Following a flurry of announcements that mostly highlighted how it was working with its partner banks on trials of existing blockchain systems, consortium startup R3CEV took steps to highlight its in-house technology development this week.

In a lengthy post published on both his personal blog and R3’s website, chief technology officer Richard Gendal Brown gave new details about the startup’s thinking on the ecosystem, and most notably, why it is seeking a different approach with the blockchain-inspired technology it is building.

Of note was that Brown spoke out against what he said was an idea he admitted he had long championed – that blockchain-based systems could prove to be widely applicable solutions for business problems in the financial services sector.

Brown went so far as to call blockchains “inappropriate” for many banking scenarios, in remarks that were heavily deferential to the ecosystem’s early innovators, including bitcoin and Ethereum.

Such platforms, Brown reasoned, have emerged as novel solutions to “business problems”, but he stressed that the financial services industry does not necessarily have the same problems that these technologies were designed to solve.

At a high level, the statements add up to what can be viewed as a mission statement from R3, one that positions the startup as more than a consortium effort between 43 major banks, but as a driver of technology in the space.

The statements also included the announcement of Corda, a new distributed ledger platform for which Brown provided the first details.

Here are the biggest takeaways and most interesting hints about what could come next from the R3 lab:

1. R3 believes more than blockchain is needed to solve bank problems

Early on in the post, Brown asserts that “blockchain” has become a term that is disassociated from its technological meaning.

In his description of Corda, Brown labels the technology a “distributed ledger platform”, a term that has long been associated with its technology (and that of Ripple), but that has perhaps been more strongly associated with the latter company.

Still, Brown looks to distance R3 from this terminology, and emphasize his conclusion that “blockchain” solutions aren’t going to broadly solve financial industry issues:

“Corda is a distributed ledger platform designed from the ground up to record, manage and synchronize financial agreements between regulated financial institutions. It is heavily inspired by and captures the benefits of blockchain systems, without the design choices that make blockchains inappropriate for many banking scenarios.”

Brown’s reasoning for the argument is that he feels this line of thinking is akin to applying technology to “arbitrary problems”.

“Every successful project I’ve worked on started with the requirements, not some cool piece of technology, and I was determined to bring that discipline into our work at R3,” he writes.

Brown goes on to state that he believes the reason blockchain is important in the equation of this larger problem is “extremely subtle”, and one that is recognized in the architecture of the Corda platform.

The post also included a harsh critique of platforms that are not questioning why blockchains are needed to solve financial business problems, stating:

“If you don’t have bitcoin’s business problem then be very wary of those trying to sell you something that looks like a bitcoin solution.”

2. Corda uses blockchain, but is not a blockchain

Though details about Corda’s architecture were kept broad, Brown indicated that it uses blockchain as part of a broader package.

He describes Corda as tailor-made for financial agreements.

“Our starting point is individual agreements between firms (‘state objects’, governed by ‘contract code’ and associated ‘legal prose’),” he writes.

In particular, he said that Corda will use blockchain technology in an effort to show that “two valid, but conflicting, transactions” cannot be present in the system.

Brown writes:

“We also recognize that different scenarios require different tradeoffs. So Corda’s design allows for a range of ‘uniqueness service’ implementations, one of which is a ‘traditional blockchain’.”

Implicit in the statement is that there will be other options that may solve this problem, however, and that blockchain would be just one solution among a larger tool-set.

3. R3 has new definition for blockchain

Brown also spent a significant portion of the post questioning the basic properties of blockchains, ultimately concluding that blockchain platforms like Ethereum and bitcoin offer five kinds of services.

This observation, Brown asserts, enabled R3 to take an analytical approach to thinking about how to tweak these basic properties for the needs of financial institutions.

“The right approach is to treat them as a menu from which to select and customise… different combinations, in different flavours, for different business problems,” he wrote.

The five properties are consensus, validity, uniqueness, immutability and authentication. For each, Brown provided a basic definition, later elaborating on the specific ways that Corda is treating each in its design.

In his definitions, Brown challenged the idea that consensus systems need to be open to worldwide participation, as in bitcoin, arguing that the network works this way because the business problem it tried to solve could be articulated as ‘How do I create a system where nobody can stop me spending my own money?’

Further, he challenged basic assumptions about how immutability in distributed ledger systems should be defined, while providing high-level overviews of each property.

