With legacy banks and big corporations eyeing the crypto space with increasing interest, R3 look to allow large enterprise systems to easily adopt blockchain technology, with R3’s Corda blockchain. Many of us in decentralized finance (DeFi) dream of a “bankless” world full of transparency and decentralization. Read on to get a full breakdown of R3 and Corda!
However, it is worth prefacing that disrupting enterprise systems is a massively ambitious goal. After all, with the trillions of dollars that these entities control, it’s unlikely they’re just going to lay down and let DeFi devour them. That’s why R3 founders Todd McDonald and David E. Rutter have put their hopes in a hybrid future for the blockchain – a blockchain that’s neither wholly transparent nor completely decentralized.
R3’s founders combined hold over 50 years of experience in capital markets and financial services. As such, they share a substantial amount of experience and business know-how. Their long careers taught them about the profound lack of trust between large firms and how they collaborate and transact amongst themselves. Hence, they figured if large enterprises would not go fully decentralized, they could at least become less centralized and more connected through blockchain technology.
They believed that if they could figure out a way to deliver blockchain solutions to this sector, it could transform entire industries. Thus, R3 developed Corda – a distributed ledger technology platform that has produced many blockchain networks for the banking, trade finance, and insurance industries.
The R3 Corda Vision
R3’s team believes that with multi-party applications, they can help create a digitally connected world. They seek to power solutions that help build trust across the financial services ecosystem. That, along with the network effect, can multiply blockchain benefits and encourage industries to come together.
However, R3 has also challenged the notion that blockchains have to send data to all parties. Moreover, they are skeptical that companies will want to throw away all their existing technology for the blockchain. Nor will they risk writing their applications in untested blockchain languages.
That’s why R3 decided to build Corda on the Java Virtual Machine (JVM). The JVM enables computers to run programs written in the Java programming language and languages it can compile to Java. The choice of JVM is certainly in stark contrast to what most platforms use when onboarding to the blockchain, such as Solidity or Vyper.
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Blockchain Benefits
It’s no secret that the present financial system sits atop an ancient infrastructure. Transactions are costly, complex, and prone to fraud and human error. It’s still a paper-based system requiring local data storage and intermediaries for validation.
However, with the blockchain, peers share a single ledger, and after a transaction gets validated, the record is secure and immutable. Furthermore, smart contracts run on top of the blockchain containing rules to which mutual parties agree. This factor eliminates the need for 3rd parties. Among other things, the beauty of blockchain technology is that it lets both sides of a transaction know what happened and when it happened.
The Benefits of DeFi
If you’ve been reading our articles on DeFi, then you already know it offers faster, less expensive, and better finance. After all, software has been eating the world for some time, but it hasn’t done a great job disrupting financial services. That’s mainly because of high switching costs, entrenched incumbents, and regulatory constraints. So, while fintech has offered traditional finance a UX facelift, many of the underlying systems developed in the 1970s remain intact.
Moreover, DeFi dApps will replace legal enforcement with smart contracts, cumbersome paperwork with code, and humans with machines. We all know that DeFi can run circles around its analog ancestors, especially in terms of costs. That’s because the global blockchain and interoperability are replacing the antiquated, siloed transaction systems of traditional banking.
Blockchain and Distributed Ledger Technology
People often use the terms “Blockchain” and “Distributed Ledger Technology” (DLT) interchangeably. But to understand blockchain technology, and more specifically R3’s Corda blockchain, it’s essential to understand the underlying DLT framework.
A distributed ledger is a database. However, unlike the centralized database used by traditional enterprises, a distributed ledger exists across multiple sites and participants. Thus it has no single point of failure nor the need for a central authority or intermediaries common to the centralized database.
Companies use distributed ledger technology to validate transactions, and the ledger’s participants can view all the records. It thus provides an auditable history of a particular dataset.
So, when you try to distinguish between blockchain technology and DLT, think of the blockchain as a type of DLT. The most significant difference is that a blockchain consists of a sequence of blocks, while DLT does not need such a chain.
Thus you can say that all blockchains are DLT, but not all DLT are blockchains. Blockchains are but a type and a subset of distributed ledgers.
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Is Corda a Blockchain?
Corda is a blockchain by definition in that transactions get cryptographically chained to the transactions dependent upon them. However, there is one key differentiator: Corda does not batch transactions into a block before confirming them in one go. Rather, Corda confirms each transaction immediately in real-time.
So, with Corda, there is no need to wait for a block interval. This factor increases scalability and privacy. So, Corda is a hybrid, if you will. It is a blockchain, and at the same time, it is not a blockchain.
R3 Corda Programs
With Corda, businesses can transact with smart contracts but in strict privacy. The Corda option reduces record-keeping and transaction costs while allowing companies to streamline their operations with such programs as:
1. CorDapps
R3 has hundreds of companies building applications on Corda, and these applications are called “CorDapps.” CorDapps encourage developers to build permissioned distributed networks and to engage and connect with new partners.
2. Partner Connect Program
R3 has a Partner Connect Program to help adopters develop innovative solutions on Corda. Also, the program seeks to help institutions solve real-world problems by embracing blockchain technology.
3. Launchpad
R3’s Launchpad is for CorDapp builders that are in their early stages. There are other Accelerator and Incubator programs for apps that are in the latter stages of development.
