The Weekend Read: Nov 20

MAS MD Ravi Menon announces MAS-R3 Interbank Payments project at SGFintechFest

by Todd McDonald

Singapore Fintech Festival

MAS MD Ravi Menon announces MAS-R3 Interbank Payments project at SGFintechFest

I asked Antony Lewis for a field report on this week’s Singapore Fintech Festival:

11,000 sweaty people couldn’t be wrong…Singapore was the hottest place for FinTech this week, as the world’s first regulator-managed FinTech event kicked off for a week-long collab confab.  Ravi Menon, the MD of the Monetary Authority of Singapore, opened the festival by announcing R3’s collaborative efforts with 10 banks and partners to put the Singapore Dollar on a distributed ledger. (see BBG article here). This garnered quite a bit of inbound interest from other parts of the globe as the week wore on, and we look forward to pursuing this piece of collaborative work in a “jurisdiction near you” soon.

Tim Grant insists that he didn’t pay off the Audio/Visual crew during his panel on Wednesday when Blythe Masters’ microphone didn’t work. The whole panel, including Oliver Bussmann (independent) and Sandra Ro (CME), generally agreed that we need to see some traction next year.  Tim’s “5 Ps” of DLT (Proof-of-Concept–>Prototype–>Pilot–>Permission–>Production) crashed Instagram as the audience became bewitched by the power of alliteration. ABC (AI, Blockchain, Cloud) grew a little more mature and became ABCD (AI, Big Data, Cloud, DLT). Our CEO, David Rutter, was also featured at the ASIFMA Annual Conference (all pics above).

The above, and the MAS’ partnership with R3 announced last week, all paves the way nicely for our Lab of Excellence in Singapore. Lattice80, the world’s largest FinTech co-working space, will be the perfect location to light up those Bunsen burners. If you would like to join us, we are hiring in Singapore.

RegTech and CBDC (cont.)

Continuing the MAS RegTech focus elsewhere, there continues to be a steady drumbeat of news stories concerning the regulator’s role in fintech and DLT. First up is the U.S. SEC and CoinDesk’s profile of the SEC DLT lead Valerie Szczepanik. The article reviews the SEC working group’s focus to date, as well as raising the topic of regulation and ICOs:

Since an ethereum startup called The DAO raised over $100m by selling digital tokens without an exchange, a rush of companies have followed suit. So-called initial coin offerings can be launched from anywhere in the world and cross borders as easily as the Internet itself. With millions of dollars worth of capital raised so far and dozens of ICOs in the works, how the SEC will handle the technology is one of the biggest areas of regulatory uncertainty in the industry. Regardless of whether Gemini and SolidX ever win approval or if ICOs might displace traditional fundraising, the SEC will likely play a role.

Speaking of The DAO, the team behind the dream/nightmare,, are back with another project, pushing the “fail fast, fail upwards” concept to its limits. I happened to see this being compared to the advent of flight and aviation inventors, yet the comparison falls flat (like many early aviators (groan)) as these innovators fail the “skin in the game” test popularized by Nassim Taleb. As far as I can tell, there was no repercussion from the absolute failure that was The DAO, whereas those early aviators had the ultimate skin in the game! (For more on that story, check out David McCullough’s excellent book on The Wright Brothers).

Sweden’s Riksbank made headlines this week with talk of issuing digital currency:

The so-called e-krona may be introduced within two years. “The less those of us living in Sweden use bank notes and coins, the clearer it becomes that the Riksbank needs to investigate whether we should issue electronic money as a complement to the money we have today,” Riksbank Deputy Governor Cecilia Skingsley told the Financial Times.

Sweden’s Riksbank is the world’s oldest central bank, and was the first to issue paper banknotes in the 1660s.

Central Bank Digital Currency (CBDC) remains an area of focus for R3 and our Research team. For R3 members, please reach out to us if you have seen our recently published private reports on this topic.

