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PsilocybeRBBC: Red Belly Network
27/5/2022 Artist: stuz0r The notorious, white-belly, poisonous Psilocybe"You call that a blockchain? This is a blockchain" Crocodile GramoliContentsTeam The Tech Slithering through the undergrowth With that considered what will RBBC do? Risk I have looked at the tech but I have mainly focussed on the connections with which RBBC’s team are involved in as well as the wider frame work it sits within. “Slithering through the undergrowth” meanders through the network that RBBC is within, accompani...
Psilocybe0L Network: A Short History of Crypto
This is a tea. A special tea. 11.2023WELCOMETake a seat, let me roll out the TV. This is a documentary, where you read and imagine Psilocybe going through some crypto history. I am going to touch on ETH, Aptos, Solana, contracts, venture capital and most importantly 0L Network. 0L Network is a fork of Diem. Remember those days of Diem and Libra? It has been quietly in construction since those days and is, well, I will let you find out. Get cosy.Start here…Humans came out of the tree and it ha...
PsilocybeR3: Obscuro In Context
3/8/2022 Psilosybe?… p’Silocbey?…. Can I just call you Gary? Editors note: back when I made this write-up I was in the throes of a bureaucratic battle with my internet provider as I had just moved. It was a long, arduous, dull saga that was finally resolved. However, during it meant I had no internet and I had to utilise my friends WiFi when I had a chance leading to incomplete work. It does still provide a decent amount of intel for you but there are missing bits and parts I wished to contin...
Twitter : @Psilocybe____
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The Encrypted Network | The Confidential Roll-Up
15/10/2024
Contents:
Welcome
Partial Cloud over Liberty Street
Gather around the table
Corda
Intel + Conclave
DeFI
TEN
Stepping Stones
Scaling Mountains
Bridge
R3 Network
If you like roots, if you like context, if you like a bit more meat in your burger, this is a longer read up on what was once a protocol called Obscuro. Now, reloaded, The Encrypted Network, more commonly known as TEN.
After you…
Under the partially clouded sky, it was late morning in New York where a list of important finance names representing important financial institution gathered to meet at the Federal Reserve Bank, 33 Liberty Street.
As the limestone warmed under the spring sun, the attendees of the Innovation Advisory Council (IAC) arrived in the morning through the FRBNY’s bronze doors.
The council consists of industry leaders and members of the Federal Reserve who meet regularly to discuss innovations in fields such as financial technologies, artificial intelligence, and digital currencies.
This meeting in April 2024 was two years after the Innovation Advisory Council was formed. As there was a lack of an internal body to deal with the rapidly changing financial tech body, The IAC was developed to specifically fill the gap.
You can pull out any name from the people present at this meeting and you will find some extensive history of experience in tech and finance. Here are some examples:
Cassie Korzyrkov – she was the first Google Chief Decision Scientist, she has a background in AI, social neuroscience economics. Ideal then to be a board member of the IAC.
Michelle Neal – Head of Markets and Executive VP of IAC,
Elena Ferri – Head of Data Science with a history at IBM, Goldman Sachs and Deutsche Bank.
Cy Watsky – a researcher for the FED, they have a paper “Tokenized Assets on Public Blockchains: How Transparent is the Blockchain?” from April 2024.
Mark Fischer – Analyst for Payments, Clearing and Digital Assets. He has worked for the US Gov and Treasury as well as a stint at the IMF.
Chris Desch – works on solutions for the FRBNY and is the Architect in BIS New York Innovation Center. This started in 2021 by FRBNY in collaboration with BIS (Bank for Internation Settlements) where they have since worked on Project Cedar and also collaborated with MAS.
And so on, you can see the Federal Reserve attendees of that meeting here - www.newyorkfed.org/medialibrary/media/aboutthefed/pdf/2024/iac-april-2024-minutes
Representatives of Nasdaq, PayPal, MIT, JP Morgan and Bain were present also. The theme of this meeting was the investor adoption of real-world asset tokenisation.
Robbie Mitchnick, the Head of Digital Assets for Blackrock, first spoke to discuss how the BTC ETF could spur institutional capital to build out the infrastructure for tokenisation.
After him, Christine Moy spoke. She is the Partner, Digital Assets, Data & AI at Apollo. She previously worked at JP Morgan where she was Managing Director at J.P. Morgan, leading the Blockchain programme. She spoke favourably of the merits of tokenisation, how it makes the financial plumbing much more efficient and more open to investors.
The person that introduced Moy was Leslie Conner Warren, she is a specialist with digital innovation at FRBNY. She used to work government relations and policy at R3.
April 2009, 15 years before that FRBNY meeting, Mike Hearn made his first Bitcoin transaction with Satoshi Nakamoto. Judging from an email between Satoshi and Martti Malmi, Nakamoto had started development around January 2008.
Hearn is one of the few people to have correspondence with Satoshi, he was a core Bitcoin developer and Hearn receives last published Satoshi email, April 2011.
Gavin Andresen says he did receive the last Satoshi email a few days after Hearn’s email but that has not been published. Gavin informed Satoshi said:
“I wish you wouldn't keep talking about me as a mysterious shadowy figure, the press just turns that into a pirate currency angle. Maybe instead make it about the open-source project and give more credit to your dev contributors; it helps motivate them."
Despite Hearn moving on from Bitcoin, he would go on to say Bitcoins strength is in its openness.
Bitcoin has had a major impact on the world and the later developments of the crypto space. Hearn had queried Satoshi on some odd bits of code, Satoshi confirmed they were meant for contracts but the code was never really sufficiently developed and as Satoshi left the idea was sealed shut.
Vitalik Buterin was involved with the Bitcoin community and co-founded the Bitcoin Magazine. He wanted to open up smart contracts on Bitcoin but would see no progress, therefore, he went on to start Ethereum:
<https://ethereum.github.io/yellowpaper/paper.pdf / https://blockchainlab.com/pdf/Ethereum_white_paper-a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf>
Amir Taaki was another early dev on Bitcoin, considered more of a radical compared to someone like Gavin Andresen, he went towards the privacy part of cryptocurrency, today working on DarkFi.
Mike Hearn was recruited by R3’s CTO, Richard Brown, to be lead blockchain engineer.
Richard Brown received a second-hand ZX Spectrum computer for his eighth birthday. Mathematics and engineering was running in his family and this proved a constant in his own life. 2000, he completed his Computer Science diploma and was recruited at IBM’s Hursley Labs in Winchester. He rose to Executive Architect for Banking Innovation in the UK and 2013, he noticed Bitcoin made it to The Economist, albeit a short column, nonetheless, this blockchain lark gave Brown an epiphany. As he puts it, this is two revolutions in one.
Open, permissionless innovation, which suits anyone wanting to transfer cash without institutions.
Provide industry-level systems of record driving efficiencies for incumbents. Brown is someone that breaks things down and masters a system, a product, inside out and that makes him invaluable, therefore, it was only a matter of time David Rutter came calling.
Rutter has an extensive history of leading collaborative efforts and consortia. Some examples:
· Involved with The International Swaps and Derivatives Association (ISDA) contributed to safer, more efficient and transparent global derivatives market.
· CEO of ICAP Electronic Broking, where he oversaw the development of EBS (Electronic Broking Services). Prior to EBS, interbank FX trades were usually brokered over the phone, EBS pioneered electronic FX trading.
· As CEO of R3, Rutter participates and contributes to the DTCC Distributed Ledger Initiative.
He has the bragging rights of adapting the financial system to the latest technology and it paying off. Rutter had started R3CEV in 2014, which was originally a family office that focussed on consulting, exchanges and ventures. He started with this Jesse Edwards and Todd McDonald - Todd had previously worked at ICAP with Rutter.
The crypto scene kept coming across their desks and they decided to investigate it. Bitcoin had come from its humble message boards and cypherpunk origins and the underlying tech was inspiring suits in finance towers to consider DLT solutions.
Todd and Rutter had travelled California back to New York then to Cali again, to speak with all sorts of people ingratiated in the crypto scene.
Richard Brown said when Rutter attempted to hire him, Brown struck up a deal, “He was quite persistent. To get him off my back, I said I would join if he could get five banks to sign on the dotted line to build a consortium of technologists and banks to launch a blockchain network.”
Given Rutter’s track record, five seems a low-bar.
The first round was to get significant names in to discuss this tech– Barclays, BBVA, JP Morgan, Goldman Sachs, Commonwealth Bank, Credit Suisse, State Street, UBS and Royal Bank of Scotland, DRW, Align Commerce, Perkins Coie, Boost VC, and Fintech Collective.