4. Venture Development
R3’s Venture Development program helps users get to market quickly and claims to have over 350 institutions already building and deploying on it.
5. Conclave
After Corda’s success, R3 launched Conclave, a confidential platform to develop apps. It enables different parties to analyze and share data securely.
R3 Corda Features
Below are some of the top features:
1. Data Privacy
Data transacted between parties on Corda is private. This feature is a significant difference between permissionless blockchain networks.
2. Scalability
Corda is a flexible platform designed to scale to a business’s needs. Users can start small on Corda and quickly scale up to Corda Enterprise.
3. Open Source
Corda is open source built on JVM.
4. Developer Community
Corda has a strong community of developers adding new features and functionality to the platform at a rapid release pace.
Permissioned vs. Permissionless Blockchains
Regardless of one’s preferences, there are different use cases for each. The main reason to use a permissioned system has to do with digital compliance. Whether it’s financial, medical, or legal, the data sets in these use cases will demand a higher level of privacy.
But the problem with many smart contract platforms is they can’t meet the privacy needs of these kinds of use cases. That’s because the central premise behind blockchain is that it’s permissionless, “be your own bank,” and all that.
Libertarian Dreams vs. Regulated Reality
The libertarian dream of decentralization and transparency drove the early cypherpunks and crypto-anarchists who founded the space. So, dreams of a bankless world persist. It’s a utopian world where people can trade freely without oversight and intermediaries, without central authorities and useless go-betweens asserting themselves between transactions to exact exorbitant fees.
On the other side of that coin, let’s say that two parties want to transact privately with each other without their addresses broadcast on Ethereum. What if they could maintain a copy of the data on their respective servers but use the blockchain to get consensus on the transaction? This situation is where Corda steps in as a hybrid blockchain to get public consensus while keeping the transaction private.
With Corda, the transaction data is only available to the interacting parties. So, users can interact with the network for performance while preserving data privacy for their personal or business needs.
R3 Corda’s Privacy Option
Yes, permissionless blockchains are tremendous but are legacy enterprises going to go along with it? Or is it more likely they will insist on some form of control, privacy, and centralization? Think about it? Would you want your search history to be public? Or your medical history? Or all your banking data? There is a lot of data floating around that people will want to keep private.
Right now, Ethereum is pseudonymous, but with governments and private firms like Chainalysis busily working to connect blockchain addresses to private individuals, even that is becoming harder to maintain.
Moreover, let’s say a traditional business wants to operate on one of these blockchains. Who do they call if something goes wrong with the network? What if there’s a privacy concern? These issues will prevent participants from joining if they can’t get the use cases out of the blockchain they need.
Understanding ISO
ISO, or the Independent Sales Organization, is a third-party payment processing company that handles businesses’ merchant accounts. These ISOs are not officially cardmember associates like VISA or MasterCard, but they partner with acquiring member banks to provide merchant services to members.
ISO 20022 is the new Swift standard for global payments as global trade will be standardized. Anything outside the ISO standard will be suspect with regards to the confines of the global banking infrastructure. That makes ISO paramount.
R3 and CBDCs?
Many countries are deciding whether or not to adopt a central bank-backed digital currency (CBDC). CBDCs seek to be the digital equivalent of cash for everyday end-users such as businesses and households.
However, they are different from other existing cashless instruments since they represent a direct claim on the central bank rather than a private institution. All in all, ISO 20022 migration is likely to be positive for CBDCs and a negative for some cryptocurrencies.
But what does this have to do with R3 Corda? It’s crucial because Corda is ISO compliant. That means it’s well-positioned to serve these big players in finance.
Unfortunately for those interested in directly investing in R3 Corda, they did not create a native token. That fact has opened the door for loads of speculation as to which contender will succeed in becoming the settlement token for Corda.
Corda, XDC, XLM, and XRP
And that leads us to XinFin’s XDC, Stellar’s XLM, and Ripple’s XRP. These are three projects that come to mind when considering potential tokens for Corda. Although there are others, XDC, XLM, and XRP appear to be the most prominent. That’s because of ISO compatibility.
The differences are that XDC is more about smart contracts while XRP and XLM are more about providing off-chain liquidity and micropayments. Thus, they have different functions but with some overlapping along the way.
Tribalism runs rampant in crypto, so we won’t get into the debate over which of the three has the best chance of success. Further, since R3’s Corda is already partnering with some of the biggest names in central banking (along with the Nasdaq, Visa, MasterCard, and IBM, etc.), whichever becomes Corda’s settlement token could reap significant rewards.
We’ve already covered XLM in a past article, and Ripple’s lawsuit has left some people skeptical if XRP can recover. Meanwhile, XinFin is making inroads by becoming the first to use the DASL Crypto Bridge. DASL enables XDC to move to Corda to contend for the prize of settlement token within the Corda ecosystem.
Corda’s Future Ecosystem
With all the competition debate, there are those like XDC’s new hot-shot developer, Quincy Jones, who consider the three projects more like collaborators than direct competition. He describes XDC, XLM, and XRP as “not even playing the same sport.” Whether they end up competing or complimenting one another in Corda’s new financial ecosystem is still to be determined.
One thing is for sure; blockchain developers are going to continue to be in high demand. XinFin’s Quincy Jones has only been in the blockchain space for a short while, and he’s already becoming the “face of the franchise.” And you could do the same if you’re willing to work not only hard but smart.
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Author MindFrac