India has also made headlines with their recent demonetization scheme. Once again, many armchair economists/sociologists on the Twitter have been giving their “two paise” on the subject, but since I at least admit total ignorance to all the nuance, here instead is what looks to be a great run down of the issue at hand by The Diplomat.

Bonus link: no idea where to put this but here is CoinDesk’s summary of their recently released State of Blockchain.

R3’s Second Smart Contract Templates Summit & RGB on Corda

We were very pleased to host the second summit dedicated to all things smart contract, with participants in person in Barclays London and New York, with many more across the globe dialed in (Ed. note: need to clarify how time is measured by organizers of upcoming event billing itself as “The Industry’s First Event Exclusively Dedicated to Smart Contracts”…). Dr. Lee Braine of Barclays once again set a high standard for the proposed agenda, and all the contributors managed to outdo themselves. IB Times has a great rundown of the event, and we have provided all of the presentation materials via this link. Allow myself to quote…myself:

The summit featured presentations by Barclays, CIBC, Nordea Markets, ISDA, FIA, Norton Rose Fulbright, Thomson Reuters, University College London, Cardozo Law School, and R3. Todd McDonald, co-founder of R3, said: “We wanted to hold this second summit to keep up the cadence and to continue what we at R3 and all the participants feel is important: progressing this in the open and it being industry led, rather than by just one organisation or one company.”

Our CTO Richard Gendal Brown was featured on two 11FS podcasts this week. First up, RGB was joined by Richard Crook (Head of Innovation Engineering, RBS) and Ajit Tripathy (Fintech and Digital Director, PWC) for a more wide ranging chat. The second is a video link to a 1-on-1 chat with Richard Brown. Both pieces were moderated by our old friend Simon Taylor, aka The Blockchain Beard (who evidently put his size smedium t shirts on a high-heat drying cycle in order to show of his Blockchain Biceps in the attached video…). Richard as always delivers an extremely lucid explanation of not only the functionality but more importantly the benefit of DLT, and specifically Corda, to financial institutions:

On why anyone should care about blockchain and DLT: It just becomes self-evident that there’s a massive opportunity in finance, wherever firms record the same data that their counterparts do, and then have to manage it, that this blockchain technology…can be used to massively simplify and reduce that cost and complexity by just doing it once and knowing for sure that what you see is what your counterpart sees.

On how is Corda different from traditional blockchains: The short answer to your question…it is designed by and for financial institutions, its focus is not on crypto-currency or virtual machines; its focus is managing legal agreements between regulated institutions, is designed to integrate and inter-operate with existing systems in banks, and is designed to integrate well with the legal system…. So this isn’t the idea of computers running amok and controlling the world. This is computer code. This is computer data that, in the event of dispute, is grounded firmly in legal reality.

The Weekend Read: July 17

1. This Week in The DAO: Money on the Hard Fork

For those (like me) who have taken a break from The DAO story during the summer months, this Motherboard piece is a great review of the attack, the aftermath and the soft/hard fork debates. One just has to ignore the soundtrack of Stephan Tual playing the world’s smallest violin for himself and all his self-inflicted troubles:

Since the $53 million were hacked in mid-June, basically everyone on the team at Stephan Tual’s startup,, has been busy limiting the extent of the damage and trying to get back the money. “ put a huge amount of work in building the framework for the DAO. At least six months of work—that’s a net loss, we are financially and mentally exhausted,” Tual said.

To paraphrase what has been said on the Internets, this is like someone complaining about having to save horses from a burning barn after they were the ones who soaked the stables in gasoline!

The market looks set for the hard fork option, and sports fan can follow the hard fork progress here (gotta love this site’s tagline for honesty: “Blockchain, make me rich and I care not what you can be used for.“) Benjamin Dean of Columbia University does a nice job of summarizing the governance questions and challenges that The DAO episode has raised for Ethereum and decentralized systems in general in this article:

This episode introduces nuance to Ethereum’s pitch on enabling applications to run “without any possibility of downtime, censorship, fraud or third party interference”. Similar claims are made by the promoters of crypto-currencies and blockchains more generally.

