Blockchain Firm R3 Files for a Patent as Fintech Race Heats Up -- 2nd Update
August 24 2016 - 6:27PM
Dow Jones News
By Paul Vigna
R3 CEV, a startup working to build new Wall Street
infrastructure using "blockchain" technology, filed for a patent
Tuesday covering software behind the new project.
The patent application is the New York firm's first, shedding
some light on what has so far been a widely followed but opaque
firm.
R3, which launched in September 2015, named the project Concord
for the harmony it hopes to build among more than 60 banks
participating in the project. The consortium originally started
with nine multinational banks. The group currently includes
Barclays PLC, Goldman Sachs Group Inc., and J.P. Morgan Chase &
Co.
The goal of the firm has been to create standards for financial
services based on "blockchain" technology, the open-ledger system
used to trade the virtual currency bitcoin. It hopes to sell the
product to the participant banks and others.
Although Concord does resemble numerous other technology
platforms working on blockchain technology, R3 felt the software
behind it, known as Corda, offered enough unique features to
justify a patent.
R3 essentially has built is something that looks in some
respects like bitcoin, but with significant differences to appeal
to banks.
Concord aims to be a universal platform connecting bank
operations within firms and across rival firms. It is aimed at
digitizing and speeding up so-called middle- and back-office
functions, like clearing and settling securities trades,
registering a variety of assets and keeping track of cash balances.
One other difference between Concord and bitcoin: Concord doesn't
have a coin.
If it comes together, Concord could help banks streamline
cumbersome operations, lower the costs of maintaining them, and
realize billions of dollars in savings.
"I don't think there's ever been a time when there's been so
much pressure on banks," said David Rutter, R3's founder and chief
executive. Citing postcrisis capital regulations and other costly
rules, he says "it's been difficult if not impossible for these big
banks to cut costs in a significant way."
A version of Concord is expected to be launched in the next
several months, R3 executives told The Wall Street Journal, with a
small number of banks using it to test some services early in 2017.
It hopes to launch an "alpha" version by midyear. "We need to make
this real to business users in 2017," said Todd McDonald, R3
co-founder and chief operating officer.
Figuring out the best way to use blockchain-based tools in the
financial-services industry has become a hot topic. A number of
firms, including Digital Asset Holdings, Hyperledger Project,
Ripple, Microsoft's Azure, and others are all working on products
to take advantage of the new technology.
In some ways, Concord resembles ethereum, the bitcoin offshoot
being built as a platform for application hosting. Concord, too, is
viewed as a platform that will allow developers to build any
variety of applications and support smart contracts. But it is
tailored expressly for financial institutions.
Perhaps the most important difference between Concord and
bitcoin and ethereum is the way transactions are recorded. With
bitcoin and ethereum, every transaction is recorded, verified and
disclosed immediately in their public, distributed ledgers. With
Concord, while the transaction is verified via a distributed
ledger, it isn't publicly disclosed. The details are shared only by
the parties involved.
Maintaining this confidentiality was a key concern of R3's
member banks, said Mr. McDonald. R3 also worked with and met with
more than 70 global regulators during development.
The banks in R3's consortium haven't committed to the new
platform, and indeed aren't bound to use it, Mr. McDonald said.
However, they have invested money and resources in helping build it
and had input into Concord's specifications.
Write to Paul Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
August 24, 2016 18:12 ET (22:12 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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