This grew significantly over the next two roundtables, in 3 months it included Stanford, Andreessen Horowitz, Xapo, BitGo, Chain, Ripple and Mirror.
Later in 2015, Hyperledger, the Bank of England, Align Commerce, and Blockstock attended the third and final roundtable hosted in New York.
As the tech is inherently shared tech and distributed tech, it requires organisations to come together to understand it and collaborate. These institutions have different needs and requirements to a family in Cyprus, for example. Projects such as Bitcoin and Ethereum are not designed to solve reconciliation in the back offices of investment banks, therefore, a fork an existing project was a no-go.
Richard Brown says, “I t is easy to poke holes, it is harder to provide an alternative. That is what R3 did. Address some of the problems of scalability, privacy and expressiveness.”
The first decision was forming the architecture of an open enterprise-grade scale project. The vision from the start was requirements-based engineering. This saw R3 hire Mike Hearn and James Carlyle in October 2015, Hearn being Lead Blockchain Engineer, Carlyle held Chief Engineer and Brown led the development.
Another April. This time it is 2016, 7 years after Hearn’s fateful email to Satoshi, Corda is first publicly explained with an emphasis on it being DLT and not a blockchain.
August of the same year, the whitepaper for Corda is dropped: docs.r3.com/en/pdf/corda-introductory-whitepaper.pdf
Richard’s beginning at R3 was not glamorous, the first London office was a dark, tiny four-person room in a shared working space in the City of London. If you think London is glamorous all I say is the tourist marketing is working.
With Hearn brought in along with Carlyle, their work also had the advice and input of Ian Grigg, a cypherpunk you may know due to Ricardian Contracts. Fundamentally, a Ricardian Contract has encoded a legal agreement as a cryptographic document within its digital contract system, as you can imagine this invention and wit would be invaluable to a consortium of financial institutions trying to devise a DLT. The Ricardian was invented in 1995, Grigg is quite the interesting person.
As RWAs become more prevalent you will see the influence of Ricardian Contracts more often, for example, Red Belly uses this concept, an RWA dedicated blockchain from Australia.
Brown echoes this, “our focus is on agreements: the need to link to legal prose is considered from the start. We know there will still always be some disputes and we should specify right up front how they will be resolved.”
If you want to pour through those words, here are two links. First is Brown’s blog introducing Corda and the second is the Whitepaper that came out a couple of months after Brown’s blog post:
https://docs.r3.com/en/pdf/corda-introductory-whitepaper.pdf
Hearn said once –
“Email, undoubtedly a very successful system, it’s been around for 20 years now, and only new companies run paperless offices. Google runs a paperless office. But most companies never got that far. And, you know, it didn’t kill the post, it didn’t kill lots of things, so Bitcoin is going to be living alongside all these other systems”
The tech is agnostic, that is what tools are, it is the application of a person’s imagination which directs the use and outcome of that tool. Some people see the end of banking due to Bitcoin but really the DLT can be applied to banking and save a lot of time and funds in finance that goes towards administration.
“At R3, we believe that distributed ledger technology has the potential to transform the financial services industry to the benefit of its clients and participant firms alike. We envision a future where financial agreements are recorded and automatically managed without error, where anybody can transact seamlessly for any contractual purpose without friction. We believe markets will move towards models where parties to financial agreements record them once and collaborate to maintain accurate, shared records of these agreements. Duplications, reconciliations, failed matches and breaks will be things of the past. Isolated islands of asset representations will be no more.” - Corda Whitepaper.
This is the second revolution that Brown saw in Bitcoin and what R3 has be pushing, “Provide industry-level systems of record driving efficiencies for incumbents.”
When I speak to non-crypto pals, and even crypto pals for that matter, about DLT I mention it is rather unsexy but is it revolutionary. It essentially circumvents intermediaries that bloat any industry that requires record keeping, contracts, admin, etc.
Smart contracts – or Agreements in Corda’s case – automate processes that may require an individual to do a hop, skip and a jump through a lawyer, a receptionist, wait 3 to 7 business days, have a work lunch, and someone retrieves the information you required to push through an authorised document. DLT can cut right through that fuss and rigmarole.
If money makes the world go round then it is about to spin a whole lot faster.
November 2016 saw CEV chopped from the name and the consortium was R3 henceforth.
Corda does have a Foundation and you can see the history of the board via this link, it has ING, Natwest, AXA, Standard Chartered, Commerzbank, Marco Polo Network and more -
https://corda.network/corda-network-foundation/foundation-board/
R3 have conducted Corda Code Club (CCC) that has hackathon events, mentorship and tuition as well as club evenings. This was working with other banks, for example, on the first CCC event, RBS and HSBC representatives attended. Nigel Quantick and John Reynolds, CEO of Coadjute, have attended, Cais Manai – at the time Product Manager at R3 for Payments, Settlement, Tokens and CBDC – offered support, as well as Hearn and Brown have performing as judges.
At these events, the Cordapps that have been created worked on decentralised credit scoring, construction management, P2P energy trading, property conveyance, sustainable fishing rights, DAO, decentralised stock exchange, a metal exchange, private health insurance, commercial property, and a Corda DEX.
They have even put games without a central point of authority, Settlers of Catan and Poker have been put to Corda to test the platform. Here is a graphic from Gartner in 2020 that demonstrates R3’s consortium approach is gaining usage of Corda.
James Carlyle, a key architecture of Corda and speaker of Japanese, sat on the board for a couple of years. Corda has partnered with DTCC on Project Ion, is the used by SIX Digital Exchange, used in Project Leonidas, Project Jura, Project Icebreaker, Project Helvetia, Project Dunbar, further demonstrating the trust and competency that R3’s Corda provided.
One of the key partnerships R3 who have also invested in the consortium is Intel.
Intel came up with SGX TEE in the early 2010s and it has gone on to be used by Microsoft Azure, New York Stock Exchange, Singapore Stock Exchange, Alibaba Cloud, IBM, and Amazon.
$3 billion in funding under the CHIPS and Science Act was awarded to Intel’s Secure Enclave program. It is used for Hyperledger’s Sawtooth to secure the "PoET" (Proof of Elapsed Time) consensus algorithm.
TEE stands for Trusted Execution Environment, Intel SGX stands for Software Guardian eXtensions, others simply call it an Enclave. When data is handled in an “untrusted” part of the computer’s memory, SGX will move it to an enclave to protect it. From there, it can call on a specific trusted function from the application.
This is a vital piece for much of modern life. A vast number of laptops run with an Intel or AMD chip, TEE is embedded into this, even phones that have an Apple or ARM chip.
As SGX TEE was being implemented across the large institution’s applications to data and financial markets, it was a natural progression for R3 to bring Intel SGX into their next project.
Corda meets secure enclave.
Conclave.
TEE is to help bring confidentiality to computing. The benefits TEE brings is scalability and takes away the computational strain that FHE’s bring to computing.
In 2019, Mike Hearn announced Conclave at Cordacon after moving to that project full time. Enclave orientated computing is something that Hyperledger and Enterprise Ethereum Alliance have sought too. It isn’t an easy task to separate as much of the software as possible away from the crucial data in the enclave.
David Rutter said, “Proprietary data – if shared and pooled effectively – holds the key to greater analytics, insight and commercial opportunity. Yet, many firms resist sending it because of an inherent mistrust in how it will be used.”
Conclave, which integrated into Corda in 2021, helps to protect that data, which furthers progress on utilising that valuable data.
This has been used by SIX Digital Exchange (SDX), DTCC, HQLAX, Euroclear and Central Bank of UAE. UAE have awarded R3 with two awards in 2024. First being, Leading Innovator in Blockchain for Financial Institutions, and the second is Most Innovative Digital Transformation Solutions (Financial).
R3, Adhara and Hyperledger work on Harmonia, which is a lab to help interoperability between the systems. Adhara also work with Ownera. Adhara help with IT solutions, liquidity management and international payments. Ownera helps FinP2P routers be interoperable, this helps all manner of cash sources connect and flow. Ownera and Archax helped tokenise BlackRock’s MMF. Archax uses R3’s Corda and R3 have also recently partnered with Ownera.
R3 have led the initiative of improving the financial software infrastructure and proven rather successful at it, to say the least. R3 has got to the point it has partnerships with SWIFT. What other horizons are there left to conquer?
A super-terse history of blockchain.
Bitcoin drops. Hash wars. Ethereum is a working blockchain, allows protocols to be built on top. ICO mania.