Smart contracts may run exactly as programmed but this does not mean that they will run as the creators intended. The DAO incident demonstrates how the complexity of these contracts is outstripping the comprehension of the people who wish to write them. This in turn introduces bugs and vulnerabilities, some of which are known, but others will only become known when something goes wrong.

While the Ethereum network’s users might be decentralised, certain features of the network are not. [SNIP] A skewed distribution of mining power and crypto-currency holdings is combined with pseudonymity of account holders and a strong incentive to game the system. This has all the makings for deceptive, unaccountable, fraudulent, and self interested decision making.

Until hard questions around governance of blockchains are asked, and solutions implemented, we should brace ourselves for more incidents like that which has befallen The DAO. At stake is not just the fate of projects like Ethereum but the future potential of blockchain technology more generally.

2. The Steem Hack

Ether isn’t the only cryptocurrency in play this week. I asked our in-house altcoin/stonewashed-jeans expert Chris Khan to file a report on the latest on Steem:

A quick look at CoinMarketCap (a daily occurrence for some) shows an unfamiliar face right above Ripple in terms of market cap: Steem. As of Sunday morning, Steem’s $3.58 cryptocurrency tokens place the total value of coins in circulation at just above $300 million. And what happens when a novel crypto takes off ? The hackers come out to play.

Steem is a native cryptocurrency used by a new social media website named Steemit. Think of Steemit a bit like Reddit (the name is obviously a total coincidence), except upvotes are worth real money. I’m not talking about Reddit gold here. I’m talking about ~$30k for a makeup tutorial. (Note, a parody of that video currently has a payout pending for ~$12k.)

At the end of last week, 260 accounts were compromised to the tune of ~$85k. Neither the Steem blockchain nor Steemit’s servers were hacked; the hackers simply took advantage of browser-side vulnerabilities (Ed. Note: another reminder that most attacks happen at the edge of the network, not the network itself). Within just 24 hours, the site was up and running, with a plan to secure compromised accounts with a balance over $100. Users have since been asked to change their passwords, with the promise of two-factor authentication in the near future. (Interestingly enough, Steemit users have multiple separate passwords for different activities such as posting and voting.) In addition, Steemit will be refunding any stolen funds (probably not too difficult given the funds amount to a mere .028% of Steem’s market cap, which Steemit can certainly spare given their assumed coin stash).

Just as things were settling down, hackers (unclear whether they were the same as those from the first attack) attempted to DDoS Steemit, so the Steemit dev team took the site down to protect against further damage and quickly learn from their mistakes to build a superior product. Steemit CEO Ned Scott seems optimistic about the site’s security enhancements, as Steem’s early investors line their pockets with what could be just another fad altcoin, or something else altogether. In any case, it might be worth taking a trip to your local Sephora and dusting off that old DSLR.

3. New Entrants

Two new entrants in the banking-blockchain ecosystem were announced this week. Two developers from the JP Morgan blockchain team have announced their effort to build an enterprise version of the open source Juno blockchain that JP Morgan released earlier this year. A company dubbed Thought Machine have emerged from stealth with few details outside of discussing their VaultOS blockchain tech will be targeted at core banking services.

4. R3 in the News

I try not to reserve too much space in these posts for R3 news, but there are two interesting things to share this week (and I am sure that the editor in chief of Pravda used to say the same thing…)

As we have mentioned previously, R3 co-hosted a Smart Contract Templates Summit with Barclays earlier this month. We have shared all the day’s presentations here. IB Times (and others) followed up with articles that provide quotes and context from our CTO Richard Brown, Dr. Lee Braine of Barclays Investment Bank CTO Office and Clive Ansell, Head of Market Infrastructure and Technology at ISDA. The following pull quote is best contrasted with The DAO entry at the beginning of this post:

Braine said that one of the motivations for creating smart contracts, together with shared ledgers underneath them, is the opportunity to reduce the number and duration of disputes. Some of the potential improvements could result from simply making the relevant information, such as agreements governing specific trades, more easily accessible.

