DTCC - Asset Clearing and Settlement Services
- jimm1
Key Points
- DTCC is the legislated clearing and settement services agency for US securities
- DTCC is owned and controlled by Wall Street firms providing services for back office operations like clearing and settlement between firms
- DTCC is leading the move to faster settlement, next step is T+1 for US financial services in 2024
- DTCC is moving faster for Digital Asset settlement services with Securrency acquisition
- DTCC is investing in Digitial Transformation and Modernization
- DTCC looking to add value to solutions with AI and DLT technologies
- DTCC leands and participates in industry pilots on Digital Asset solutions and settlements
References
Related SWT pages
capital markets, securities management concepts
m Blockchain Financial Services - DeFi - NFTs
STS - Smart Trust Services: deliver trusted outcomes
m Token Economy Examples: Tokenomics
VCE > Value Chain Economies: micro economies for value-chain communities ( VCC )
Key Groups
Hyperledger Capital Markets SIG for basic concepts
https://wiki.hyperledger.org/display/CMSIG/Capital+Markets+SIG
The Capital Markets Special Interest Group (CMSIG) represents industry professionals working together to study how Hyperledger DLTs interact with Capital Markets use cases. This covers issuance and trading of instruments to continued market-making, management of risk, program-trading, regulations, capital requirements, traceability, post trade settlement, custody including corporate actions and more. This group also explores architecture, identity and performance related considerations specific to Capital Markets and DLTs.
capital market concepts
Capital Markets are a way to connect investors and borrowers for long term provision of capital. A way to invest in enterprises, so that funds from investors are put to productive use. Investors or lenders can be individuals or other entities. Borrowers are companies and governments. Although the term market applies to exchanges and associated infrastructure; financial intermediaries like banks connect the various parties together. Investors are compensated directly by borrowers or are rewarded by appreciation of long-term securities. Capital Markets include the stock market and the bond market dealing with equities, bonds, and credit markets. They can also include derivatives. Securities are a way to tokenise underlying assets and have had a long history.
Capital Markets Taxonomy - 2020
CM SIG projects
https://wiki.hyperledger.org/display/CMSIG/CMSIG-Projects
Trade Finance Securitization
different than current receivables factoring
https://wiki.hyperledger.org/display/CMSIG/Trade+Finance+Securitization
Capital Markets Regulations
https://wiki.hyperledger.org/display/CMSIG/CMSIG-Projects-Regulation
Key Regulation Concepts
m Blockchain Regulation Trends
US State digital asset regulations & innovations
Key Concepts
IBOR vs ABOR
http://www.opeff.com/IBORvsABOR.html
Investment Book of Records aka IBOR and labeled the traditional approach as Accounting Book of Records or ABOR. These newer systems didn't have the capability to conduct full ledger accounting and also in many cases lacked ability to keep track of historical positions and relied on daily position and cash refreshes from an accounting systems.
OpEff pioneered the first ever web based portfolio accounting system, Perfona, that is a hybrid of ABOR and IBOR and is the first system to give the choice to the manager to determine what model to implement.
How blockchain can impact Financial Services
"Any financial operation that has low transparency and limited traceability is vulnerable to disruption by blockchain applications.” –Bruce Weber and Andrew Novocin
https://knowledge.wharton.upenn.edu/article/blockchain-will-impact-financial-sector/
Centralized solutions may migrate to decentralized given trust, compliance
Hosanagar expects the first wave of applications to be rolled out in “private” blockchains where a central authority such as a financial institution and its partners are the only ones with the permission to participate (as opposed to public, permissionless blockchains where participants are anonymous and there is no central authority). Applications in the private blockchains, he said, will be more secure and will offer some of the benefits of decentralized ledgers but will not be radically different from the way things work at present. However, over time, he expects smart contracts (self-executing contracts when requirements are met) to be offered on public blockchain networks like Ethereum. “When securities are traded, intermediaries provide trust, and they charge commissions. Blockchains can help provide such trust in a low-cost manner. But trade of securities is governed by securities laws. Smart contracts offer a way to ensure compliance with the laws. They have great potential because of their ability to reduce costs while being compliant,” says Hosanagar.
Werbach - Important technologies, he said, are far more likely to be integrated into the system than replace it. According to Werbach, while some firms will fail to make the transition and some new ones will take hold, “over the long-run, virtually every historic innovation that eliminated some forms of intermediation also created new forms.
Reduces friction and improves efficiency in financial systems
when a syndicate of lenders participates in a loan, having one shared ledger means they don’t all need to keep track of it independently. International payments and corporate stock records are other examples where there are huge inefficiencies due to duplicate record-keeping and intermediaries. “End users won’t see the changes in the deep plumbing of financial services, but it will allow new service providers to emerge and new products to be offered,” said Werbach.
Sharing governance strategies in new ecosystems first
“Distributed organizations serving an open community need to take care to design their governance systems, incentive structures and decision-making processes to create consensus without unduly slowing down the decision-making,” said Weber and Novocin. “Scenario planning or war gaming are worth exploring at the beginning of blockchain projects. Forward planning enables organizations to swiftly respond in a predictable way that is supportive of stakeholders. Publicizing these plans in advance can also build trust and user confidence.”
Cryptocurrency Risks to date exist
Bitcoin has shown that the fundamental security of its proof-of-work system is sound, but it has major limitations such as limited scalability, massive energy usage and concentration of mining pools. There has been massive theft of cryptocurrencies from the centralized intermediaries that most people use to hold it, and massive fraud by promoters of initial coin offerings and other schemes. Manipulation is widespread on lightly-regulated cryptocurrency exchanges.
Currency regulation and governance
There must be recognition among cryptocurrency proponents that maturation of the industry will require cooperation in many cases with incumbents and regulators,” added Werbach.
It's clear, cryptocurrencies ( where they are legal ) need to comply with KYC, AML and other financial regulations. Blockchain should make that governance simpler and lower cost.