But what really sparked a change was data feeds from oracles, such as Chainlink, and dapps that help liquidity such as Uniswap and Aave. With these innovations, the volume and TVL within DeFi has shot up. From a few hundred thousand to around $180bn TVL in late 2021/22.
Smart contracts help to automate so much and with settlement on immutable blockchains, it helps transparency of settlement. There are many benefits blockchain has that TradFi is seduced by:
Instant Settlement
Final Settlement
P2P Settlement
Lower Costs
Efficient
Triple Entry Accounting
Shared Ledger
Reduced Fraud
Immutable
User Control of Assets
Yield Farming
In 2021, crypto-assets total market cap was $2tn. Yet, the likes of McKinsey are saying Real-World Asset tokenisation could be $2tn, if you believe Raoul Paul he says it could be $10tn. The amount of wealth coming on chain is staggering to contemplate. Institutions want to enter the market and they are more likely to do so with engineers and professionals they have worked with.
R3 had a department called Obscuro Labs, this was set up in 2022.
This was not merely handed to the intern for an experiment this was given some of the stellar names within R3, they were not messing around.
This lab was co-founded by aforementioned James Carlyle.
Gavin Thomas who was Engineering COO at R3, he is the CEO of Obscuro Labs and worked on Corda.
Cais Manai, holding roles in R3 centred around CBDC before joining in the Obscuro fun.
Tudor Malene, another lead R3 engineer who holds CTO of the new project.
Neal Shah, former R3 Senior Product Engineer, he has since moved onto Balyasny Asset Management.
Roger Willis helped write the whitepaper, he is now at IOHK, famous for Cardano.
Other contributors to the whitepaper are:
Richard Gendal Brown
Mike Hearn
Moritz Platt
Tim Brinded
Fred Dalibard
Stefan Iliev
Zbigniew Czapran
You can read that paper here - whitepaper.ten.xyz/obscuro-whitepaper/abstract.html
And R3 co-founder, Todd McDonald, helped lead funding rounds as the A-team were delivering the goods.
$9 million including R3, Republic Capital, KuCoin Labs, Magnus Capital, Big Brain Holdings, Builder Capital, DWF Labs, Pragma Ventures, GTS Ventures.
There are other team members bringing sharp talents, do see here - www.ten.xyz/team/
This was all for a Confidential Roll-Up for Ethereum. Originally, it was called Obscuro but this has since changed to The Encrypted Network or TEN for short in 2023.
It does not full into the category of a ZK roll-up as it does not utilise ZK tech nor is it an optimistic roll-up, in fact it has quicker delays compared to an optimistic roll-up. 1-day delays to begin with then as the node network grows it can get down to 10 minutes.
Ethereum bytecode is the language of Ethereum Virtual Machine to execute Solidity smart contracts, TEN uses the EVM entirely. There is no need to learn a new language and a developer has the option to determine what is made private.
Nodes are Aggregators, they get paid in TEN. An aggregator that can prove their TEE attestation they maintain and register the TEE encrypted data into the local database. Validators are not a part of the aggregator gossip network.
Metis is the first Layer 2 to have a decentralised sequencer, TEN is applying this too, this is rare amongst L2s and it is a vulnerability if the sequencer is centralised. A decentralised sequencer reduces the chances of MEV, a centralised sequencer can manipulate the order of transactions, front run orders and can even exclude transactions. It allows multiple participants to be involved with the transaction ordering and hold participants accountable. This is great for the networks security as it reduces a single point of failure and resistant to DoS attacks.
Therefore, it should be a priority of L2s to have a decentralised sequencer but surprisingly this is lacking. It is something that TEN is not overlooking this factor and have this as a part of the architecture.
TEN’s consensus mechanism – POBI – selects a sequencer at random in each round. The winner needs the smallest random number within the group, the aggregator that has this earns the round reward.
POBI stands for Proof of Block Inclusion – Intel invented Proof of Elapsed Time in 2016 and this has influenced POBI.
TEN helps to provide confidential computing in an otherwise transparent Web3. Private computation allows to protection of sensitive data being sold to nefarious actors.
The tech of Web3 and the expansion of DeFi is appealing. Banks and other financial institutions have private blockchains, as touched on before, the TEN team have provided Corda services to many of the large players. For a lot of these institution the wealth is siloed and in walled gardens. DeFi’s success is because it is public.
Chainlink’s Sergey Nazarov has spoken on stage with great enthusiasm how much wealth is coming on-chain because the tech breaks down boundaries. RWAs can be fractionalised, it changes fundraising as it circumvents a lot of traditional infrastructure, immutable, instant settlement, and so on. With DLT, TradFi systems are becoming antiquated.
Ethereum is the Manhattan of the blockchain world, this is where the main financial traffic is therefore it is ripe for a confidential roll up. I must stress a lot of these institutions are not going to simply trust any protocol. If a team of devs built out a confidential L2 that they have had previously worked with they are more likely too.
Furthermore, providing this sort of tech will allow untrusted counterparties to come together as the blockchain can provide privacy, security and automation. This will open up speed of finance and cut costs, which go back into the economic cycles.
And therefore, there is a strong case for success of The Encrypted Network.
Before coming to market, TEN has partnered up and built an ecosystem to help with usage upon release. To name just a few, Supra Oracles, Hyperlane, Asset Flume, Galxe, Parsiq and more. Do see here for the list of the ecosystem - www.ten.xyz/ecosystem/
One of the hooks that computers had to draw in the public to use the devices was games. A clever use of 0s and 1s at the backend can lead to defending the human race from aliens, otherwise known as Space Invaders. That was for arcade machines but computer devices made by Microsoft had simple games like Solitaire and Minesweeper to help stimulate contact time with the GUI of a PC.
We can take for granted how Web2 literate we have become but Web3 can still be a hurdle for people to wrap their head around, to interact with. There is still much room to grow for the space.
The early 2000s saw Chris Moneymaker qualify for World Series of Poker in 2003 via an online poker site. He ended up winning and this spurred on the “Poker Boom” of online poker traffic in the early 2000s, which also saw a larger number of people using the internet.
Blockchain mimics much of the Internets rise and there were early attempts at poker. Web2 has issues of proving that you are not being screwed by the platform and there are lots of bots. An honest platform will need to do audits and get the credible certificates.
There were attempts in the early days, how there was regulatory pressure, liquidity issues, small player pool, and the technical side was clanky. The premise was there but just needed refinement.
TEN can provide encryption via the use of TEEs, random numbers can be generated and encrypted due to this architecture, and this can be done with immediate finality.
An important innovation that TEN can enable with TEEs is Confidential Proof of Humanity (CoH). This enables someone to verify they are indeed a real person yet their identity remains confidential as TEEs provide secure KYC and TEN deletes the documents once it is verified.
This leads to a person receiving a Soulbound NFT, like a blue tick on Twitter/X, it shows the verification process was successful. This NFT cannot be transferred and this helps combat against a players colluding and joining the same table whilst being in the same geographical location.
With most game-related computations off-chain, TEN can significantly reduce the gas costs associated with poker game play.
Battleships is another demonstration of how gaming can be secured on TEN. A simple game yet shielding a players battleship position is not so simple. Now with TENs capabilities, games can balance the need for transparency and privacy in the development, which is all in Solidity.
With fair, scalable environments, TEN can provide the platform gaming, have high-volume tournaments with verified contestants. If you find yourself thinking, “this is just Battleships and poker what’s the big deal?” Aforementioned, Microsoft had humble Solitaire and then decades later there is Halo.
Cais Manai makes a point that Civilisation VI is a great game yet it could have the addition of an NFT buried in the game. As TEN can provide randomisation it means even the developers do not know where this reward is and the player can unearth this NFT, it could even be BTC. This provides trust that there isn’t insider information being leaked to pals of the devs. No-one knows where the prizes are. Happy hunting!
Michael Jacobides, who is an academic advisor to the NY Fed Res and the Boston Consultancy Group (BCG), spoke a couple of years ago about how a chain needs a hook to bring the average joe into crypto. Emphasising what makes your chain different.
And my thinking across cycles is how the space captures and maintains a user base. Gradually the space has become more user-friendly for the casual person but why would they use it consistently?
The original people in crypto were cypherpunks, gamblers and risk-takers. TEN can help the Web3 casinos, it can resist MEV on trading, it can help gaming to bring in people, it can help verification on social dApps.
It can assist with DeFi and DAO governance. Voting is confidential and this stops the bandwagon effect therefore people vote with their beliefs.
As we zoom out a little more, TEN has the ability to protect Digital ID (DID) and verify the necessary documents to support it, as demonstrated with its CoH. This underpins using banking, payments, and insurance, as TEN can provide privacy, fraud detection and prevention, make compliance more efficient.