Brown agreed, adding: “If you look at the experience with The DAO recently, one of the key takeaways from that incident was that, in a system that perhaps had an express design goal of having the code be dominant, there is a need to have a broader contract that explains what happens in the event that things do go wrong.”

And finally, we are very happy to announce that Absa has joined the R3 effort as our first African member. Welcome aboard!

The Weekend Read: July 3

1. This Week in The DAO

It has been difficult for me to keep up with the weekly machinations of The DAO Drama, so I phoned a friend and asked Tim “The Swanny” Swanson for his quick recap on all things DAOy and forks both soft and hard:

Coming together over a soft fork

Coming together over a soft fork

Relative to the previous two weeks, news and developments around The DAO were more subdued.  Oh, who am I kidding!  One of the proposals that has been actively discussed is the “soft fork” model which Ethereum miners have been voting on.  But a vulnerability was subsequently discovered in the “soft fork” and now developers including those at the Ethereum Foundation are telling miners to vote against a “soft fork” (although it should be noted that the Ethereum Foundation itself isn’t formally pushing or organizing for any one path forward).  As a result, the two other major options that are being discussed are: (1) a “hard fork” in which transactions involved with The DAO and child DAOs, are isolated and surgically removed (E.g. rolled back); (2) do nothing and let the drained ETH remain in the hands of the attacker.  If (1) is done it may temporarily solve the issue but then it could create a slippery slope precedent for future exploits and governance thereof.

Note: Martin Koeppelmann, an Ethereum developer, has published a detailed FAQ worth checking out.

2. Summer Reading

Speaking of The Swanny, he has recently returned from East Asia and logged this post on The Kimberley Process for cryptocurrencies. (Speaking of Kimberly, no wonder that I went to school with so many (a top 10 name in the 70’s) but it has now fallen out of favor to drop to #110…)

Another SWIFT hack report surfaced this week, with Ukrainian and Russian banks targeted and $10m reported to be stolen via the SWIFT network.

Citi released the third report of a series on Bitcoin and blockchain. You can read a review of it in the WSJ (Bitcoin Still Not Ready for Prime Time, Citi Says) and CoinDesk (Citi: Bitcoin is an Opportunity for Banks, Not a Threat) and one can see the POV of each outlet reflected in their choice of title…

Another R3 member bank, Deutsche Bank, has a great two minute video featuring GTB Chief Digital Officer Edward Budd giving an overview of benefits of blockchains not only to banks but clients.

And speaking of R3 members, a warm welcome to Banco Bradesco as our newest member from Latin America.

That’s all for this week. For our American friends, have a great Fourth!

The Weekend Read: June 26

Not enough to swing the vote

Not enough to swing the vote

[Ed. Note: As I was away all week, busy playing Forrest Gump (accidental tourist of history) in London during the Brexit vote, I have asked the estimable Kathleen Breitman to step in for this week’s Read. My only contributions are the pithy photos, which to be honest is usually much stronger than my prose. Enjoy. – Todd]

1. The law of TheDAO is being what it is

Several weeks ago, a group of former Ethereum developers raised over $150 mn to create a kickstarter-esque investment platform “governed by code.” Despite pleas for a temporary moratorium on TheDAO by computer scientists who spotted several deficiencies with it, TheDAO management went forth with their platform and it was soon hacked to the tune of $50 mn. Lesson learned: if you outsource a sophisticated operation in governance, like a venture capital organization, to a scripting language and a non-deterministic compiler, you’re gonna have a bad time. 

As we published our last edition of the Weekend Read, TheDAO hack was a nascent pool of mixed accounts and attributions. Over the last week, a few people have given rich accounts of what went wrong with TheDAO. Here are my suggestions for primers and opinions:
Phil Daian’s analysis at Hacking Distributed  
Peter Vessenes’ prescient observations of Ethereum attacks 
Emin Gun Sirer’s presentation to the IC3 meetup in NY this week (in ppt form for consultants)
Our own Ian Grigg’s color commentary on smart contracts

Setting aside what happened with TheDAO, the hack has spurred a fruitful conversation on smart contracts and our brave new world of codified value transfer. As I mentioned on a panel earlier this week, I think TheDAO hack has been a wakeup call to the “blockchain” community to think more seriously about security and governance in distributed systems.