Blockchain continues to evolve
Weber and Novocin expect that in the next few years, many more businesses will implement private blockchains to improve the transparency and traceability of their financial operations, supply chains, inventory management systems and other internal business systems. Clearer standards will be adopted and a few high-profile projects will emerge. Meanwhile, they said, R&D will continue among the many decentralized blockchain projects to invent more scalable public ledgers
Blockchain use case examples in Banking
identity support - KYC, fraud prevention - Indy, Aries
payment processing - AML, SARS
peer to peer payments
improve reconciliations
faster settlements between banks
syndicated lending
letters of credit
digital accounting ledgers replace paper
automate compliance
IBM we.trade for trade finance
non-traditional banking solutions
ICOs
CBDC support
crypto deposits
https://www.omfif.org/wp-content/uploads/2020/05/The-role-of-blockchain-in-banking.pdf
https://www.fintechnews.org/10-use-cases-of-blockchain-technology-in-banking-2020/
https://www.cbinsights.com/research/blockchain-disrupting-banking/
https://customerthink.com/top-5-thought-provoking-use-cases-of-blockchain-in-banking-finance-sector/
https://consensys.net/solutions/payments-and-money/
https://www.ibm.com/blockchain/industries/financial-services
https://www.ibm.com/blockchain/solutions/trade-finance
DTCC for securities settlements
https://www.dtcc.com/news/2020/may/18/dtcc-unveils-proposals-to-explore-further-digitalization
DeFi-Introduction to Decentralized Finance.pdf link
DeFi vs CeFi vs ReFi
DeFi - all apps rely on blockchain for security and integrity
No Intermediaries
– Parties interact directly with smart contracts
<< except parties interact through an app that interacts through an api to access a blockchain and smart contract 99% of the time
Permissionless
– Use of financial application and products
– Creation of financial products
<< except it's not permissionless and it requires privacy according to laws ( see wallets, access, GDPR etc )
Code is the law
– Smart/financial contract is immutable
– Smart contract decides on state changes
<< contract is an instance of a contract type and represents the obligations of the parties usually and MAY reflect the law
Accessibility
– Democratization of financial services
<< except that you are dependent on a different set of exchanges to access and trade in a market in most cases similar to CeFi
Efficiency
– Immediate settlement (few seconds)
– Open 24/7
– Borderless
– Low cost and scalability (L2s)
<< except that trades are subject to the legal jurisdictions they occur ( not borderless ), limited scalability compared to CeFi and not low cost if you look at conversion costs in and out of crypto
Transparency
<< except visibility to the operations of the DEX you trade in has similar viisbility to CeFi, the security of your transactions in wallets, key management etc
Composability
<< composability for the developer not the user of DeFi apps. Users CAN choose a crypto, a wallet, an exchange etc
DEXes
Automated Market Maker Algorithms - AMM
AMM Example on Crypto Buy - you pay over 2% fee for a trade - insane
Yield Farming
Providing tokens to DeFi protocols to participate in fees earned by these protocols
Yield Farming is a process of providing liquidity to DeFi
protocols, similar to liquidity provision of market makers in
TradFi, in exchange for participation in transaction fees
Liquidity Providers (LPs) are referred to as Yield Farmers. Any
blockchain user can become a yield farmer (permissionless).
Technically, yield farming protocols are aggregators that deploy
liquidity to DeFi protocols
Liquid Staking
Liquid Staking is a token, which value tracks staked tokens
Consensus mechanisms – ensures that all nodes in
the blockchain network has the same copy of ledger ( related to blockchain transaction validity - NOT staking )
Proof-of-work (PoW) vs Proof-of-stake (PoS)
❑ PoW uses energy to solve the cryptographic puzzle
❑ PoS puts tokens “at stake” to assure BC correctness
❑ Staking - locking tokens in exchange for staking rewards
❑ Staking rewards come from transaction fees and inflation
Liquid Staking is a token, which value tracks staked
tokens
Synthetic tokens and their target values
❑ Wrapped Tokens -> tokens from other BC
❑ Stablecoins -> fiat currency
❑ Liquid Staking -> staked tokens + staking rewards
Issues
Issues - MEV Opportunities - Flash Loans
Flash loan – un-collateralized loan that must be returned within the same block of transaction, otherwise the flash loan transaction is reverted – used in trading strategies and attacks in DeFi (decentralized finance)
DeFi references
CoinGecko, “How to DeFi, Beginner, Advanced”, 2020 ❑ S. M. Werner, D. Perez, L. Gudgeon, A. Klages-Mundt, D. Harz, and W. J. Knottenbelt, “SoK: Decentralized Finance (DeFi),”, 2020 ❑ J. Xu, K. Paruch, S. Cousaert, and Y. Feng, “SoK: Decentralized Exchanges (DEX) with Automated Market Maker (AMM) Protocols,” 2021 ❑ L. Gudgeon, S. Werner, D. Perez, and W. J. Knottenbelt, “DeFi Protocols for Loanable Funds: Interest Rates, Liquidity and Market Efficiency”, 2020, ❑ S. Cousaert, J. Xu, and T. Matsui, “SoK: Yield Aggregators in DeFi”, 2022 ❑ S. Scharnowski and H. Jahanshahloo, “Liquid Staking: Basis Determinants and Price Discovery,” 2022
Fidelity Investments
Jason Ward VP
Bhaskar Balan Head Asset Management Technologies
State Street Bank
news.191204 - State Street cuts Fabric investment
was working on Fab coin on Fabric project.
Previously, a large DLT team at State Street had been working with the Hyperledger Fabric open-source permissioned blockchain software.
The aim was to create a single book of record, which could run State Street’s investment book at the front end, an accounting book of record for the middleware and a custody book of record on the back end. This new DLT system would remove the need to reconcile between hundreds of databases, involving hundreds of man-hours each day.
Now, however, the bank is now describing its approach as “ledger-agnostic,” and relying more on outside providers.
“If something is Fabric-related we still have some Fabric engineers on board,” said Achkar, who runs a digital asset product development and innovation team in London, complemented by similar teams in the U.S. and Singapore. But his objective is to identify the best business cases, rather than the best protocol, he said.
“I think the choice in approaching that space was, do we need to have all of these resources internally, or can we actually build partnerships and work with other providers in the market?” he said.
Citizens Bank
FIS Global
Fiserv
AMEX
Amica
Traditional Bank Services Evolve
Key Questions to answer
- Who are our key customer segments?
- What is our solution strategy to service those segments? how well is it working?
- How do they see our brand vs others?
- How do they value us compared to our competitors?
- What's the SWOT for each segment given the competition?
- Where are our services cost-competitive, cost-prohibitive?
- What are the key service metrics our customers expect, value?
- What are our best products for customers? most profitable? high growth?
- Are our products and services competitive with our customer's expectations?
- Who can we partner with to offer full range of products and services to our key segments?
- What associations can help deliver value to our customers now?
- What service providers can provide higher value, quality services to our key segments?
- Do our service providers create gaps in delivery on ease of use, value, cost, operational risks?
- Which services and activities are higher value touch points for people vs online systems?
- Are out chatbots lowering customer satisfaction?
- What automated B2B services do we offer now effectively? where are the gaps?
- How do we lower fixed costs to be more reactive to market demand changes?
- What key technologies do our customers use ( business, consumer ) now? where are they headed ( trends )?
- Have we measured security and trust vs competition? How do customers see us?
- What is our track record on customer-driven innovation that we can point to now?
Focus areas:
- decide what the bank's role should be within their customer segment's future
- customer focus means feedback, data-driven decisions and future service models, products and market messaging
- smart investments in technology and innovation - test external services, solutions, get feedback from pilots, evolve vs re-invent
- build smart governance that is pro-active vs reactive to risks, customer needs
- reset corporate values, mission, culture where needed based on customer needs, opportunities
- avoid NIH syndrome, look at smart partnerships
Securities Trading Process - Simplified Overview
https://www.investopedia.com/terms/d/dtcc.asp
For example, when an investor places an order through their broker—and the trade is made between that broker and another broker or similar financial professional—information about that trade is sent to the NSCC (or an equivalent clearinghouse) for clearinghouse services.
After the NSCC has processed and recorded the trade, they provide a report to the brokers and financial professionals involved. This report includes their net securities positions after the trade and the money that is due to be settled between the two parties.
