cross-border payments platform powered by Corda enterprise blockchain. The solution will tackle high overhead costs, liquidity management and a lack of standards for processes between banks and clearing systems. The project will help Mastercard match Visa’s offering and add another payments rail to its existing capabilities. (By the way, Mastercard has also recently joined the Marco Polo trade finance network run on Corda. That’s another strategic move!)

DLT as digital transformation enabler: SDX

I have already written about Swiss Digital Exchange (SDX), the world’s first end-to-end platform for digital assets, in one of my previous articles. Hence, this time I will just mention the latest info to show how DLT has actually enabled a complete transformation of SIX Stock Exchange into a new business model. The full launch is expected in Q4 2020.

The first prototype featured digital security token issuance, live trading, and instant settlement. It aimed to demonstrate the integration of a distributed central securities depository with the conventional model of a stock exchange. New features, like asset servicing and post-trade services, are planned to be released in the second prototype in Q1 2020.

Also, Swiss Stock Exchange is working with the Switzerland’s central bank (SNB) on the research to make central bank digital money available for the trading and settlement among financial market participants. One option could be to issue digital Swiss franc tokens by the SNB for financial market participants (a so called, wholesale central bank digital currency) on the SDX system. The other option is that banks wire money from their accounts at the central bank to SIX’s omnibus account. Then, the cash could be tokenised on the ledger and distributed to the respective bank nodes.

Happy 2020!

Avivah Litan is a distinguished Analyst and Research VP at Gartner. I will leave you with her prediction: ‘We are witnessing many developments in blockchain technology that will change the current pattern. By 2023, blockchain platforms will be scalable, interoperable, and will support smart contract portability and cross chain functionality. They will also support trusted private transactions with the data confidentiality required. All together, these technology advances will take us much closer to mainstream blockchain and the decentralised web.’

Hope that you have found the above interesting! Here is the link to all the CordaCon talks — so you can pick and choose what to watch over the holidays. Hope you will enjoy it! Happy 2020!

As always, all your comments and suggestions are welcome!