Currently, we have payment rails and assets separate, buying a car or a house has all these processes that are separate and convoluted. With automation from smart contracts, we can put these two rails together to make it efficient and fast, a DLT payment and asset system becomes one.
The privacy helps against data breaches, vital for anyone, further demonstrating the need for TEN beyond gambling and gaming. This is an important step forward to integrate consumers with Web3 in everyday life.
Additionally, it can provide decentralised dark pools for large institutions and high net-worth individuals. The privacy of TEN helps shield strategies, intentions, prevent front-running, it keeps order size and price away from prying eyes. Traditional dark pools are run centrally, consequentially there is a trust issue. Decentralising dark pools enables counterparties to use trustless infrastructure.
Institutions execute large block trades and do not want to negatively impact the market, leading to cascading events and capitulation. TEN protects these trades, which leads me to another point if we zoom out even further.
TEN is building the bridge from Corda to Ethereum.
R3 have done a Corda bridge with XDC Network. XDC Network is a hybrid Layer 1 for trade finance, and this enabled interoperability and reducing settlement time. The companies operating on Corda, such as SBI, can configure and understand the services necessary as these private pools mingle with the cryptocurrency ecosystem and exchanges.
The Corda platform had a successful 2023, receiving the Best Blockchain Technology award, Best Permissioned Technology Initiative, Most Innovative Use of DLT/Blockchain, Most Innovative Use of Blockchain in Banking, CBDC Partner Initiative.
R3 are often involved in Wholesale CBDC projects, there is a G20 mandate to make cross-border payments cheaper, faster, more transparent.
Leading the charge in this is the Middle-East, particularly UAE. UAE has opened their doors to Coinbase, Project Diamond’s objective is to bring institutional investment to digital assets and RWA. UAE has the Financial Infrastructure Transformation (FIT) Programme, R3 help develop the Digital Dirham. This has seen real-value international trade settlements through platforms like the mBridge initiative – the benefit means through Corda, it the sender bank provides the transaction directly to the recipient bank rather than through intermediaries.
From a 2023 Bernstein, $5 trillion in assets could be tokenized on blockchain in the next five years and with digital cash there are various applications, please do see this chart:
Institutional regulated DeFi. How do the Central Banks interact with DeFi, Web 3, Metaverse and so on? They will be on ledgers such as the Corda and need to bridge into the crypto-universe. Therefore, TEN is primed for success in leading these funds onto chain.
And with digital representation of real-world assets, defi will have the chance to operate with these tokenised securities. A key thing I stress to people is tokenisation comes in waves, each asset class gradually tokenises. People are cautious of being first but they definitely do not want to be last, there will be a standard S bend to adoption, once there is momentum in adoption this will have a cascade of wealth represented on-chain.
Global equities market is around $100tn so too cash.
Private equity is $11tn.
Commodities equates to $20tn.
The bonds market is $130tn.
Real estate is over $300tn.
The global derivatives market is touted to be $600 trillion to $1 quadrillion in value.
And so on. The point being there is a great amount of wealth to be unlocked by DLT, and actors such as TEN have the background to unlock this and protect the privacy of it. Given they are usually first in implementing wholesale CBDC projects and contracts, having worked with Accenture, BIS, and sovereign states, when it comes to the application of retail CBDC, the odds are in their favour to implement those sorts of projects too.
Scaling mountains may be hard, it is only for the most robust.
It is not just the tech, if you are dealing with privacy there will be regulation issues. TEN works closely with regulators.
Richard Correia was the Global Head of CBDC for R3, he was leading and working with projects that you may be familiar with. Project Jura, Project Dunbar, Project Helvetia, these include BIS, SDX, BdF, SNB and more central banks. There was also the eKrona project with Riksbank.
Bryan D'Souza works has Head of Partnerships for R3 in the Middle-East. Emirates NBD is a leading banking group that is wanting to innovate blockchain in UAE. Therefore, it is a natural fit for them to bring R3 to their council along with PwC and Chainalysis.
Dr Alisa DiCaprio is the Chief Economist at R3, which is strategising and researching. She is voted one of the most influential women in fintech by American Banker. She also an advisor to the Global Blockchain Business Council (GBBC), this is a large council of business leaders, ambassadors, non-profits, start-ups, institutions. A significant body to the digitisation of finance and healthcare.
Jack Fletcher used to be a senior advisor to the UK Liberal Democrats Chief Whip. He moved from that position to be the global lead for R3’s strategic relationships with central banks and CBDC.
Here is a letter to the UK government on CBDC - committees.parliament.uk/writtenevidence/111489/pdf/ - In this is a pertinent line, “The Depository Trust & Clearing Corporation (DTCC), one of the world’s more risk-sensitive institutions, chose R3 as its partner to develop and launch its Project Ion platform.” That is wise to point out, even the most risk-adverse are opting with R3.
In 2020, HSBC announced it put $10 billion of paper-based private placement records on R3’s Corda blockchain. HSBC are in favour of Corda so much that in order to speed up onboarding time of customers, HSBC moved Corda to Google Cloud in 2021, this reduced it from months to weeks.
To quote HSBC, “Corda was built with the highest standards of privacy and security in mind. The platform is ideally suited to empower HSBC’s global custody clients to access details of their private assets securely, and in real time.”
In 2023, HSBC became the first bank to tokenise gold via R3.
HBSC have said elsewhere, in context of expanding their partnerships with R3, “We anticipate HSBC and other banks will conduct more live transactions this year, while the system is readied for a full commercial launch within a year and it could take another 3-5 years of collaborative work to gain critical mass.” www.business.hsbc.ae/en-gb/campaigns/blockchain
In April 2024, this time not in New York, R3 is brought into the UK’s Regulated Liability Network for their technical expertise.
So aside from that, what else has R3 done?
Aside from issuing digital tokens with Nasdaq, custody and settlement with BNY Mellon, collaborating with ABI, providing the infrastructure for Brazil’s Bradesco and Itau for foreign trade, Wells Fargo on inter-bank transfer, Bank of America for financial services, onboarding MonetaGo, partnering SIX Group, apply solutions for insurance such as Allianz and Chubb, what else has R3 done really?
Is that all?
DLT is a tool and communities express with that tool with how they implement it. R3 got ahead of the curve. R3 are providing the platform for nation states to facilitate the use of CBDCs and this should hardly be a surprise since R3 is a consortium of banks.
What this does for me is reassure that this is a team of the highest calibre, with extraordinary brain power and connection behind it. There is a gargantuan weight of expertise and wealth insinuated by this.
I have already discussed Ian Grigg, the inventor of the Ricardian contract, helped R3’s whitepaper, embedding regulation into Corda’s digital agreements as well as Mike Hearn who was a Bitcoin core developer. R3 has had a host of talent that has had an impact on the crypto-space.
In 2024, Peter Todd was “outed” as Satoshi Nakamoto in an HBO documentary. He may not be Satoshi, he did work on Bitcoin and also worked at R3 in 2016 on Corda.
Ross Nicoll helped technical aspects of Corda’s smart contracts before going onto making Dogecoin function as well briefly working at CryptoKitties.
Kathleen Breitman worked at Accenture then went onto R3 before founding Tezos.
Eric McEvoy worked at IBM then SDX before becoming the Blockchain Solutions Engineer at R3, is a DeFi Developer at Wintermute. Wintermute also back Ethena Labs, which Eric co-founded.
Mike Ward helped R3 form partnerships, one notable one is Microsoft Azure, he is currently the CPO of IOHK, the company behind Cardano.
Kostas Chalkias is another former-R3 cadet. With a Ph.D in Cryptography, he was involved in the development of cryptographic solutions for Corda. He went onto work for Facebook’s Diem and co-found Mysten Labs and subsequently Sui.
Gottfried Leibbrandt was the CEO of SWIFT integrated its GPI (Global Payments Innovation) system with R3’s Corda platform.
Brad Garlinghouse of Ripple integrated Ripple’s XRP into R3's Corda platform.
This is a letter to the Federal Reserve in 2019 from R3 - www.federalreserve.gov/SECRS/2019/November/20191114/OP-1670/OP-1670_110719_137047_425584962832_1.pdf
Here is a response letter from R3 to a FDIC information request, I believe from 2021, though I am not entirely sure - www.fdic.gov/system/files/2024-06/2021-rfi-digital-assets-3064-za25-c-022.pdf
One of the authors of that letter was Leslie Conner Warren. She moved on from her R3 Gov Relations and Global Policy role at R3, on April 2024, under the partial cloud floating over Liberty Street, to the Federal Reserve Bank of New York Innovation Advisory Council.