At this point, the NSCC provides settlement instructions to the DTCC; the DTCC transfers the ownership of the securities from the selling broker's account to the account of the broker who made the purchase. The DTCC is also in charge of transferring funds from the buying broker's account to the account of the broker who made the sale. The broker is then responsible for making the appropriate adjustments to their client's account. This entire process typically happens the same day the transaction occurs. The process for institutional investors is similar to the process for retail investors.
- seller makes offer in Broker A
- buyer accepts offer in Broker B
- trade matched on exchange
- trade sent to clearing
- clearing records trade and notify brokers of net positions and money to settle
- clearing notifies DTCC of settlement requirements
- DTCC transfers security ownership from seller to buyer
- DTCC transfers funds from buyer broker B to seller broker A
- both brokers update buyer and seller account funds
DTCC -
- The Depository Trust and Clearing Corporation (DTCC) is an American financial services company that provides clearing and settlement services for the financial markets.
- The Depository Trust and Clearing Corporation settles the vast majority of securities transactions in the U.S.
- Settlement is an important step in the completion of securities transactions; by ensuring that trades are executed properly and on time, the settlement process contributes to investor confidence and reduces market risk.
DTCC - post trade settlement uses Blockchain
Current Post Trade Process
DTC Project ION -
DTCC’s DLT Based settlement Platform in Parallel Production - Kamlesh Nagware
DTCCs DLT Based settlement Platform in Parallel Production - more to follow.pdf link
DTCCs DLT Based settlement Platform in Parallel Production more to follow.pdf file
The Project Ion platform is now parallel processing an average of over 100,000 bilateral equity transactions per day, and almost 160,000 transactions on peak days, with the DTCC subsidiary.
Project Ion is being designed to adhere to rigorous regulatory standards and deliver the resiliency, volume capacity, security, scalability and risk control that DTCC is known for. Project Ion is also being built to support a netted T+0 settlement cycle, as well as T+2, T+1, and extended settlement cycles. Settling stock trades in the U.S. currently takes two days. The U.S. Securities and Exchange Commission (SEC) has proposed speeding up stock settlement times to something called T+0 – jargon for processing trades the same day they're executed.
Blockchain Network Model for Sharing Data
MIT - Blockchain and Money Course - Fall 2018
DirectBooks - underwriting platform for securities
DirectBooks creates a singular distribution point to manage communications across constituents
owned by Axion
shows how traditional financial institutions that many believed could be threatened by technology popularized by bitcoin, which moves value with less dependence on slow intermediaries, have come up with centralized solutions to accomplish some of the same tasks. “Across the banks, the potential reduction in operational risk is certainly in the hundreds of millions, if not in billions,” of dollars says Johnsson.
Current bond issuance process for underwriting
Currently, when a company like AT&T wants to raise capital, it first posts the amount the company wants to raise and the interest rate it’s offering on a newswire like Bloomberg. A team of salespeople at Deutsche Bank, JPMorgan or any number of other banks then spend the next three hours or so manually calling asset managers at Blackrock, Wellington and others to see if they’re interested.
what Axoni built was a back-office process for the vast array of counterparties to nearly instantly communicate, while the bonds themselves still settle the normal way through the Depository Trust Company in the U.S. and Euroclear in Europe, for example.
DTCC buys Securrency
Jim>>
Securrency acquisition aligns well with the work DTCC has already done planning Digital Asset capabilities for settlement solutions and should produce faster delivery of Digital Asset capabilities in DTCC solutions for clients.
October 19, 2023 ‒ DTCC, the premier market infrastructure for the global financial services industry, today announced it has signed a definitive agreement to acquire Securrency Inc. (“Securrency”), a leading developer of institutional-grade, digital asset infrastructure. The acquisition, which is expected to close within the next several weeks, will position DTCC to provide global leadership in bridging best-in-class industry practices with advanced digital technology to encourage acceptance and adoption of digital assets.
Lynn Bishop discusses purchase of Securrency for Digital Asset Services
Securrency will become a fully-owned subsidiary of DTCC and will operate under the name DTCC Digital Assets. Lynn Bishop, DTCC Managing Director and Chief Information Officer, sat down with DTCC Connection to discuss how the acquisition will help the industry unlock the value of digital assets and support firms through their digital transformation journey.
Securrency
https://securrency.com/about-us/
Digital Asset Custody Solutions
US Treasury Report on Digital Asset Custody 2022
US Treasury Report on Digital Asset Custody 2022 link
US Treasury Report on Digital Asset Custody 2022.pdf file
NASDAQ Digital Asset Custody Solutions 2022
Nasdaq is taking its first steps into crypto services with an emphasis on security, entering the business with a custody product for bitcoin and ether aimed at institutional investors.
“We feel that custody is foundational to any other service that we build,” says Ira Auerbach, the newly named head of Nasdaq Digital Assets. “The ability to hold on to our customers' funds in a safe, secure, scalable and accessible manner is a key launch point for anything else we do in the future,” added the former head of the Gemini exchange’s crypto prime brokerage.
Clients are required to place enormous trust in their custodians, a confidence that individual investors are skeptical of handing over. This wariness has given rise to the phrase “not your keys, not your crypto,” meaning that private keys – analogous to passwords for the accounts holding crypto funds – do not belong in the hands of intermediaries. Since institutions are unlikely to build out their own infrastructure to custody assets, they need to choose a partner prepared to take custody of institutional-sized cryptocurrency accounts.
When asked why clients would choose a traditional financial player instead of a crypto-native firm to take custody of their digital assets, Auerbach responds that Nasdaq is uniquely positioned because of its knowledge of what institutional clients need in order to use a financial product.
“We have a long history of working with these institutions, we know their pain points, we have products built internally to address these pain points,” Auerbach said. “We think we can make institutions much more comfortable and usher in a larger adoption of the ecosystem.”
In parallel with the custody service, Nasdaq is expanding its anti-financial crime technology to weed out money laundering, fraud and market abuse in digital assets. The advantage Nasdaq has is that the company has the capabilities to analyze potentially fraudulent behavior in both traditional markets and digital assets as well, says Valarie Bannert-Thurner, senior vice president of anti-financial crime technology at Nasdaq.
https://www.investopedia.com/nasdaq-starts-crypto-services-6740707
- Nasdaq competes with established crypto players such as Coinbase to attract institutional investors.
- The stock market operator offers crypto custody as well as expands its services.
- It has hired Gemini alum, Ira Auerbach, to run its digital division.
Institutional investors will be offered custody services for Bitcoin and Ether through this new initiative. With this move, Nasdaq, the second-largest U.S. stock market operator, will offer institutional clients in the U.S. the same services that crypto firms such as Coinbase, Anchorage Digital, and BitGo provide to small financial firms
- Underpins Nasdaq’s Focus on Advancing the Transformation of Markets and Driving Broader Institutional Adoption of Digital Assets
- Subject to Regulatory Approval, Nasdaq Digital Assets Will Provide a Proprietary Custody Solution with Liquidity and Execution Services for Financial Institutions
- Appoints Ira Auerbach, Former Global Head of Gemini Prime, to Lead New Business
- Expands Anti-Financial Crime Technology Capabilities for Digital Assets
Nasdaq Digital Assets will be led by Ira Auerbach, Senior Vice President, Head of Digital Assets, who will oversee the team’s strategic roadmap, growth targets, and product development. Auerbach brings over a decade of leadership experience in building institutional-grade solutions and innovative services across digital assets and traditional finance. Auerbach joined Nasdaq from Gemini, where he held several executive positions across product, business development, and trading. Most recently he was the Global Head of Gemini Prime, the crypto platform’s prime brokerage services.