4. The financial industry’s problem is shared facts

If Brown spoke at length about how the financial industry is not looking to solve the same problems as bitcoin, he also defined what he believes to be the underlying problem that R3, and by extension, the wider industry, should be trying to attack.

The emphasis, according to Brown, should be on achieving consensus about the state of deals between individual financial firms. To achieve this, he argues Corda needed to create a digital link between “human-language prose documents” and smart contract code.

Brown writes:

“The financial industry is pretty much defined by the agreements that exist between its firms and these firms share a common problem: the agreement is typically recorded by both parties, in different systems and very large amounts of cost are caused by the need to fix things when these different systems end up believing different things.”

In this way, Brown defined Corda as an attempt to use a network to ensure that all parties in a transaction “see the same thing” and know that others who need to know this truth can recognize it.

He went on to write that it is also important for those involved in such deals to specify upfront how agreements are made and how disputes can be resolved, adding:

“We take into the account the reality of managing financial agreements; we need more than just a consensus system. We need to make it easy to write business logic and integrate with existing code; we need to focus on interoperability. And we need to support the choreography between firms as they build up their agreements.”

5. Corda’s big-picture details have emerged

Though there was no white paper or code released on Corda, Brown did provide a high-level overview of how the distributed ledger system will be built based on the properties of blockchain systems he detailed earlier in the post.

For example, he said Corda would seek to achieve consensus only between parties to deals, not all participants – a design element he categorized as different than public blockchains.

“This does not mean that a third party down the road also needs to see it,” he wrote.

As for validity, Corda, he said, lets users write “validation logic” in “time-tested, industry-standard tools”.

“We define who needs to be in agreement on a transaction’s validity on a contract-by-contract basis,” he continued.

Notably, he said that Corda’s design has the most in common with existing blockchain platforms on elements such as immutability and authentication.

“Our data structures are immutable and our building block is the exchange of digitally-signed transactions,” he notes.

Though, he continued to stress that it differs through attempts to select a set of validators confirming deals on the network, and that not all validators would take part in this process.

The design is perhaps not surprising given that R3 has long argued publicly that bitcoin’s globally distributed network of transaction validators, while working for bitcoin and its goals, is ill-suited to the needs of financial incumbents.

6. Corda has no native cryptocurrency

Consistent with its past descriptions as a “fabric”, Brown indicated that Corda does not use its own digital asset or cryptocurrency.

Of note is the modifier “native”, which suggests that Corda may support the use of other digital assets or cryptocurrencies.

Brown wrote that Corda would support a “variety of consensus mechanisms” a further hint that some digital tokens may present or allowed to be used in its ledger system.

7. R3 has bitcoin on the mind

Perhaps the most interesting takeaway from the piece given R3’s market positioning was Brown’s clear deference to bitcoin’s architecture, which he termed a “marvel”.

“Its interlocking components are one of those rare examples of something so elegant that they seem obvious in hindsight, yet which required a rare genius to create,” he wrote.

Brown even characterized bitcoin as a solution to a “business problem”, albeit one he suggested isn’t one shared by major financial institutions or that they would perhaps even articulate as a business problem.

In this light, Brown discussed bitcoin’s use of a blockchain as a product of its goals, a similar logic that he used to speak out about why this type of architecture might not be needed to solve issues major financial institutions are experiencing.

Notably, former bitcoin developer Mike Hearn is also leading the effort on Corda, serving as its lead platform engineer.

8. Regulators are included in the Corda ledger

Brown indicated that Corda is also being designed to accommodate global regulators who may want insight into the transactions occurring within distributed ledger frameworks.

“Corda’s design directly enables regulatory and supervisory observer nodes,” Brown indicated early on in the text.

Later, he returns to this idea, noting that financial institutions using Corda will be able to know that their counterparties and regulators have received any information they can view.

9. Corda doesn’t compete with other blockchains

Despite spending a length of time describing how Corda is similar and dissimilar from other systems, Brown sought to frame it as unique.

The positioning found Brown offering praise for the innovation ongoing in the distributed ledger and blockchain space as a whole, even if he expressed a disdain for firms that were perhaps approaching the industry opportunistically.

Brown said that he as been “deeply impressed” by engineering solutions from other providers, and that R3 will continue to pursue projects that showcase the benefits or shortcomings of these systems in order to provide market information.

“Corda does not seek to compete with or overlap with what other firms are doing: indeed, we are building it because no other platform out there seeks to solve the problems we’re addressing,” he wrote.

He concluded:

“Different solutions for different problems is our mantra.”

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