To wrap this up and to reiterate, TEN having a bridge to Corda is rather significant. This is a convergence of the partnerships that rest on the private system to come to the public domain.
TEN provides the tech to take Ethereum further, scale it, protect, provide more traffic for the ecosystem, all the while still utilising Solidity. TEN will enable the adoption of games, of day-to-day utility and to enable the secure environment for RWAs and the large institutions, private banks and family offices to come to the public blockchain space.
Stablecoin velocity is much more than the traditional bank money. Tokenisation is gathering great momentum after years of applied effort from developers in garages to teams in high towers.
With TEN providing a private extension to Ethereum means it is also expanding the world of finance.
The Encrypted Network | The Confidential Roll-Up
15/10/2024
Contents:
Welcome
Partial Cloud over Liberty Street
Gather around the table
Corda
Intel + Conclave
DeFI
TEN
Stepping Stones
Scaling Mountains
Bridge
R3 Network
If you like roots, if you like context, if you like a bit more meat in your burger, this is a longer read up on what was once a protocol called Obscuro. Now, reloaded, The Encrypted Network, more commonly known as TEN.
After you…
Under the partially clouded sky, it was late morning in New York where a list of important finance names representing important financial institution gathered to meet at the Federal Reserve Bank, 33 Liberty Street.
As the limestone warmed under the spring sun, the attendees of the Innovation Advisory Council (IAC) arrived in the morning through the FRBNY’s bronze doors.
The council consists of industry leaders and members of the Federal Reserve who meet regularly to discuss innovations in fields such as financial technologies, artificial intelligence, and digital currencies.
This meeting in April 2024 was two years after the Innovation Advisory Council was formed. As there was a lack of an internal body to deal with the rapidly changing financial tech body, The IAC was developed to specifically fill the gap.
You can pull out any name from the people present at this meeting and you will find some extensive history of experience in tech and finance. Here are some examples:
Cassie Korzyrkov – she was the first Google Chief Decision Scientist, she has a background in AI, social neuroscience economics. Ideal then to be a board member of the IAC.
Michelle Neal – Head of Markets and Executive VP of IAC,
Elena Ferri – Head of Data Science with a history at IBM, Goldman Sachs and Deutsche Bank.
Cy Watsky – a researcher for the FED, they have a paper “Tokenized Assets on Public Blockchains: How Transparent is the Blockchain?” from April 2024.
Mark Fischer – Analyst for Payments, Clearing and Digital Assets. He has worked for the US Gov and Treasury as well as a stint at the IMF.
Chris Desch – works on solutions for the FRBNY and is the Architect in BIS New York Innovation Center. This started in 2021 by FRBNY in collaboration with BIS (Bank for Internation Settlements) where they have since worked on Project Cedar and also collaborated with MAS.
And so on, you can see the Federal Reserve attendees of that meeting here - www.newyorkfed.org/medialibrary/media/aboutthefed/pdf/2024/iac-april-2024-minutes
Representatives of Nasdaq, PayPal, MIT, JP Morgan and Bain were present also. The theme of this meeting was the investor adoption of real-world asset tokenisation.
Robbie Mitchnick, the Head of Digital Assets for Blackrock, first spoke to discuss how the BTC ETF could spur institutional capital to build out the infrastructure for tokenisation.
After him, Christine Moy spoke. She is the Partner, Digital Assets, Data & AI at Apollo. She previously worked at JP Morgan where she was Managing Director at J.P. Morgan, leading the Blockchain programme. She spoke favourably of the merits of tokenisation, how it makes the financial plumbing much more efficient and more open to investors.
The person that introduced Moy was Leslie Conner Warren, she is a specialist with digital innovation at FRBNY. She used to work government relations and policy at R3.
April 2009, 15 years before that FRBNY meeting, Mike Hearn made his first Bitcoin transaction with Satoshi Nakamoto. Judging from an email between Satoshi and Martti Malmi, Nakamoto had started development around January 2008.
Hearn is one of the few people to have correspondence with Satoshi, he was a core Bitcoin developer and Hearn receives last published Satoshi email, April 2011.
Gavin Andresen says he did receive the last Satoshi email a few days after Hearn’s email but that has not been published. Gavin informed Satoshi said:
“I wish you wouldn't keep talking about me as a mysterious shadowy figure, the press just turns that into a pirate currency angle. Maybe instead make it about the open-source project and give more credit to your dev contributors; it helps motivate them."
Despite Hearn moving on from Bitcoin, he would go on to say Bitcoins strength is in its openness.
Bitcoin has had a major impact on the world and the later developments of the crypto space. Hearn had queried Satoshi on some odd bits of code, Satoshi confirmed they were meant for contracts but the code was never really sufficiently developed and as Satoshi left the idea was sealed shut.
Vitalik Buterin was involved with the Bitcoin community and co-founded the Bitcoin Magazine. He wanted to open up smart contracts on Bitcoin but would see no progress, therefore, he went on to start Ethereum:
<https://ethereum.github.io/yellowpaper/paper.pdf / https://blockchainlab.com/pdf/Ethereum_white_paper-a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf>
Amir Taaki was another early dev on Bitcoin, considered more of a radical compared to someone like Gavin Andresen, he went towards the privacy part of cryptocurrency, today working on DarkFi.
Mike Hearn was recruited by R3’s CTO, Richard Brown, to be lead blockchain engineer.
Richard Brown received a second-hand ZX Spectrum computer for his eighth birthday. Mathematics and engineering was running in his family and this proved a constant in his own life. 2000, he completed his Computer Science diploma and was recruited at IBM’s Hursley Labs in Winchester. He rose to Executive Architect for Banking Innovation in the UK and 2013, he noticed Bitcoin made it to The Economist, albeit a short column, nonetheless, this blockchain lark gave Brown an epiphany. As he puts it, this is two revolutions in one.
Open, permissionless innovation, which suits anyone wanting to transfer cash without institutions.
Provide industry-level systems of record driving efficiencies for incumbents. Brown is someone that breaks things down and masters a system, a product, inside out and that makes him invaluable, therefore, it was only a matter of time David Rutter came calling.
Rutter has an extensive history of leading collaborative efforts and consortia. Some examples:
· Involved with The International Swaps and Derivatives Association (ISDA) contributed to safer, more efficient and transparent global derivatives market.
· CEO of ICAP Electronic Broking, where he oversaw the development of EBS (Electronic Broking Services). Prior to EBS, interbank FX trades were usually brokered over the phone, EBS pioneered electronic FX trading.
· As CEO of R3, Rutter participates and contributes to the DTCC Distributed Ledger Initiative.
He has the bragging rights of adapting the financial system to the latest technology and it paying off. Rutter had started R3CEV in 2014, which was originally a family office that focussed on consulting, exchanges and ventures. He started with this Jesse Edwards and Todd McDonald - Todd had previously worked at ICAP with Rutter.
The crypto scene kept coming across their desks and they decided to investigate it. Bitcoin had come from its humble message boards and cypherpunk origins and the underlying tech was inspiring suits in finance towers to consider DLT solutions.
Todd and Rutter had travelled California back to New York then to Cali again, to speak with all sorts of people ingratiated in the crypto scene.
Richard Brown said when Rutter attempted to hire him, Brown struck up a deal, “He was quite persistent. To get him off my back, I said I would join if he could get five banks to sign on the dotted line to build a consortium of technologists and banks to launch a blockchain network.”
Given Rutter’s track record, five seems a low-bar.
The first round was to get significant names in to discuss this tech– Barclays, BBVA, JP Morgan, Goldman Sachs, Commonwealth Bank, Credit Suisse, State Street, UBS and Royal Bank of Scotland, DRW, Align Commerce, Perkins Coie, Boost VC, and Fintech Collective.
This grew significantly over the next two roundtables, in 3 months it included Stanford, Andreessen Horowitz, Xapo, BitGo, Chain, Ripple and Mirror.
Later in 2015, Hyperledger, the Bank of England, Align Commerce, and Blockstock attended the third and final roundtable hosted in New York.
As the tech is inherently shared tech and distributed tech, it requires organisations to come together to understand it and collaborate. These institutions have different needs and requirements to a family in Cyprus, for example. Projects such as Bitcoin and Ethereum are not designed to solve reconciliation in the back offices of investment banks, therefore, a fork an existing project was a no-go.
Richard Brown says, “I t is easy to poke holes, it is harder to provide an alternative. That is what R3 did. Address some of the problems of scalability, privacy and expressiveness.”