“Demand among institutional investors for engaging in digital assets has increased in recent years, and Nasdaq is well-positioned to accelerate broader adoption and drive sustainable growth,” said Tal Cohen, Executive Vice President and Head of North American Markets, Nasdaq. “With our trusted brand and strong track record as a technology provider for the global capital markets, Nasdaq is uniquely placed to address industry pain points by improving liquidity, scalability, and resiliency, with the goal to engender greater trust and confidence in the digital assets ecosystem.”
Adena Friedman, President and Chief Executive Officer, Nasdaq. “The technology that underpins the digital asset ecosystem has the potential to transform markets over the long-term. To deliver on that opportunity, our focus will be to provide institutional-grade solutions that bring greater liquidity, integrity, and transparency to support the evolution.”
Anti-crime focus for digital assets
The integrity of the digital landscape is key to realizing the full potential of digital assets. Yet, cryptocurrency-based money laundering activity reached $8.6 billion in 2021, a 30% increase from 2020.1
To play a central role in combatting the rising threat of financial crime across the digital assets financial landscape, Nasdaq has expanded its anti-financial crime technology with new capabilities and coverage for the cryptocurrency ecosystem. Through its Verafin and Surveillance product offerings, Nasdaq has launched a comprehensive suite of crypto-specific detection capabilities to effectively mitigate risks and provide continuous monitoring of anti-money laundering, fraud detection, and market abuse across traditional and digital assets, fiat and crypto, and on- and off-chain activities.
“Our expanded suite of anti-financial crime solutions reinforces our commitment to protecting the integrity of the financial system,” said Jamie King, Executive Vice President, Head of Anti-Financial Crime, Nasdaq. “As the world of digital assets evolves and converges with traditional finance, it is crucial to provide the necessary portfolio of technology solutions designed to safeguard participants across the financial ecosystem.”
ESMA ( EU’s securities markets regulator ) DLT Pilot Program for securities RTS
https://www.esma.europa.eu/press-news/esma-news/esma-publishes-report-dlt-pilot-regime
European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today published its Report on the distributed ledger technology pilot regime (DLT Pilot). In the report, ESMA provides guidance on certain technical elements and makes recommendations on compensatory measures on supervisory data to ensure a consistent application by DLT market infrastructures from the start of the regime.
The DLT Pilot Regime is part of the Digital Finance Package introduced by the European Commission in 2020 to further enable and support the potential of digital finance while mitigating associated potential risks. The Regulation on a pilot regime for market infrastructures based on the DLT Pilot aims at developing the trading and settlement for DLT financial instruments. The DLT Pilot requires ESMA to assess whether the RTS developed under MiFIR relative to certain pre- and post-trade transparency and data reporting requirements need to be amended to be effectively applied also to securities issued, traded, and recorded on DLT.
The ESMA DLT report - 2022
esma70-securities-market-regulator-2022-460-111_report_on_the_dlt_pilot_regime.pdf link
esma70-securities-market-regulator-2022-460-111_report_on_the_dlt_pilot_regime.pdf file
DeFi Concepts
Web 3 technologies help drive DeFi solutions
DeFi, in a nutshell, is an alternative financial infrastructure that is decentralized (i.e., intermediaries do not need to exist between parties to a financial transaction) and built on smart contracts
Tokenization of assets supports DeFi
Tokenisation: Propelling innovation at speed
defi-Tokenization-moving-DeFi-forward-2021-1639244311874.pdf
potential to cause disintermediation to financial institutions through the use of smart contracts, creating programmable assets
peer-to-peer market where financial services can be delivered in an automatic, trustless manner. DeFi has given rise to a wide range of new investment opportunities. In this ecosystem, lending, synthetic assets, insurance and automatic token exchanges can happen directly between parties who use the same blockchain via dapps. DeFi Lending protocols have emerged which allow users to borrow and lend digital assets directly to other users, with interest rates fluctuating in real time based on supply and demand. This removes the need to pay fees to a central third party and creates greater flexibility – there are no pre-defined loan durations and users are free to withdraw or repay at any time.
<<<
- costs to move in and out of tokens to fiat is very high now - will come down to reasonable levels at some point
- most exchanges charge high trading fees with little guarantees compared to conventional financial systems
- tier 1 financial systems are more secure today
- blockchain networks have limited interoperability today compared to traditional financial systems
>>>
Staking ( like CDs ) provides yield and POS to participate in governance decisions
Yield farming, lending and staking of cryptoassets to generate returns are additional investment opportunities. Staking involves locking up cryptoassets and agreeing not to withdraw them for a period of time as a way of contributing to a blockchain network. In return, stakers can earn additional coins or tokens. Staking also allows investors to participate in the governance of the blockchain protocol. For example, on a ‘proof of stake’ blockchain
DAO
Decentralized Autonomous Organisations (DAO) are member owned communities without a typical centralized leadership and management structure
<<< practically there will be contracted teams to administer these networks
can existing financial services providers provide efficient, trusted DeFi services better than new operators using similar technologies??
>>>
NFTs provide unique opportunities to create value from any type of asset
NFTs have opened up unprecedented opportunities for investors to purchase assets directly from the creators, without the need for a centralized party.
NFTs are digital assets that represent unique tangible and intangible assets – which can range from digital art, videos, sneakers5 , sports cards and even a tweet . As its name suggests, these tokens are nonfungible, meaning they cannot be exchanged for one another, and each NFT is unique
NFTs can be programmed with specific parameters. For example, conditions can be specified such that whenever the NFT is resold, the original creator can receive a percentage of income from the resale of their artwork. With such innovative characteristics, it’s enormously appealing for both creators and investors to jump into this digital ecosystem.
Carbon offsets market growing
In September 2021, MOSS, the largest environmental platform globally to tokenize carbon credits, listed their MCO2 token on Gemini, a major digital assets exchange, enabling accessibility to a wider investor base and sending US$10 million in 8 months to Amazon forest conservation projects
Net zero sustainable product models
net-zero tokenized gold products – structured such that for each ounce of gold purchased, sufficient carbon credit tokens will be bought to offset the carbon footprint of the gold. This provides investors with a sustainable way to invest in commodities and facilitates the transition to a net-zero economy.
a>>> doc the p2p trading app
a>>> doc the carbon offsets market app
Asset transformations > physical assets > digital assets > tokenized assets
Asset branding concepts
combinations of origination, authentication, historical significance, original designs, humor, integrity, kindness, sustainability support, fairness, and stories, series of related works as limited editions, the story is the biggest part of the value journey
see the best serialization asset creators in the past for branding
SPAC ownership of NFTs as an option
Can Tokenization can enable existing assets to be customized at a granular level at a lower cost. ?
