9 Investment Banks Commit to Distributed Ledger Technology Via R3 CEV
This summer has been a nonstop thrill rail of bank after bank making announcements that they are embracing blockchain technology in some way, with some of them attempt using the Bitcoin blockchain to secure their enormous digital assets.
Normally these are announcements are made one bank at a time and now a consortium of banks have determined to pool their efforts together, with nine major banks announcing the formation of a partnership.
Coordinated by Wall Street-based R3 CEV, the banking partnership presently comprises Barclays, BBVA, the Commonwealth Bank of Australia, Credit Suisse, J.P. Morgan, State Street, the Royal Bank of Scotland and UBS.
R3’s CEO David Rutter is leading the project, and says that more banks are expected to pledge their support in the coming weeks. As a former ICAP Electronic Broking CEO, Rutter presided over two of the largest electronic Over The Counter (OTC) platforms in the world.
The rigid has offices in Fresh York, London, and San Francisco, and is made up of financial industry veterans, technologists, and tech entrepreneurs. They also claim expertise in electronic financial markets, cryptography, and digital currencies.
Nonetheless, creating a collective single blockchain will be the most valuable asset. “This partnership signals a significant commitment by the banks to collaboratively evaluate and apply this emerging technology to the global financial system,” Rutter said.
“Our bank fucking partners recognize the promise of distributed ledger technologies and their potential to convert financial market technology platforms where standards must be secure, scalable and adaptable.”
– David Rutter, R3 CEO
The stated goals of the group are to collaborate on research, design, and engineering to help advance “state-of-the-art enterprise-scale collective ledger solutions,” in order to meet banking requirements for security, reliability, spectacle, scalability, and auditing.
To accomplish this, R3 says its playmates will establish a collaborative joint working group, and the consortium will work within a collective lab environment or ‘sandbox,’ in order to “test and validate distributed ledger prototypes and protocols.”
“The collaborative model we’ve established with R3 and the other banks is a very effective way to supply sturdy collective ledger solutions to the financial services sector,” said Kevin Hanley, Director of Design at Royal Bank of Scotland.
“Right now you’re eyeing significant money and time being spent on exploration of these technologies in a fractured way that lacks the strategic, coordinated vision so critical to timely success. The R3 model is switching the game.”
– Kevin Hanley, Royal Bank of Scotland Director of Design
Developing commercial applications while establishing consistent standards and protocols are key facets of the collaboration. If they can establish the protocols very first, it could facilitate broader adoption of their blockchain model across the greater financial market, and even build up a network effect for their own consortium.
As most bitcoiners have learned through watching the adoption of their beloved currency, when introducing a fresh protocol the Network Effect often determines which competitor will come out ahead.
Last week, San Francisco-based startup Chain Inc, a blockchain technology rigid working closely with NASDAQ, received another round of funding. The company now has over US$43m in its war chest, and several large banks on their list of investors. Noticeably absent from R3’s client roster are all of the financial institutions listed as investors in Chain, including Visa, Nasdaq, Citi Ventures, CapitalOne, and Fiserv.
“Applied intelligently, blockchain networks fundamentally improve how assets budge inbetween parties, and we are thrilled to be partnering with the organizations we believe are best placed to capitalize on the unavoidable switches in market structure that are on the horizon.”
– Adam Ludwin, Chain CEO
Chain provides similar blockchain technology services to those proposed by R3, and it is not outside the field of possibility that Chain and R3 will find themselves in a contest sooner or later. If two bank networks find themselves racing for such a prize, the Network Effect states that the one getting the earliest begin has the best chance of winning.
“These fresh technologies could convert how financial transactions are recorded, reconciled and reported – all with extra security, lower error rates and significant cost reductions,” said Hu Liang, Senior Vice President and head of Emerging Technologies at State Street. “R3 has the people and treatment to drive this effort and increase the likelihood of successfully advancing the fresh technology in the financial industry.”
A more specific aim of the group is to create a collective ledger that can “safely and securely store and share data in a consistent, effective ledger outside the firm’s firewalls where it can be analyzed and matched against other counterparties.” Albeit they haven’t mentioned if their eventual objective would be a permissionless ledger, like Bitcoin’s blockchain, it is reasonable to assume that their planned network won’t be.