The first decision was forming the architecture of an open enterprise-grade scale project. The vision from the start was requirements-based engineering. This saw R3 hire Mike Hearn and James Carlyle in October 2015, Hearn being Lead Blockchain Engineer, Carlyle held Chief Engineer and Brown led the development.
Another April. This time it is 2016, 7 years after Hearn’s fateful email to Satoshi, Corda is first publicly explained with an emphasis on it being DLT and not a blockchain.
August of the same year, the whitepaper for Corda is dropped: docs.r3.com/en/pdf/corda-introductory-whitepaper.pdf
Richard’s beginning at R3 was not glamorous, the first London office was a dark, tiny four-person room in a shared working space in the City of London. If you think London is glamorous all I say is the tourist marketing is working.
With Hearn brought in along with Carlyle, their work also had the advice and input of Ian Grigg, a cypherpunk you may know due to Ricardian Contracts. Fundamentally, a Ricardian Contract has encoded a legal agreement as a cryptographic document within its digital contract system, as you can imagine this invention and wit would be invaluable to a consortium of financial institutions trying to devise a DLT. The Ricardian was invented in 1995, Grigg is quite the interesting person.
As RWAs become more prevalent you will see the influence of Ricardian Contracts more often, for example, Red Belly uses this concept, an RWA dedicated blockchain from Australia.
Brown echoes this, “our focus is on agreements: the need to link to legal prose is considered from the start. We know there will still always be some disputes and we should specify right up front how they will be resolved.”
If you want to pour through those words, here are two links. First is Brown’s blog introducing Corda and the second is the Whitepaper that came out a couple of months after Brown’s blog post:
https://docs.r3.com/en/pdf/corda-introductory-whitepaper.pdf
Hearn said once –
“Email, undoubtedly a very successful system, it’s been around for 20 years now, and only new companies run paperless offices. Google runs a paperless office. But most companies never got that far. And, you know, it didn’t kill the post, it didn’t kill lots of things, so Bitcoin is going to be living alongside all these other systems”
The tech is agnostic, that is what tools are, it is the application of a person’s imagination which directs the use and outcome of that tool. Some people see the end of banking due to Bitcoin but really the DLT can be applied to banking and save a lot of time and funds in finance that goes towards administration.
“At R3, we believe that distributed ledger technology has the potential to transform the financial services industry to the benefit of its clients and participant firms alike. We envision a future where financial agreements are recorded and automatically managed without error, where anybody can transact seamlessly for any contractual purpose without friction. We believe markets will move towards models where parties to financial agreements record them once and collaborate to maintain accurate, shared records of these agreements. Duplications, reconciliations, failed matches and breaks will be things of the past. Isolated islands of asset representations will be no more.” - Corda Whitepaper.
This is the second revolution that Brown saw in Bitcoin and what R3 has be pushing, “Provide industry-level systems of record driving efficiencies for incumbents.”
When I speak to non-crypto pals, and even crypto pals for that matter, about DLT I mention it is rather unsexy but is it revolutionary. It essentially circumvents intermediaries that bloat any industry that requires record keeping, contracts, admin, etc.
Smart contracts – or Agreements in Corda’s case – automate processes that may require an individual to do a hop, skip and a jump through a lawyer, a receptionist, wait 3 to 7 business days, have a work lunch, and someone retrieves the information you required to push through an authorised document. DLT can cut right through that fuss and rigmarole.
If money makes the world go round then it is about to spin a whole lot faster.
November 2016 saw CEV chopped from the name and the consortium was R3 henceforth.
Corda does have a Foundation and you can see the history of the board via this link, it has ING, Natwest, AXA, Standard Chartered, Commerzbank, Marco Polo Network and more -
https://corda.network/corda-network-foundation/foundation-board/
R3 have conducted Corda Code Club (CCC) that has hackathon events, mentorship and tuition as well as club evenings. This was working with other banks, for example, on the first CCC event, RBS and HSBC representatives attended. Nigel Quantick and John Reynolds, CEO of Coadjute, have attended, Cais Manai – at the time Product Manager at R3 for Payments, Settlement, Tokens and CBDC – offered support, as well as Hearn and Brown have performing as judges.
At these events, the Cordapps that have been created worked on decentralised credit scoring, construction management, P2P energy trading, property conveyance, sustainable fishing rights, DAO, decentralised stock exchange, a metal exchange, private health insurance, commercial property, and a Corda DEX.
They have even put games without a central point of authority, Settlers of Catan and Poker have been put to Corda to test the platform. Here is a graphic from Gartner in 2020 that demonstrates R3’s consortium approach is gaining usage of Corda.
James Carlyle, a key architecture of Corda and speaker of Japanese, sat on the board for a couple of years. Corda has partnered with DTCC on Project Ion, is the used by SIX Digital Exchange, used in Project Leonidas, Project Jura, Project Icebreaker, Project Helvetia, Project Dunbar, further demonstrating the trust and competency that R3’s Corda provided.
One of the key partnerships R3 who have also invested in the consortium is Intel.
Intel came up with SGX TEE in the early 2010s and it has gone on to be used by Microsoft Azure, New York Stock Exchange, Singapore Stock Exchange, Alibaba Cloud, IBM, and Amazon.
$3 billion in funding under the CHIPS and Science Act was awarded to Intel’s Secure Enclave program. It is used for Hyperledger’s Sawtooth to secure the "PoET" (Proof of Elapsed Time) consensus algorithm.
TEE stands for Trusted Execution Environment, Intel SGX stands for Software Guardian eXtensions, others simply call it an Enclave. When data is handled in an “untrusted” part of the computer’s memory, SGX will move it to an enclave to protect it. From there, it can call on a specific trusted function from the application.
This is a vital piece for much of modern life. A vast number of laptops run with an Intel or AMD chip, TEE is embedded into this, even phones that have an Apple or ARM chip.
As SGX TEE was being implemented across the large institution’s applications to data and financial markets, it was a natural progression for R3 to bring Intel SGX into their next project.
Corda meets secure enclave.
Conclave.
TEE is to help bring confidentiality to computing. The benefits TEE brings is scalability and takes away the computational strain that FHE’s bring to computing.
In 2019, Mike Hearn announced Conclave at Cordacon after moving to that project full time. Enclave orientated computing is something that Hyperledger and Enterprise Ethereum Alliance have sought too. It isn’t an easy task to separate as much of the software as possible away from the crucial data in the enclave.
David Rutter said, “Proprietary data – if shared and pooled effectively – holds the key to greater analytics, insight and commercial opportunity. Yet, many firms resist sending it because of an inherent mistrust in how it will be used.”
Conclave, which integrated into Corda in 2021, helps to protect that data, which furthers progress on utilising that valuable data.
This has been used by SIX Digital Exchange (SDX), DTCC, HQLAX, Euroclear and Central Bank of UAE. UAE have awarded R3 with two awards in 2024. First being, Leading Innovator in Blockchain for Financial Institutions, and the second is Most Innovative Digital Transformation Solutions (Financial).
R3, Adhara and Hyperledger work on Harmonia, which is a lab to help interoperability between the systems. Adhara also work with Ownera. Adhara help with IT solutions, liquidity management and international payments. Ownera helps FinP2P routers be interoperable, this helps all manner of cash sources connect and flow. Ownera and Archax helped tokenise BlackRock’s MMF. Archax uses R3’s Corda and R3 have also recently partnered with Ownera.
R3 have led the initiative of improving the financial software infrastructure and proven rather successful at it, to say the least. R3 has got to the point it has partnerships with SWIFT. What other horizons are there left to conquer?
A super-terse history of blockchain.
Bitcoin drops. Hash wars. Ethereum is a working blockchain, allows protocols to be built on top. ICO mania.
But what really sparked a change was data feeds from oracles, such as Chainlink, and dapps that help liquidity such as Uniswap and Aave. With these innovations, the volume and TVL within DeFi has shot up. From a few hundred thousand to around $180bn TVL in late 2021/22.
Smart contracts help to automate so much and with settlement on immutable blockchains, it helps transparency of settlement. There are many benefits blockchain has that TradFi is seduced by:
Instant Settlement
Final Settlement
P2P Settlement
Lower Costs
Efficient
Triple Entry Accounting
Shared Ledger
Reduced Fraud
Immutable
User Control of Assets
Yield Farming
In 2021, crypto-assets total market cap was $2tn. Yet, the likes of McKinsey are saying Real-World Asset tokenisation could be $2tn, if you believe Raoul Paul he says it could be $10tn. The amount of wealth coming on chain is staggering to contemplate. Institutions want to enter the market and they are more likely to do so with engineers and professionals they have worked with.