If the end to end solution can be delivered at lower risk, cost through automation, execution of asset management using digital identity
Automation of bond coupon payments impacts lowers cost, improves investor flexibility
a tokenized bond, smart contracts can automatically compute and execute coupon payments, significantly lowering the cost involved. Coupons could easily be paid weekly or even daily. Issuers would have much greater flexibility to tailor and customize bond terms to meet investor preferences
Need for trusted, open digital asset exchanges connecting asset networks with buyers, sellers, traders
licensed digital asset exchanges in jurisdictions such as Singapore, Hong Kong10 and Switzerland, to NFT marketplaces like Nifty Gateway and OpenSea. These infrastructures are vital in driving demand and accelerating innovation in this space. However, most still exist as disparate ecosystems, and there is a need for DLT bridges to enhance interoperability among various networks.
a>>> compare existing digital asset markets on costs, stability, risks, asset types, capacity, ease of use, security
DeFi Challenges
digital asset markets on costs, stability, risks, asset types, capacity, ease of use, security, fees, conversion costs, IAM, provenance, settlements, interoperability
these initiatives usually exist in their disparate blockchains, operating in silos, resulting in unrealized benefits of a cumulative network effect.
Interoperability solution directions
There are numerous way of integrating blockchains either through APIs or network of networks effect. For the former, APIs can help integrate two separate blockchains on an individualized basis. However, the lack of a defined governance can make integrations between multiple blockchains onerous. For the latter, relying on multiple network connections across blockchains and establishing industry token standards can scale and create a congruous environment for cross-blockchain applications. Well-known token standards such as the ERC-20, an interface for fungible tokens, are increasingly used to support compatibility with the Ethereum network. Furthermore, smart contract languages such as Digital Assets Modeling Language (DAML) can make future integrations possible through enabling interoperability across enterprise blockchains. Various other initiatives include companies such as Consensys11, who has developed a universal token that can support all asset types across both centralized and decentralized use cases on the Ethereum blockchain. In realizing a multi-chain future, blockchain bridges (e.g., Polkadot) can be used to connect different chains that have distinct governance and rules, relaying external data and tokens.
Standards on asset protocols, accounts, custody key to integrate existing, new financial services
With the growth of DeFi protocols, there is a role that traditional financial institutions can play to serve as a conduit between traditional finance and DeFi.
How are DeFi business design assumptions defined and validated?
new definitions of M1 to M4
asset registrations
account registrations
account agents
asset exchanges
- clear and settle trades within an exchange
- net or direct asset transfers across exchanges
asset brokers / dealers ( like real estate )
- clear and settle trades within an broker
- net or direct asset transfers across brokers
decentralization methods to deliver value
risk assessments, underwriting, insurance
security
regulation management and enforcement
- regulatory uncertainty as a key challenge. Several jurisdictions, including Singapore, Hong Kong and the United Kingdom have since made progress in this area and have released guidance specifying that tokenized forms of traditional securities remain subject to existing regulatory regimes governing traditional financial securities. Moreover, some regulators have introduced a fresh set of legislation to modulate the issuance of asset tokens. While this is a good start, greater clarity, communication and consistency from regulatory bodies around the world is essential to spur innovation and growth in this space
- see Liechtenstein, Estonia, Wyoming, Rhode Island, EUBOF on regulation concepts
- SEC, FDIC, OCC, Fed, Fincen
- States: RI, Wyoming
- EU - EUBOF, EC regs
- uniformlaws.org link
- EU legal content
- legiscan for US laws
asset trade management - types, authorizations, consents, notarizations, escrow, reserves, margin, clearance, settlement
custody management - vaults, access
- As decentralized exchanges are non-custodial, a credible third party like a custodian can be involved to provide protection of private keys and ensure a safe transfer of assets from off-chain to on-chain
- A potential role for banks to consider would be to serve as a universal adaptor to various DeFi networks. This would help to bridge the gap between the traditional fiat economy and the decentralized economy.
identity and access management
privacy controls
consent management
proof of governance
The DeFi roadmap forward
what are the success keys for the market? for the parties, roles?
when will the DeFi network effect reach a turning point?
how does investment finance and trade finance overlap in DeFi?
what are the threats? who are the attackers?
DEFI Mind map
https://www.linkedin.com/posts/rohasnagpal_defi-crypto-blockchain-activity-6855782716995076096-pmu6
DEFI Opinions
Anthony Day, IBM
This chart shows a good overview across stablecoins, custodians, KYC and the protocols / dApps offering financial products.
As I was discussing with David Palmer in yesterday’s comments, we’re already seeing established banks (CeFi / TradFi) making DeFi, Crypto and Digital Assets available to their customers as alternative products, but it’s not necessary for banks to be the ‘front end’.
Do you see banks as a major player in the growth of DeFi, or do you believe the Web3 revolution will be led by individuals themselves?
<< "I expect the innovators will evolve Financial Services DeFi capabilities faster and the existing players will adapt and productionize those well also" Jim Mason
verified.me SecureKey design
Design overview for Fabric with proposed enhancements for DID, Indy support
https://docs.google.com/document/d/1ENMO-S7i0ef09IRx5teE-eJbRMFsaKSXEdatcufvjPM/edit
SecureKey Technologies is launching an interoperability initiative aimed at establishing common standards and development frameworks for next generation digital identity networks.
Contributions
We will support the efforts within the Hyperledger and Decentralized Identity Foundation (DIF) communities to help create innovative distributed ledger technologies and digital identity networks. We believe that creating cross-project and cross-network standardization and interop along with common development frameworks represents the next step in transforming the digital identity space. In particular we support, and look forward to contributing to, the efforts of Hyperledger Fabric, Indy and the newly proposed Aries project along with DIF’s Identity Hub efforts.
Contributions will be directed towards the community projects above as well as open project extensions within the TrustBloc initiative.
In particular, we will contribute:
- Hyperledger Fabric performance and customization improvements. We are excited to contribute improvements we learned while building and taking our network operational.
- Enable DIDs to be managed and exposed from Fabric, and more generically enabling document provenance.
- A model for digital identity exchange based on DIDs, Verifiable Credentials, and Hubs.
- Efforts towards interoperability with the newly proposed Hyperledger Aries project, in order to use a Fabric-based ledger and our digital identity model. We think it’s critical to allow variation on top of a common base.
- Tooling and demos to enhance developer experiences building digital identity networks.
About SecureKey
SecureKey builds identity networks like Verified.Me, the Canadian identity sharing Network supported by seven major banks, mobile operators, a major credit agency, and other providers in Canada. Verified.Me provides a user centric, privacy protecting identity platform for services that trust the individual’s identity established at their financial institution and other connected organizations. Users can link in account information across services for a convenient but highly reliable digital identity where information is delivered in real time.
Technical Brief
In the following diagram, we provide an overview of the components related to the TrustBloc initiative. We will follow-up with additional details and data exchange flows.
IBM Cross Border Carrier Payments solution coming
https://finance.yahoo.com/news/softbank-develop-cross-carrier-blockchain-050039037.html
SoftBank is teaming up with IBM to develop cross-carrier blockchain solutions, with the focus on technologies that will allow smartphone users to make local payments when traveling overseas and roaming.
first project being undertaken by the CBSG is the Cross-Carrier Payment System (CCPS), which is aimed to allow mobile-phone customers to pay locally using their devices when traveling outside their home countries.
TBCASoft will be using the IBM Blockchain Platform, IBM’s Hyperledger-powered enterprise blockchain solution.