On that note, I recommend that everyone check out litigator-turned-coder-turned-ad-tech-enterpreneur Bill Marino’s recent post on Smart Contract Escape Hatches. The post is inspired by Bill’s work at Cornell and some approaches to contract recourse provided by the last ~2,000 years of exchanging goods. I also shamelessly recommend my husband’s recent interview at Epicenter Bitcoin where he discusses Tezos, a cryptographic ledger which can instantiate innovations at the protocol level through a native voting mechanism. (While using formally specified smart contracts to boot!) 

2. The Three Comma Club

This week, Greenwich Associates published a survey of 134 actors in and around the blockchain-for-capital markets space. Unsurprisingly, most financial services firms have heard about “blockchain.” To my surprise, Greenwich also reports that the projected cumulative spend on the technology will hit the $1 bn mark among these actors in 2016. I hope that these dollars yield deeper understandings and insights into 2017. As of now, I still hear too many falsehoods about the technology to believe that the industry has matured enough from 2015. 

3. Miscellaneous News





The Weekend Read: June 19

1. This Week in CBDC

I asked our Tim Grant for the R3 take on the Cad-coin news (see Canada experiments with digital dollar on blockchain), also know as Project Jasper:

“Tremendous progress this week with our Canadian partners as we saw the first public outing (see FTWSJBloomberg) of our ongoing collaboration with the Bank of Canada, Payments Canada (the artist formerly known as the Canadian Payments Association), BMO, CIBC, RBC, Scotia and TD. Our shared goal is to understand the mechanics, limits and possibilities of distributed ledger technology in an experimental wholesale payment system environment. Very much a proof of concept, we are looking to explore a number of key questions related to access, cost, security and resiliency, collateral management and transparency.”

Bank of England’s Mark Carney has a very well written speech that covers Fintech in general and calls out DLT specifically, full transcript here:

FinTech has the potential to affect monetary policy transmission, the safety and soundness of the firms we supervise, the resilience of the financial system, and the nature of shocks that it might face. It could also have profound implications for the Bank’s secondary objective, as supervisors, to facilitate effective competition between the firms we regulate. 

Mr. Fedcoin, JP Koning, is back with another post on the relative merits of central bank digital currency. The post is worth a read for its “so what” comparison with an unsexy system that just works: Fedwire.

2. DAO Danger

The big headline this week was the hack of TheDAO, the smart contract decentralized autonomous organization that recently raised over a billionty dollars in their initial crowdfunding raise. There have been lots of very good posts on this subject in the last few days; a non-exhaustive list includes posts by Vitalik, Emin Gun Sirer, Matt Levine, a few by Peter Vessenes, Ryan Shea.

The news is moving a bit too quickly for this post to stay current, but one non-tech lesson is clear: the massive capital raise and subsequent attention on TheDAO was too much, too soon. One could argue that the massive price run up in Q4 2013 was the worst thing that could have happened to Bitcoin at that point in the technology’s (and community’s) development/maturity cycle. It was like watching a young hoops prospect going pro too early.

For TheDAO, their rush to ‘market’ and the ridiculous sums that it garnered in the crowd funding did it no favors. Stephan Tual,’s founder and one of TheDAO’s creators, had the audacity to claim that “the unthinkable happened” in his post-mortem blog post. Let that sink in. Unthinkable?! You created a $150m+ bounty in your v1 software that was running on an extremely complex and young platform. It would be unthinkable for it not to be attacked. Perhaps in retrospect the first crowd raise could have been a bit smaller than ~1/5th the float of Ethereum…

As a palate cleanser from all the above, please enjoy this mini-profile of Vitalik from earlier this week.

And Happy Fathers Day to all!