R3 had a department called Obscuro Labs, this was set up in 2022.
This was not merely handed to the intern for an experiment this was given some of the stellar names within R3, they were not messing around.
This lab was co-founded by aforementioned James Carlyle.
Gavin Thomas who was Engineering COO at R3, he is the CEO of Obscuro Labs and worked on Corda.
Cais Manai, holding roles in R3 centred around CBDC before joining in the Obscuro fun.
Tudor Malene, another lead R3 engineer who holds CTO of the new project.
Neal Shah, former R3 Senior Product Engineer, he has since moved onto Balyasny Asset Management.
Roger Willis helped write the whitepaper, he is now at IOHK, famous for Cardano.
Other contributors to the whitepaper are:
Richard Gendal Brown
Mike Hearn
Moritz Platt
Tim Brinded
Fred Dalibard
Stefan Iliev
Zbigniew Czapran
You can read that paper here - whitepaper.ten.xyz/obscuro-whitepaper/abstract.html
And R3 co-founder, Todd McDonald, helped lead funding rounds as the A-team were delivering the goods.
$9 million including R3, Republic Capital, KuCoin Labs, Magnus Capital, Big Brain Holdings, Builder Capital, DWF Labs, Pragma Ventures, GTS Ventures.
There are other team members bringing sharp talents, do see here - www.ten.xyz/team/
This was all for a Confidential Roll-Up for Ethereum. Originally, it was called Obscuro but this has since changed to The Encrypted Network or TEN for short in 2023.
It does not full into the category of a ZK roll-up as it does not utilise ZK tech nor is it an optimistic roll-up, in fact it has quicker delays compared to an optimistic roll-up. 1-day delays to begin with then as the node network grows it can get down to 10 minutes.
Ethereum bytecode is the language of Ethereum Virtual Machine to execute Solidity smart contracts, TEN uses the EVM entirely. There is no need to learn a new language and a developer has the option to determine what is made private.
Nodes are Aggregators, they get paid in TEN. An aggregator that can prove their TEE attestation they maintain and register the TEE encrypted data into the local database. Validators are not a part of the aggregator gossip network.
Metis is the first Layer 2 to have a decentralised sequencer, TEN is applying this too, this is rare amongst L2s and it is a vulnerability if the sequencer is centralised. A decentralised sequencer reduces the chances of MEV, a centralised sequencer can manipulate the order of transactions, front run orders and can even exclude transactions. It allows multiple participants to be involved with the transaction ordering and hold participants accountable. This is great for the networks security as it reduces a single point of failure and resistant to DoS attacks.
Therefore, it should be a priority of L2s to have a decentralised sequencer but surprisingly this is lacking. It is something that TEN is not overlooking this factor and have this as a part of the architecture.
TEN’s consensus mechanism – POBI – selects a sequencer at random in each round. The winner needs the smallest random number within the group, the aggregator that has this earns the round reward.
POBI stands for Proof of Block Inclusion – Intel invented Proof of Elapsed Time in 2016 and this has influenced POBI.
TEN helps to provide confidential computing in an otherwise transparent Web3. Private computation allows to protection of sensitive data being sold to nefarious actors.
The tech of Web3 and the expansion of DeFi is appealing. Banks and other financial institutions have private blockchains, as touched on before, the TEN team have provided Corda services to many of the large players. For a lot of these institution the wealth is siloed and in walled gardens. DeFi’s success is because it is public.
Chainlink’s Sergey Nazarov has spoken on stage with great enthusiasm how much wealth is coming on-chain because the tech breaks down boundaries. RWAs can be fractionalised, it changes fundraising as it circumvents a lot of traditional infrastructure, immutable, instant settlement, and so on. With DLT, TradFi systems are becoming antiquated.
Ethereum is the Manhattan of the blockchain world, this is where the main financial traffic is therefore it is ripe for a confidential roll up. I must stress a lot of these institutions are not going to simply trust any protocol. If a team of devs built out a confidential L2 that they have had previously worked with they are more likely too.
Furthermore, providing this sort of tech will allow untrusted counterparties to come together as the blockchain can provide privacy, security and automation. This will open up speed of finance and cut costs, which go back into the economic cycles.
And therefore, there is a strong case for success of The Encrypted Network.
Before coming to market, TEN has partnered up and built an ecosystem to help with usage upon release. To name just a few, Supra Oracles, Hyperlane, Asset Flume, Galxe, Parsiq and more. Do see here for the list of the ecosystem - www.ten.xyz/ecosystem/
One of the hooks that computers had to draw in the public to use the devices was games. A clever use of 0s and 1s at the backend can lead to defending the human race from aliens, otherwise known as Space Invaders. That was for arcade machines but computer devices made by Microsoft had simple games like Solitaire and Minesweeper to help stimulate contact time with the GUI of a PC.
We can take for granted how Web2 literate we have become but Web3 can still be a hurdle for people to wrap their head around, to interact with. There is still much room to grow for the space.
The early 2000s saw Chris Moneymaker qualify for World Series of Poker in 2003 via an online poker site. He ended up winning and this spurred on the “Poker Boom” of online poker traffic in the early 2000s, which also saw a larger number of people using the internet.
Blockchain mimics much of the Internets rise and there were early attempts at poker. Web2 has issues of proving that you are not being screwed by the platform and there are lots of bots. An honest platform will need to do audits and get the credible certificates.
There were attempts in the early days, how there was regulatory pressure, liquidity issues, small player pool, and the technical side was clanky. The premise was there but just needed refinement.
TEN can provide encryption via the use of TEEs, random numbers can be generated and encrypted due to this architecture, and this can be done with immediate finality.
An important innovation that TEN can enable with TEEs is Confidential Proof of Humanity (CoH). This enables someone to verify they are indeed a real person yet their identity remains confidential as TEEs provide secure KYC and TEN deletes the documents once it is verified.
This leads to a person receiving a Soulbound NFT, like a blue tick on Twitter/X, it shows the verification process was successful. This NFT cannot be transferred and this helps combat against a players colluding and joining the same table whilst being in the same geographical location.
With most game-related computations off-chain, TEN can significantly reduce the gas costs associated with poker game play.
Battleships is another demonstration of how gaming can be secured on TEN. A simple game yet shielding a players battleship position is not so simple. Now with TENs capabilities, games can balance the need for transparency and privacy in the development, which is all in Solidity.
With fair, scalable environments, TEN can provide the platform gaming, have high-volume tournaments with verified contestants. If you find yourself thinking, “this is just Battleships and poker what’s the big deal?” Aforementioned, Microsoft had humble Solitaire and then decades later there is Halo.
Cais Manai makes a point that Civilisation VI is a great game yet it could have the addition of an NFT buried in the game. As TEN can provide randomisation it means even the developers do not know where this reward is and the player can unearth this NFT, it could even be BTC. This provides trust that there isn’t insider information being leaked to pals of the devs. No-one knows where the prizes are. Happy hunting!
Michael Jacobides, who is an academic advisor to the NY Fed Res and the Boston Consultancy Group (BCG), spoke a couple of years ago about how a chain needs a hook to bring the average joe into crypto. Emphasising what makes your chain different.
And my thinking across cycles is how the space captures and maintains a user base. Gradually the space has become more user-friendly for the casual person but why would they use it consistently?
The original people in crypto were cypherpunks, gamblers and risk-takers. TEN can help the Web3 casinos, it can resist MEV on trading, it can help gaming to bring in people, it can help verification on social dApps.
It can assist with DeFi and DAO governance. Voting is confidential and this stops the bandwagon effect therefore people vote with their beliefs.
As we zoom out a little more, TEN has the ability to protect Digital ID (DID) and verify the necessary documents to support it, as demonstrated with its CoH. This underpins using banking, payments, and insurance, as TEN can provide privacy, fraud detection and prevention, make compliance more efficient.
Currently, we have payment rails and assets separate, buying a car or a house has all these processes that are separate and convoluted. With automation from smart contracts, we can put these two rails together to make it efficient and fast, a DLT payment and asset system becomes one.
The privacy helps against data breaches, vital for anyone, further demonstrating the need for TEN beyond gambling and gaming. This is an important step forward to integrate consumers with Web3 in everyday life.
Additionally, it can provide decentralised dark pools for large institutions and high net-worth individuals. The privacy of TEN helps shield strategies, intentions, prevent front-running, it keeps order size and price away from prying eyes. Traditional dark pools are run centrally, consequentially there is a trust issue. Decentralising dark pools enables counterparties to use trustless infrastructure.