TBCASoft technology helps “optimize” clearing between different carriers and transaction records, according to the announcement, and allows for the interoperability of mobile networks and the bolting on of networks of merchants to enable payments
Potential Value Opportunities
Potential Challenges
ice phishing - DLT account delegation to a bad actor
"Smart contracts you interact with are immutable, often open-source, and audited. How do phishing attacks happen with such a secure foundation?" said Microsoft.
The 'ice phishing' technique doesn't involve stealing one's private keys. Rather, it entails tricking a user into signing a transaction that delegates approval of the user's tokens to the attacker.
"This is a common type of transaction that enables interactions with DeFi smart contracts, as those are used to interact with the user's tokens," Microsoft informed.
In an 'ice phishing' attack, the attacker merely needs to modify the spender address to the attacker's address.
This can be quite effective as the user interface doesn't show all pertinent information that can indicate that the transaction has been tampered with.
Once the approval transaction has been signed, submitted, and mined, the spender can access the funds. In case of an 'ice phishing' attack, the attacker can accumulate approvals over a period of time and then drain all the victim's wallets quickly.
This is exactly what happened with the Badger DAO attack that enabled the attacker to drain approximately $121 million in November-December 2021.
"The Badger DAO attack highlights the need to build security into web3 while it is in its early stages of evolution and adoption," said Microsoft.
"At a high level, we recommend that software developers increase security usability of web3. In the meantime, end users need to explicitly verify information through additional resources, such as reviewing the project's documentation and external reputation/informational websites," the tech giant added.
NFT theft on OpenSea - Phishing Attack and Ethereum design
https://www.youtube.com/watch?v=SpOvzaKdRWk
In the last few days about $1.7 million in NFTs were stolen from OpenSea users, and there is quite a bit of confusion about how it was done. In this video I talk about a number of "design decisions" in the Ethereum space, and their security issues. These include: token approvals, off-chain signing, how NFT decentralized exchanges work, and there is a bit about phishing emails thrown in for good measure. In summary, it doesn't look like OpenSea was to blame in this case, but just as we've been trying to hammer home the "don't share your seed phrase with anyone" security mantra, it appears that "take extra care when signing requests" needs to be emphasized too.
NFT theft on OpenSea - Phishing Attack and Ethereum design gdoc
NFT theft on OpenSea - Phishing Attack and Ethereum design gdoc
NFT: can represent ANY asset or service that has value and can authenticated
Vitalik Buterin
“For example, a person might have a Soul that stores SBTs representing educational credentials, employment history, or hashes of their writings or works of art,” the paper says.
What assets or services have a market value and represent a unique experience that can be represented by an NFT?
ah yes ....
The Problem With NFTs': A Crypto Expert Responds to a Viral Takedown
https://www.yahoo.com/news/problem-nfts-crypto-expert-responds-104049890.html
- Olson discusses what he perceives to be the blockchain’s security gaps, the hollow hype of NFTs, and the limited capability of DAOs.
- asked Tascha Che—a widely followed macro-economist and Web 3 investor who offers crypto education via essays and videos to her 121,000 Twitter followers—to respond directly to some of Olson’s specific critiques. I then went back to Olson to ask him to respond to some of Che’s rebuttals.
- bitcoin is disproportionately benefiting the earliest adopters. That’s why I think some of the projects in this space are unsustainable, because you cannot reward early adopters at the expense of new entrants
- Crypto adoption is growing at an astonishing rate worldwide:
- you have new innovations happening every day
- fraud -
vast majority of fraud comes from scammers inputting bad information from the start, by getting someone’s password. When you are tricked into doing something on the blockchain, all of the mechanics that follow are legitimate, according to the rules of the system. This has opened the door for every type of scam imaginable - The point of the system is a revolution in how we distribute value. The point is not inventing a system that is more secure than the centralized system
- NFT image for token not secure
in most cases there’s no cryptographic relationship between the image that an NFT points to and its token. - You can just swap out what’s being hosted at the end point of that URL
- What's unique about NFT?
- what you’re owning is the hash token onchain, and that in itself has all the benefits that blockchain offers: It’s immutable, decentralized, hard to destroy.
- there will be hyper-tokenization, and everything of value will find some kind of on-chain denomination
- blockchain is allowing everybody to create assets of value
- Is Web3 just new central services providers in reality? ( eg consensys opensea etc )
- There are decentralized alternatives, newer ones, trying to compete with OpenSea, like LooksRare, that has a co-op ownership model.
- DAO
- DAO only handles code-appropriate tasks: bookkeeping, digital signature verification, on-chain asset management. But that’s just a productivity tool. It’s a slow, inflexible tool for executing straw polls
- Yeah. Right now, DAOs cannot really do much. Anybody saying they are going to replace centralized organizations in the short term, that is entirely hype
- blockchain opens up new possibilities of governance
- Olson
- questions around Web 3 are very much centered around base functionality. This stuff doesn’t do what people say it does and it overwhelmingly exposes people to unnecessarily high risk and the burden of risk.
- Che
- Tokenization opens participation as investors
- With tokenization in crypto, everyone can invest in crypto startups—not just venture capital firms or high net-worth individuals —and these markets have liquidity like the stock market from day one. If you don’t like the volatility of startup investment, then don’t do it.
- Che on regulation
- Focus on education and risk disclosure, instead of having stupid bans that end up exacerbating social inequality
- << is this a viable stance for most financial needs that require safety, guarantees, insurance
Are NFTs dying off in 2022 after 2021 hype?
- NFT hype phase is ending
- NFTs have value as a delivery package for digital or physical content or assets that are truly unique ( an NFT for Buckingham Palace ?? )
- Ethereum POW is not a useful platform
- Ethereum POS after the Merge will be a better commercial platform with less risk, more predictable fees
NFT Growing Pains: ‘Blue Chip’ Success Exposes Ethereum Weaknesses And Market Strengths
Jim >>
Good article from Michael. As a blockchain technologist, content creator and former brand manager in the physical world, his insights all make sense. When hype peaks on a new trend, anything sells. After the hype dies off, it's the content, the brand strength, reputation and distribution channels that have the biggest impact on winners and losers in the market. Any truly unique entity ( digital or physical ) may benefit from an NFT delivery.
Web 3 is Moving the Internet to Securitization of Digital Assets
The Internet Is Just Investment Banking Now
web3-nft-2022-theatlantic.com-The Internet Is Just Investment Banking Now.pdf
Web 3 and NFTs run on centralized services
Web 3 has securitized all assets ( real and digital )
Candidate Solutions
Other Financial Market Solutions - Kamlesh Nagware
https://www.linkedin.com/pulse/dtccs-dlt-based-settlement-platform-parallel-follow-kamlesh-nagware/
Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Green Shoots Seminar, Singapore, 29 August 2022 mentioned that Blockchain could play important role in real-time efficient clearing & settlement system. Below are some excerpts from his presentation, you could read a more detailed interview here on BIS official website https://www.bis.org/review/r220830d.htm : -
· In cross-border payments and settlements, wholesale settlement networks using distributed ledger technologies such as Partior – a joint venture among DBS, JP Morgan and Temasek – are achieving reductions in settlement time from days to mere minutes.
