R3 announced that its Corda platform source code will be released as open-source to the Hyperledger project,a Linux Foundation Collaborative Project seeking to advance blockchain technology.
R3 does not automatically describe Corda as blockchain; it more usually describes it as a distributed ledger platform. The difference in terminology helps explain the confusion over blockchain potential. The technological success of the bitcoin blockchain has led people to consider that blockchain is a technology that can be applied in other areas. However, blockchain is a solution to the bitcoin requirement. Applying the solution for one requirement directly to other requirements will undoubtedly cause problems and issues.
R3’s CTO Richard Brown explains that Corda is the result of dismantling the conceptual components of blockchain and applying and adapting the relevant components to financial institution requirements. Taking this approach he finds a distributed ledger rather than full blockchain technology that can provide an economic solution to the complex issues of financial agreements.
For example, says Brown, “We are not building a blockchain. Unlike other designs in this space, our starting point is individual agreements between firms -‘state objects’, governed by ‘contract code’ and associated ‘legal prose’. We reject the notion that all data should be copied to all participants, even if it is encrypted.”
Nevertheless, the resulting distributed ledger platform will be described by most as ‘blockchain’, and will offer its users the advantages offered by blockchain technology to Bitcoin. The security officer will welcome its authentication: “every action in the system is almost always associated with a private key; there is no concept of a ‘master key’ or ‘administrator password’ that gives God-like powers,” says Brown. “This is quite different to traditional enterprise systems where these super-user accounts are prevalent and petrifying from a security perspective.”
The businessman will welcome the huge reduction in reconciliation costs from manual methods to the minimal in blockchain transactions. “Numerous research reports put potential efficiency gains to financial services from blockchain at between $15bn and $20bn. Already today, using blockchain-based applications, companies could bring the cost of a cross-border transaction down from $25 to $1 or $2,” writes Bussmann in the FT.
What R3 is making available to the Hyperledger project is a financial services distributed ledger platform upon which banks and other institutions can build their own applications. “We want other banks and other parties to innovate with products that sit on top of the platform, but we don’t want everyone to create their own platform … because we’ll end up with lots of islands that can’t talk to each other,” said R3’s chief engineer, James Carlyle.
“If we have one platform with lots of products on top, then we get something that’s more like the internet, where we still get innovation but we can still communicate with each other.”
Microsoft and Bank of America Merrill Lynch announced in September that they are working together to build and test frameworks for blockchain-powered exchanges between businesses and their customers and banks.