Institutions execute large block trades and do not want to negatively impact the market, leading to cascading events and capitulation. TEN protects these trades, which leads me to another point if we zoom out even further.
TEN is building the bridge from Corda to Ethereum.
R3 have done a Corda bridge with XDC Network. XDC Network is a hybrid Layer 1 for trade finance, and this enabled interoperability and reducing settlement time. The companies operating on Corda, such as SBI, can configure and understand the services necessary as these private pools mingle with the cryptocurrency ecosystem and exchanges.
The Corda platform had a successful 2023, receiving the Best Blockchain Technology award, Best Permissioned Technology Initiative, Most Innovative Use of DLT/Blockchain, Most Innovative Use of Blockchain in Banking, CBDC Partner Initiative.
R3 are often involved in Wholesale CBDC projects, there is a G20 mandate to make cross-border payments cheaper, faster, more transparent.
Leading the charge in this is the Middle-East, particularly UAE. UAE has opened their doors to Coinbase, Project Diamond’s objective is to bring institutional investment to digital assets and RWA. UAE has the Financial Infrastructure Transformation (FIT) Programme, R3 help develop the Digital Dirham. This has seen real-value international trade settlements through platforms like the mBridge initiative – the benefit means through Corda, it the sender bank provides the transaction directly to the recipient bank rather than through intermediaries.
From a 2023 Bernstein, $5 trillion in assets could be tokenized on blockchain in the next five years and with digital cash there are various applications, please do see this chart:
Institutional regulated DeFi. How do the Central Banks interact with DeFi, Web 3, Metaverse and so on? They will be on ledgers such as the Corda and need to bridge into the crypto-universe. Therefore, TEN is primed for success in leading these funds onto chain.
And with digital representation of real-world assets, defi will have the chance to operate with these tokenised securities. A key thing I stress to people is tokenisation comes in waves, each asset class gradually tokenises. People are cautious of being first but they definitely do not want to be last, there will be a standard S bend to adoption, once there is momentum in adoption this will have a cascade of wealth represented on-chain.
Global equities market is around $100tn so too cash.
Private equity is $11tn.
Commodities equates to $20tn.
The bonds market is $130tn.
Real estate is over $300tn.
The global derivatives market is touted to be $600 trillion to $1 quadrillion in value.
And so on. The point being there is a great amount of wealth to be unlocked by DLT, and actors such as TEN have the background to unlock this and protect the privacy of it. Given they are usually first in implementing wholesale CBDC projects and contracts, having worked with Accenture, BIS, and sovereign states, when it comes to the application of retail CBDC, the odds are in their favour to implement those sorts of projects too.
Scaling mountains may be hard, it is only for the most robust.
It is not just the tech, if you are dealing with privacy there will be regulation issues. TEN works closely with regulators.
Richard Correia was the Global Head of CBDC for R3, he was leading and working with projects that you may be familiar with. Project Jura, Project Dunbar, Project Helvetia, these include BIS, SDX, BdF, SNB and more central banks. There was also the eKrona project with Riksbank.
Bryan D'Souza works has Head of Partnerships for R3 in the Middle-East. Emirates NBD is a leading banking group that is wanting to innovate blockchain in UAE. Therefore, it is a natural fit for them to bring R3 to their council along with PwC and Chainalysis.
Dr Alisa DiCaprio is the Chief Economist at R3, which is strategising and researching. She is voted one of the most influential women in fintech by American Banker. She also an advisor to the Global Blockchain Business Council (GBBC), this is a large council of business leaders, ambassadors, non-profits, start-ups, institutions. A significant body to the digitisation of finance and healthcare.
Jack Fletcher used to be a senior advisor to the UK Liberal Democrats Chief Whip. He moved from that position to be the global lead for R3’s strategic relationships with central banks and CBDC.
Here is a letter to the UK government on CBDC - committees.parliament.uk/writtenevidence/111489/pdf/ - In this is a pertinent line, “The Depository Trust & Clearing Corporation (DTCC), one of the world’s more risk-sensitive institutions, chose R3 as its partner to develop and launch its Project Ion platform.” That is wise to point out, even the most risk-adverse are opting with R3.
In 2020, HSBC announced it put $10 billion of paper-based private placement records on R3’s Corda blockchain. HSBC are in favour of Corda so much that in order to speed up onboarding time of customers, HSBC moved Corda to Google Cloud in 2021, this reduced it from months to weeks.
To quote HSBC, “Corda was built with the highest standards of privacy and security in mind. The platform is ideally suited to empower HSBC’s global custody clients to access details of their private assets securely, and in real time.”
In 2023, HSBC became the first bank to tokenise gold via R3.
HBSC have said elsewhere, in context of expanding their partnerships with R3, “We anticipate HSBC and other banks will conduct more live transactions this year, while the system is readied for a full commercial launch within a year and it could take another 3-5 years of collaborative work to gain critical mass.” www.business.hsbc.ae/en-gb/campaigns/blockchain
In April 2024, this time not in New York, R3 is brought into the UK’s Regulated Liability Network for their technical expertise.
So aside from that, what else has R3 done?
Aside from issuing digital tokens with Nasdaq, custody and settlement with BNY Mellon, collaborating with ABI, providing the infrastructure for Brazil’s Bradesco and Itau for foreign trade, Wells Fargo on inter-bank transfer, Bank of America for financial services, onboarding MonetaGo, partnering SIX Group, apply solutions for insurance such as Allianz and Chubb, what else has R3 done really?
Is that all?
DLT is a tool and communities express with that tool with how they implement it. R3 got ahead of the curve. R3 are providing the platform for nation states to facilitate the use of CBDCs and this should hardly be a surprise since R3 is a consortium of banks.
What this does for me is reassure that this is a team of the highest calibre, with extraordinary brain power and connection behind it. There is a gargantuan weight of expertise and wealth insinuated by this.
I have already discussed Ian Grigg, the inventor of the Ricardian contract, helped R3’s whitepaper, embedding regulation into Corda’s digital agreements as well as Mike Hearn who was a Bitcoin core developer. R3 has had a host of talent that has had an impact on the crypto-space.
In 2024, Peter Todd was “outed” as Satoshi Nakamoto in an HBO documentary. He may not be Satoshi, he did work on Bitcoin and also worked at R3 in 2016 on Corda.
Ross Nicoll helped technical aspects of Corda’s smart contracts before going onto making Dogecoin function as well briefly working at CryptoKitties.
Kathleen Breitman worked at Accenture then went onto R3 before founding Tezos.
Eric McEvoy worked at IBM then SDX before becoming the Blockchain Solutions Engineer at R3, is a DeFi Developer at Wintermute. Wintermute also back Ethena Labs, which Eric co-founded.
Mike Ward helped R3 form partnerships, one notable one is Microsoft Azure, he is currently the CPO of IOHK, the company behind Cardano.
Kostas Chalkias is another former-R3 cadet. With a Ph.D in Cryptography, he was involved in the development of cryptographic solutions for Corda. He went onto work for Facebook’s Diem and co-found Mysten Labs and subsequently Sui.
Gottfried Leibbrandt was the CEO of SWIFT integrated its GPI (Global Payments Innovation) system with R3’s Corda platform.
Brad Garlinghouse of Ripple integrated Ripple’s XRP into R3's Corda platform.
This is a letter to the Federal Reserve in 2019 from R3 - www.federalreserve.gov/SECRS/2019/November/20191114/OP-1670/OP-1670_110719_137047_425584962832_1.pdf
Here is a response letter from R3 to a FDIC information request, I believe from 2021, though I am not entirely sure - www.fdic.gov/system/files/2024-06/2021-rfi-digital-assets-3064-za25-c-022.pdf
One of the authors of that letter was Leslie Conner Warren. She moved on from her R3 Gov Relations and Global Policy role at R3, on April 2024, under the partial cloud floating over Liberty Street, to the Federal Reserve Bank of New York Innovation Advisory Council.
To wrap this up and to reiterate, TEN having a bridge to Corda is rather significant. This is a convergence of the partnerships that rest on the private system to come to the public domain.
TEN provides the tech to take Ethereum further, scale it, protect, provide more traffic for the ecosystem, all the while still utilising Solidity. TEN will enable the adoption of games, of day-to-day utility and to enable the secure environment for RWAs and the large institutions, private banks and family offices to come to the public blockchain space.
Stablecoin velocity is much more than the traditional bank money. Tokenisation is gathering great momentum after years of applied effort from developers in garages to teams in high towers.
With TEN providing a private extension to Ethereum means it is also expanding the world of finance.
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