· In capital markets, Marketnode – a joint venture between SGX and Temasek – is leveraging distributed ledger technology to tokenise assets, which reduces the time needed to clear and settle securities transactions, from days to just minutes.
· Wholesale CBDCs on a distributed ledger have the potential to achieve atomic settlement, or the exchange of two linked assets in real-time.
· JP Morgan has established its digital asset capabilities in Singapore via its Onyx division, which has pioneered several DLT-based products and initiatives. Offerings include round-the-clock real-time fund transfers with shorter settlement times and no intermediaries.
Bitcoin Layer 2 for fast, DeFi solutions
https://cointelegraph.com/news/defi-is-not-decentralized-at-all-says-former-blockstream-executive
As Mow pointed out, DeFi projects are governed by entities that can modify the protocol at will.
“Bitcoin, at the fundamental level, is money, and it should be immutable,” explained Mow. “If you can change it at will, then you’re no better than a fiat currency governed by the Fed.”
Bitcoin’s (BTC) decentralization makes it very difficult to modify its protocol, which is why Mow considers it a unique candidate for becoming a truly global monetary system.
Mow pointed out that despite the immutability of Bitcoin’s base layer, developers can still build applications on the Bitcoin blockchain by working with its layer-2 scalability solutions.
In particular, Mow is a strong proponent of the Lightning Network, which allows instantaneous, cheap Bitcoin transactions. By promoting Lightning technologies, Mow is trying to accelerate the path toward hyperbitcoinization — a situation where people will be exchanging Bitcoin without the need to convert it into fiat currency.
“Lightning will displace Visa, Mastercard and everything else,” he stated. “And it reduces costs for merchants, which means better experience and savings for consumers.”
BSTX exchange SEC approved to trade derivatives ( and more ) using blockchain
https://news.yahoo.com/u-sec-approves-u-exchange-181013074.html
BSTX, aims to launch in the second quarter, said Jay Fraser, a director. It will initially trade securities, such as stocks or exchange-traded funds, first listed on its exchange, but those securities would be tradable on rival bourses.
BSTX ultimately aims to expand trading to all U.S. stocks and potentially tokenized securities, Fraser said. Stock tokens are digital versions of equities pegged to the underlying share, usually traded in fractional units.
Fraser said the aim is for BSTX to look "more like" crypto exchanges such as Coinbase as opposed to traditional exchanges like Nasdaq.
In addition to traditional pricing data feeds, BSTX plans to offer a market data feed that will operate on a private blockchain. That feed will allow exchange members to see their own activity, as well as the activity of other BSTX participants on an anonymized, delayed basis, the exchange filing said.
The exchange plans to expand its use of blockchain, the technology that underpins cryptocurrencies such as bitcoin, over time to support products like tokenized securities, Fraser said.
BSTX was originally going to be called the Boston Security Token Exchange and planned to exclusively trade tokenized securities, but the SEC rejected that plan in December of 2020.
The exchange will also give members the option to settle trades as quickly as the same day, as opposed to the current two-day standard settlement time, which would free up cash counterparties have to pledge against trades while also reducing the risk of either party defaulting.
The securities industry as a whole is currently debating moving to single-day settlement.
IBM Food Trust Network
| https://www.ibm.com/blockchain/solutions/food-trust | IBM Food Trust Network |
| https://www.ibm.com/downloads/cas/E9DBNDJG | Food Trust Overview ( view here ) |
| https://github.com/IBM/IFT-Developer-Zone/wiki/doc-Message-Types | Message Types |
| https://github.com/IBM/IFT-Developer-Zone/wiki/APIs | Food Trust API's |
| https://food.ibm.com/ift/api/connector/swagger-ui.html | Swagger Tests for API's |
| https://www.gs1.org/sites/default/files/docs/epc/EPCIS-Standard-1.2-r-2016-09-29.pdf | EPICS standard for trading partners |
Food Trust Value List
| Value | Features | Description |
|---|---|---|
| Safety | Transparency Traceability | Trace food instantly – with end-to-end supply chain data visibility – to help ensure food safety and regulatory compliance. |
| Supply chain efficiency | Shared immutable ledger | Access a shared and immutable digital ledger in real time – rather than ink on paper – to find choke points and uncover opportunities to speed your supply chain. |
| Food Freshness | Traceability Shared data | Gain instant and efficient food tracing from source to consumer to more accurately judge peak freshness and remaining shelf life – and reduce product loss. |
| Sustainability | Shared data Immutable ledger Smart contracts | Rely on shared data and an immutable ledger to help ensure the promised quality of products and that food comes from a sustainable source. Smart contracts improve data quality |
| Brand Trust | Transparency Traceability | Gain a competitive advantage as you add transparency and specificity about the sourcing of your food products. Build trust in the safety and quality of your brand. |
| Food waste | Shared data | Identify waste hot spots and speed responsiveness using better visibility into your food supply chain. Reduce costly food waste and boost your bottom line. |
| Food Fraud | Shared data Immutable ledger Smart contracts | Data-sharing across the food supply helps eliminate chances for fraud and errors – and can help preserve the integrity of raw materials, products, and packaging. |
Verified.me - a secure blockchain identity framework for Canadian banks on IBM Blockchain
Verified.Me, by SecureKey Technologies Inc., is the new and secure way to help you verify your identity, so you can quickly get access to the services and products you want online, in person and on the phone.
Verified.Me helps verify your identity using personal information that you consent to share from your Connections, like your financial institution, with service providers you want to transact with.
https://verified.me/wp-content/uploads/2019/04/VerifiedMe_General_Overview_Script_EN-1.pdf
Fetch.AI - smart blockchain tokenomics framework
Agents
Fetch.AI is a decentralised digital world in which useful economic activity takes place. This activity is performed by Autonomous Agents. These are digital entities that can transact independently of human intervention and can represent themselves, devices, services or individuals. Agents can work alone or together to construct solutions to today’s complex problems.
Open Economic Framework
The digital world in which agents live is called the Open Economic Framework (OEF). This world acts as the ultimate value exchange dating agency: each agent sees a space optimised in real-time just for them, where important things are clear and visible and less important things are simply removed. The OEF provides the senses for agents: their sight, touch and hearing to present to them a world unique to the viewer.
Smart Ledger
Underpinning the digital world is the smart ledger: a new generation of learning ledger that provides a collective super-intelligence to support agents’ individual intelligences. It provides market intelligence, previously locked up in centralised silos, to everyone so that any agent that wants something is assured of the shortest possible route to find another that has it. Fetch.AI’s smart ledger scales to support millions of transactions per second and is able to restructure itself to present the OEF’s digital world to the agents that use it.
Open Banking API Whitepaper
A Whitepaper for Open Banking and Open Data Ecosystem Participants Globally
APIs are the best way to open up consent-driven access to user data and are ubiquitous in the digital world. Much of the software that we use in our daily lives is powered by services delivered via APIs. The ability to get navigation directions, order delivery online, and communicate with email are use cases where data is provided via APIs. However many of these APIs are proprietary, although they may follow certain international standards, they are built to allow one company to use the services of another company. Such APIs are typically market driven and have a clear commercial rationale to be built and consumed by all parties.
There are several categories of APIs however where the commercial rationale is not as straight-forward, for example:
● Accessing bank account information (or any financial account information including checking, savings, stocks, bonds, mutual funds, and insurance)
● Initiating a payment directly from a bank account
● Accessing health information
● Accessing usage and tariff data from utility companies and telcos
Ecosystem collaboration is required to deliver these use cases, because bilateral implementations amongst all market participants is not viable at scale. Ecosystem-wide collaboration has emerged from industry-led efforts (with financial incentives) or reciprocity between participants, but widespread global adoption of open data APIs is hindered by several factors:
1. Competition: By restricting access to data, companies make it harder for consumers to directly compare services, thus making it less likely for customers to move.
2. Control: Private companies prefer that any interaction with their services or data take place through an interface the company controls.
3. Security: opening up APIs is seen as opening up additional attack vectors.
4. Strategic: Many finance companies are scared of becoming high-cost “dumb pipes”, i.e. providing the expensive and risky plumbing but having no interaction with the end user, (and therefore no opportunity to sell more services).
Source: Open ID
Open Banking, Open Data and Financial-grade APIs
Open Banking, Open Data and Financial-grade APIs-report.pdf link
Open Banking, Open Data and Financial-grade APIs-report.pdf file
Data is often referred to as the “new oil” of the digital economy. It is a powerful asset used by companies to improve their services and to build artificial intelligence (AI) models. However data can often be used to “lock” consumers into a service. A move to consentdriven access to all user data can break that lock, make it easier for consumers to move between different service providers and unleash a wave of innovation.1 Open Banking can also help facilitate financial inclusion, better serving those on the margins of society by offering a bridge to the formal economy. A
PIs are the best way to open up consent-driven access to user data and are ubiquitous in the digital world. Much of the software that we use in our daily lives is powered by services delivered via APIs. 2 The ability to get navigation directions, order delivery online, and communicate with email are use cases where data is provided via APIs. However many of these APIs are proprietary, although they may follow certain international standards, they are built to allow one company to use the services of another company. Such APIs are typically market driven and have a clear commercial rationale to be built and consumed by all parties.
There are several categories of APIs however where the commercial rationale is not as straight-forward, for example:
● Accessing bank account information (or any financial account information including checking, savings, stocks, bonds, mutual funds, and insurance) ● Initiating a payment directly from a bank account
● Accessing health information
● Accessing usage and tariff data from utility companies and telcos Ecosystem collaboration is required to deliver these use cases, because bilateral implementations amongst all market participants is not viable at scale.
Ecosystem-wide collaboration has emerged from industry-led efforts (with financial incentives) or reciprocity between participants, but widespread global adoption of open data APIs is hindered by several factors: 1. Competition: By restricting access to data, companies make it harder for consumers to directly compare services, thus making it less likely for customers to move. 2. Control: Private companies prefer that any interaction with their services or data take place through an interface the company controls.
Open Insurance Data Ledger - OIDL - common database
https://cointelegraph.com/news/linux-foundation-launches-blockchain-based-platform-for-insurance
reduces underwriting costs, risks with a common blockchain database.
Several insurance firms collaborate on the network
Tech partners include: MOBI, Chainyard, KatRisk...
Blockchain Platform Building a managed Blockchain-as-a-Service BAAS -sm-arun.pdf
https://arsulegai.medium.com/blockchain-platform-55d5c0408b44
Blockchain Platform Building a managed Blockchain-as-a-Service BaaS-sm-arun.pdf
Data Plane and Control Plane for blockchain
If you were to construct the platform as a House then control plane will be your cornerstone, blockchain protocol itself will be your structure on top of that. It is the data plane that makes it a Home! Sweet Home!
Control Plane
Management: Consists of components that will procure & provision required resources, deployment automation, assign appropriate roles and secure them, generate necessary configurations, keep the health of the (entirety) system up & valid at any point, attach right monitoring tools, enable automated recovery procedures. These include deprecating and renewing necessary identities, accesses, optimizing the resource utilization when possible & scaling them up when required.
Administration: One would require different access levels for multiple kinds of resources. It is important to consider each persona in sight, especially it is crucial for an application developer to utilize blockchain offering at ease without having to learn underlying complexities. At the same time, an administrator should be able to play around with configurations. To give an example, a typical application developer would not worry about “how” does the distributed database perform synchronization and rather they would only consider how to store/retrieve the data. Whereas an administrator would not worry what data is added into the database, but rather consider the better configuration choices to guarantee SLAs.
Data Plane
Define boundaries for user/service interaction with the platform. Remember that the control plane will manage all identities, however it is data plane components that will enable authentication & authorization to the right entity. Add components that will make application developers, business operators, consortium and network administrators to interact with the blockchain network managed by the control plane. Provide conventional means for interfacing including, for instance one can support RESTful APIs, web sockets, queues and pub-sub topics for data ingestions/event reading.
Add more system integrations as needed around the BAAS core
Really well thought out conceptual foundation for blockchain as a service ( BAAS ) that fits most use cases very well.
As I look at the specifics on the blockchain side I've found additional optimizations in design for improved data integrity, integration and performance with additional engineering for specific use cases I work on. For me, the key is understanding the specific capabilities I need blockchain to deliver for a use case first, then design.
Thanks for the excellent, quick overview !
Engineering >> Extend, generalize the core BAAS architecture model using SWT themes
- understand the use case clearly and requirements for data: reliability, quality, availability, recovery, integration, monitoring, journaling
- understand the data volumes, value, validity, variance, variety, volatility
- understand the client needs by role, priority based on FACTUR3.IO analysis
- Define the use cases, actor, goals, OKRS, privacy, security
- Define Identity mappings, IAM, GDPR compliance for identities, credentials, transactions, certs, signatures, documents
- Define the general JEPL - process flow with event services for pub / sub for KDE, KTE
- Use event streams where applications need to be reactive, responsive
- Use batch control files where time-series data needs to be processed at scale and potentially replayed
- Define logical transactions that include the BAAS transactions in the unit of work and commit boundary
- If useful, define logical cases that contain or reference multiple transactions as a logical unit
- messaging services as mediators for load management on BAAS
- off-chain databases and documents provide a logical transaction boundary ( vs the limited physical transaction on blockchain )
- use the blockchain lastTXId in the related off-chain database
- smarter blockchain data validation with KDH - keyDataHash
- Model BAAS after Fabric with both the permanent ledger AND the current world state databases
- Determine retention for source input transactions
- Define source transaction replay capability period
- Transactions references - if this transaction is an adjustment or replacement for an existing transaction, provide the existing original TXid this transaction references
- Determine retention for business data
- Determine data segment archives for archiving, access use cases
Fidelity to offer institutional trading on Ethereum 2022
https://www.yahoo.com/finance/news/fidelity-roll-ethereum-trading-institutions-180047751.html
“Institutional Ethereum capabilities are coming to the Fidelity Digital Assets platform on October 28, 2022,” Fidelity Digital Assets said in an email sent to its clients. The offering will only be available for Fidelity’s existing institutional clients who already trade or custody Bitcoin, which the firm provided services for beginning in 2018.
Last month, the WSJ reported that Fidelity may soon bring Bitcoin trading to retail customers—a rumor also publicly shared by Galaxy Digital CEO Mike Novogratz.
Step-by-step guide for Example
sample code block